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Weekly Forex Forecast (August 21 – 25, 2017)

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The EURUSD remained buoyant last week after testing the 1.1670 support area for the second week in a row. At the same time, buyers struggled to overcome the 1.1820 handle as we discussed in the August 14th commentary.

As long as the 1.1670 support level holds on a daily closing basis (5 pm EST), the upside bias is intact. Only a daily close below the level would open up downside targets including 1.1490 and 1.1300.

However, there isn’t much to do here so long as buyers are capped by 1.1820 and 1.1875. You could entertain a long position from the 1.1670 area, but the upside potential is somewhat limited with those two resistance levels intact.

I’m going to stand aside until a favorable opportunity presents itself. That could be the result of a close above 1.1875 or even a continuation pattern that may be forming on the 4-hour chart. Either way, I intend to stay clear of the sideways consolidation.

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EURUSD daily chart

The GBPUSD ended last week lower, making it the third in a row following the August 3rd bearish candle that formed at 1.3250. Sellers also took out trend line support during Thursday’s session and confirmed the break on Friday.

To get a better view of the rising wedge that’s been developing since March, see last week’s post.

As long as the 1.2880/90 area holds as resistance on a daily closing basis, I’ll continue to favor the downside. Key support for the week ahead comes in at 1.2770 followed by 1.2615.

Alternatively, a close back above the trend line near 1.2880/90 would re-expose the horizontal resistance level at 1.2970 with a close above that paving the way for a move toward 1.3125.

GBPUSD daily time frame

The NZDUSD could be in the process of carving a major top. The price action since May points to a head and shoulders pattern, though the right shoulder has yet to form.

That last bit is an important distinction because until neckline support near 0.7240/50 is broken on a daily closing basis, the uptrend is intact.

For the coming week, key resistance comes in at the late June/early July swing highs at 0.7345. There is another resistance level just above that at 0.7380 which lines up with the November 2016 high.

While a sell signal from either one of those levels would be enticing, the bigger play here is the (possible) head and shoulders reversal. For now we’ll have to wait and see which direction market participants want to take the NZDUSD.

A daily close below neckline support near 0.7240/50 would expose the measured objective at 0.6880. This level has been a key influence since October of 2015.

NZDUSD head and shoulders

Last week we looked at the 4-hour rising wedge that has been forming on the EURGBP since July.  The pattern hints at exhaustion from buyers and signals a turn lower could be in the cards.

Twenty four hours after I released that commentary, sellers took the Euro cross down to wedge support at 0.9060. The immediate bounce from this area confirms that the lower level is drawn correctly.

We can also see how buyers closed Friday’s session just below last week’s high, but sellers continue to flock to key resistance at 0.9144.

For the week ahead, I’ll be watching to see if sellers can break wedge support on a 4-hour closing basis. If so, we could see the Euro cross slide toward the next support level at 0.8990. A close below that would expose 0.8895.

Alternatively, a daily close (5 pm EST) above the horizontal resistance at 0.9144 would negate the idea that buyers are tiring.

EURGBP 4-hour rising wedge

The AUDNZD has had a rough time over the last six years. Even after carving what appeared to be a massive inverse head and shoulders pattern between 2014 and 2015, buyers have been unable to lift prices above the 1.1400 area.

Fast forward to today, and we can see that the pair is forming a rising wedge that extends from the July low at 1.0395. The formation hints at exhaustion from buyers and signals a turn lower could be in store this week.

Because the AUDNZD is known to be more sporadic than other more liquid currency pairs, I need to see two things happen before considering a position.

The first is a 4-hour close below wedge support near 1.0800. Such a close would indicate that momentum is shifting and a turn lower is likely.

The second thing I need to see following a close below support is bearish price action on a retest of the level as new resistance. This would help confirm the break and also give me an area I can use to hide my stop loss.

I’m going to stay on the sideline until those two things happen. If neither occurs and buyers decide to break resistance near 1.0870, we could see some additional gains here.

However, I won’t consider going long if that happens as I never buy into a bullish exhaustion pattern such as this rising wedge.

A turn lower this week would first target the area just below the 1.0600 handle. A close below that would expose the July low near 1.0400.

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AUDNZD 4-hour rising wedge

Leave a Comment:

10 comments
Chioma says

You didn’t forecast for gbpjpy.

Reply
    Justin Bennett says

    Correct, but that doesn’t mean I won’t comment on it later in the week. There also isn’t much to say about the GBPJPY at the moment. Not much has changed since my August 15th commentary.

    Reply
Roy says

I am waiting on that head and shoulders pattern to manifest! Great anaylsis Justin

Reply
    Justin Bennett says

    Thanks, Roy. It’ll no doubt be interesting to see what happens.

    Reply
Chris OReilly says

Since gbpjpy was mention Justin i want to thank you for all your forecast especially when it comes to gbpjpy. I did pyramiding and got around 75% profit from your forecast thank you!!!

Reply
    Justin Bennett says

    That’s great to hear, Chris.

    Reply
Remon says

XAUUSD FORECAST ?

Reply
Darius says

AUDNZD looks like is going to close above the wedge and above trendline which connects 2016 march 22 and 2017 march 16.

Now what would be next targed for buying? 1.10127 looks nice level?

Reply
    Darius says

    On the other hand, it will likely be still forming wedge, only that right end will be wider for now

    Reply
Mimi says

I actually continued buying the pair based on strong/weak analysis, although the pair is over-extended. However, I’ve also seen that pairs can be over-extended for long periods of time and I will wait for lower lows and lower highs before selling. I only took profit on Friday, 1 Sept as there are some big economic news scheduled for AUD this coming week.

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