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Weekly Forex Forecast (August 15 – 19, 2016)

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After dropping 190 pips between August 2nd and the 5th, EURUSD managed to climb higher last week to retest the 1.1200 key handle.

This move wasn’t too surprising as just last weekend I mentioned the potential of another rally as long as the single currency remained above 1.1060 on a daily closing basis.

But despite the previous week’s rally efforts, the pair failed to close above the 1.1200 resistance level. This area was the site of the August 2nd false break.

With the bulls and bears still battling for position, not much has changed since the month began. I expect the 1.1200 level to attract sellers while buyers are likely to take an interest in a retest of the 1.1060 area.

The coming week looks relatively light regarding event risk with Monday being a bank holiday for the EU. However, do note that this Wednesday features the FOMC meeting minutes, which could shake things up for the US dollar.

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EURUSD key levels

After a relief rally during Friday’s session that carried GBPUSD higher by 100 pips, the pair once again encountered sellers near the 1.3050 handle.

I mentioned this trade setup on Wednesday as the British pound was in the process of carving out a bearish pin bar against the US dollar.

I’ll maintain my bearish bias here as long as GBPUSD remains below this level on a daily closing basis. Key support comes in at the post-Brexit low of 1.2790 followed by 1.2500.

GBPUSD bearish pin bar from resistance

AUDUSD has been on a 340-pip tear since the July 27th low at 0.9420. However, the 4-hour ascending channel that has developed from this level signals a possible change in direction within the next few days.

The bearish momentum we saw take over during the final 48 hours of last week could carry over into the coming sessions. And while a short-term channel doesn’t necessarily indicate a lasting reversal, it does signal that a pullback is in order within the broader uptrend that extends from the May low at 0.7144.

A close below the 0.7646 handle would open up the first downside target at 0.7500. This level is the June 9th high as well as several prominent swing lows from both March and April.

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AUDUSD ascending channel on the 4-hour chart

I mentioned USDCAD on Thursday just minutes before the pair broke below the key 1.30 handle, a level that intersects with channel support that extends from the current 2016 low at 1.2460.

From here I would expect the 1.30 area to attract offers while a move lower would find support at the June 20th gap at 1.2845 followed by the June 23rd low of 1.2678.

However, if this plays out as a bear flag pattern, there is a high likelihood of an eventual test of the current 2016 low at 1.2460. And as long as USDCAD remains below 1.30 on a daily closing basis, the potential for such a move must be respected.

The Canadian dollar will be at the mercy of manufacturing and retail sales along with the core CPI on Friday. However, the key driver for the pair could be Wednesday’s FOMC meeting minutes.

USDCAD bear flag pattern

AUDCAD appears to have broken down from the two-month trend line support late in Friday trade. I mentioned this potential setup last week, pointing out the recent Canadian dollar strength against many of its counterparts.

With Friday’s break behind us, traders can begin watching for a retest of the level as new resistance. A move lower would likely encounter support at the July 21st low at 0.9730 followed by the post-Brexit low of 0.9490.

Both currencies should remain active this week with Australian monetary policy meeting minutes on Monday followed by employment data on Wednesday. The week finishes off with Canada core CPI and retail sales at 8:30 am EST.

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AUDCAD broken trend line

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