Daily Price Action
Shares

Weekly Forex Forecast (April 11 – 15, 2016)

Shares

EURUSD took a breather last week after rallying 629 pips between the March low of 1.0824 and the current April high of 1.1453. We have to go all the way back to mid-November of last year to find a weekly range smaller than the paltry 125 pips from last week.

The tight consolidation raises the all-important question, is the pair running out of buyers at current prices or is this a corrective move before the next leg higher?

While it might be fun to speculate based on a hundred different variables, I have to go with what’s in front of me. And as long as the 1.1340 level holds as support, the idea of a retest of the October 2015 highs near 1.1490 can’t be ruled out.

That said, I’m not interested in buying the pair, at least not at current levels. I never want to buy into sideways price action, and with the 1.1490 level just above current prices, any break from consolidation doesn’t leave enough on the table to make an entry appealing.

So it seems more time is needed to answer the question above; a valid resolution knowing that we have other currency pairs to trade that promise a more attractive risk to reward ratio.

Want to see how we are trading these setups? Click here to get lifetime access.

EURUSD key support and resistance on the daily time frame

The GBPUSD chart you see below was mentioned on Friday as one to watch heading into Thursday’s BoE rate decision.

I continue to hear the rumblings about Brexit followed by speculation as to what it would mean for the pound. But just like the EURUSD chart above, my expectations are limited to the support and resistance levels you see below.

In other words, the pair is range-bound until it isn’t. And unless one of these levels gives way over the coming sessions, we aren’t likely to see much movement.

However, of the two scenarios (bullish or bearish), I would prefer to see a break higher. I realize the bearish trend isn’t conducive to this idea, but I’m also not interested in trading an overstretched market. A highly debatable comment, for sure, but it wouldn’t take a lot of evidence to illustrate that this could very well be the case, at least from a purely technical perspective.

At this point, I’m staying clear of buying GBPUSD as long as the bearish trend holds firm while at the same time respecting the potential for a bullish reversal. As always, time will be the deciding factor.

GBPUSD key levels in focus ahead of BoE decision

If you are long EURGBP or thinking of getting long, you may want to have a look at the chart below. The pair is approaching a massive level in the form of channel resistance that extends from the 2008 high.

EURGBP descending channel on the weekly chart

Any time a market approaches a level of this significance, I prefer to be on the sidelines as it offers me an unbiased perspective of the price action that follows.

However, if you insist on trading EURGBP in the week ahead, the 0.8065 area may provide some support to those interested in buying. This level is the September 2014 high as well as the 2010 low.

The Euro cross managed a close above this area on Friday, giving credence to the idea that a retest of resistance at 0.8156 is underway. A quick glance at your weekly chart will show this level playing a key role in 2010, 2012 and again in 2014.

Above 0.8156, the bulls face their biggest test in almost three years. If channel resistance should break, it could create a buying opportunity with no shortage of bullish potential.

On the flip side, any bearish price action from the 0.8180 area could produce a selling opportunity with just as much potential, if not more.

Want to see how we are trading these setups? Click here to get lifetime access.

EURGBP support and resistance

AUDNZD is taking its sweet time coming off the 1.1300 resistance area. But this is a good thing if, like me, you have a bullish bias towards the Aussie cross.

The daily chart below illustrates the disparity between the impulsive move higher and the correct move lower.

Impulsive and corrective moves on the AUDNZD daily chart

Even the ratio of bullish to bearish candles is what we want to see during these two phases. Note that the impulsive move is made up of mostly bullish candles while the corrective move is a mixed bag of both.

I mentioned the ascending channel you see below almost two weeks ago on March 29th. However, as you can see from the chart below, the pair still has some ground to cover before buying looks favorable.

From here things become pretty straightforward. A move into the support zone between 1.0970 and 1.1020 could offer an attractive opportunity to get long. A move higher from there would take the pair back toward the 1.1300/30 resistance area.

AUDNZD 4-hour ascending channel

Last week, NZDJPY produced what could become the most significant break of any pair in 2016; a bold statement, but one that is backed up by plenty of technical factors.

On Thursday, the yen cross closed below seven-year trend line support that extends from the 2009 low. The next 24 hours confirmed the bearish move with a weekly close below the level.

NZDJPY seven-year trend line support

As I mentioned last week as well as in the 2016 forecast, this breakdown looks eerily similar to what we saw during the 2008 financial crisis. Granted that trend line was more prominent, but the overall price action of late certainly has a familiar look to it.

For those with a short interest here, Friday’s session played out perfectly. After rallying to an intraday high of 74.20 and retesting former support as new resistance, the pair sold off to the tune of 60 pips, forming an inside/bearish rejection bar in the process.

Last week’s close should help feed the bearish sentiment in the week ahead, which could ultimately expose the 69.00 key support level. This area outlines several highs that formed between 2009 and 2012. It is also the 50% Fibonacci retracement when measuring from the 2009 low to the 2015 high.

Want to see how we are trading these setups? Click here to get lifetime access.

NZDJPY inside bar on the daily chart

Leave a Comment: