Weekly Forex Forecast (August 28 – September 1, 2017)

The EURUSD made a significant move on Friday. After consolidating for three weeks, the single currency broke above the 1.1875 handle, a level that has held the pair in check since August 2nd.

We’ve had our eye on this level for some time now. We also discussed the ascending channel you see below on Thursday of last week. At the time, it seemed that the most likely scenario would be another pullback into the 1.1670 area. Apparently, the bulls had other plans.

With Friday’s close above 1.1875, there isn’t much to prevent a retest of the 2012 low at 1.2040. Just above that level we have ascending channel resistance which could become a factor again as it did in early August.

A rotation lower into the 1.1875 area would likely encounter an increase in buying pressure. Only a daily close (5 pm EST) below 1.1875 would negate the bullish outlook toward 1.2040 and re-expose the 1.1670 support area.

Keep in mind that Wednesday features the ADP employment change and prelim GDP figures for the U.S. As usual, the main event is Friday’s non-farm payroll at 8:30 am EST.

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We looked at the GBPUSD as Friday’s session was wrapping up. The pair broke free from trend line support on August 17th and then retested the area as new resistance between August 18th and the 21st.

So far, the pair is respecting the levels we’ve had outlined quite well. Last week hit a low of 1.2774, just one pip above the level I illustrated in August 20th forecast.

For the week ahead, I’ll be watching to see how price reacts should buyers retest the 1.2970 area. Considering the trend line that extends from the March low and the key horizontal level, this has become a confluence of resistance. A sell signal from the area could present a favorable opportunity to get short.

Alternatively, a daily close back above 1.2970 would suggest that control has flipped back to buyers. It would also expose the July 18th high at 1.3125. Key support for the week ahead comes in at 1.2770.

NZDUSD bears had their first real test on Friday after closing the pair below key support on August 23rd. The level appears to be the neckline of a two-month head and shoulders pattern.

Buyers managed to extend Friday’s rally above former support at 0.7240 on an intraday basis but failed to hold those gains into the close. As long as the 0.7240 area continues to cap advances on a daily closing basis (5 pm EST), downside targets remain exposed.

We could see some additional consolidation to start the new week given that prices are still a bit overextended. With the 10 and 20 EMAs approximately 40 pips above Friday’s close, there’s still some room for sideways movement.

Key support comes in at 0.7100 with the measured objective for the head and shoulders at 0.6880. Only a daily close above the 0.7240 area would negate the bearish reversal pattern and turn our attention higher.

The GBPJPY has had a nice run following the retest of the 143.00 area. This came after sellers managed to break the confluence of support on August 10th.

However, recent overextended prices led to a late week rebound. We first discussed the idea that sellers were getting ahead of themselves on August 21st, which meant a rebound of some sort was likely.

With Friday closing back above the 140.50 handle, the odds of a push higher this week have improved significantly. With that said, the bearish breakout from the ten-month wedge pattern on August 21st should be enough to keep gains somewhat limited.

A retest of the 140.50 area this week is likely to encounter an increase in buying pressure. Key resistance comes in at 142.80, an area that has been a key factor since July of last year.

My bias remains weighted to the downside, but a bounce higher in the near-term should not be ruled out given the strength we saw in the final 48 hours of last week.

The CADJPY had a rough start in August. The decline that began on July 27th carried over into the first eleven days of this month before the pair finally caught a bid at 85.50.

Since that time, buyers have been in control and have driven the price 230 pips higher. However, the choppy price action over the last couple of weeks suggests that this might be consolidation following the early August selloff.

There is also a confluence of resistance near 88.20 that could come into play this week. This area is the intersection of a key horizontal level and the extension of an early stage ascending channel.

Whether or not the pair finds selling pressure at 88.20 or even trades that high is anyone’s guess. It’s also unclear whether this is a corrective move or the next leg higher following the rally that began in June.

We may not have the answers to those questions for quite some time. That aside, I will be watching to see how price reacts to 88.20 should buyers test the level this week. A sell signal from the area could offer a favorable opportunity to get short.

If this is indeed a corrective move, the bigger play would be a close below 4-hour channel support. Such a break would expose the August low at 85.50 followed by the next key support area at 84.50/75.

Alternatively, a close above the 88.20 handle this week would negate the bearish scenario. It would also pave the way for a retest of the current 2017 high at 89.72.

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