Weekly Forex Forecast (December 19 – 23, 2016)

·    December 18, 2016

·      December 18, 2016

·    December 18, 2016

The EURUSD furthered its descent last week with a close below the former multi-year low at 1.0461.

Also of significance was Thursday’s low, which at 1.0365 makes it the lowest print for the single currency since January of 2003.

Given how aggressively the pair sold off in the second half of last week, I wouldn’t be surprised to see some consolidation to kick off the new week. But as long as 1.0461 holds as resistance on a daily closing basis, the bias remains heavily weighted to the downside.

Also, considering the new thirteen year low, it seems appropriate to once again mention my long-term outlook for the pair. I first made this assessment on September 3, 2015, and as you can see from the link I just shared, nothing has changed.

Of course, any move of that size takes many months or even years to materialize, but all of the ingredients are there.

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EURUSD range

GBPUSD bears are on the move again, this time breaking wedge support that extends from the October 25th low at 1.2081.

I mentioned this idea last week, noting that a close below support would expose 1.2326. This level acted as resistance on October 19th and later served as support on the 18th and 21st of November.

However, last week’s breakout didn’t quite make it to the 1.2326 handle. This wasn’t too surprising considering the pound has been one of the more resilient currencies against the US dollar.

Still, it seems that a move to this area over the coming sessions is the likely scenario.

On Thursday of last week, I pointed out the resistance area that starts at 1.2510 and extends toward 1.2550. A late Friday push gave a print of 1.2509 before losing 27 pips just before the close.

The idea for the new week remains the same. Any bearish price action from this resistance area could produce a favorable selling opportunity for a move toward 1.2326.

A close below 1.2326 would expose the series of lows from October at 1.2090.

GBPUSD resistance area

The AUDUSD stayed true to form last week. On December 11th I mentioned the sideways price action that had followed the bearish impulsive move in mid-November.

The consolidation suggested that the next leg lower was imminent. Sure enough, Wednesday’s session cracked the lower boundary of consolidation, triggering a new round of offers below the 0.7500 handle.

Speaking of 0.7500, it too was pointed out last week as key resistance for the pair. And although buyers gave it everything they had, sellers held price below it on a daily closing basis.

From here the 0.7330 area is of interest in the week ahead. The area served as support a couple of times in June and once again in November.

The 0.7330 level is also the 50% retracement of this year’s range, which spans from 0.6826 to 0.7834.

A move lower would likely encounter buyers at the May low of 0.7150.

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AUDUSD support and resistance

The only thing keeping the NZDUSD afloat at the moment seems to be descending channel support that extends from the 2016 high. I first mentioned this pattern a few weeks ago after the pair broke below trend line support that extends from the January low.

At the moment the kiwi appears to be stuck between support and resistance.

But given last week’s move, I wouldn’t be surprised to see some consolidation to start the new week. How much consolidation is anyone’s guess, but the price is too stretched at the moment to consider selling.

Furthermore, with channel support just below Friday’s close, a short from current levels could get you in trouble. As such, I’ll wait for a daily close below channel support before considering an entry.

Such a close would expose the next level of support at 0.6840. This was a key pivot for the pair between late March and mid-May.

NZDUSD channel

The NZDJPY holds the key to what is perhaps my favorite setup for the new week. Actually, the trade idea materialized on Friday with the close below 4-hour rising wedge support.

This is one of the best rising wedge patterns I’ve seen in a very long time. If you aren’t familiar with these structures, they tend to suggest exhaustion from buyers and thus a reversal of trend.

In addition to the 4-hour structure below (second chart), the yen cross also carved out a weekly bearish pin bar.

NZDJPY confluence of resistance

The confluence of resistance at 83.30 was enough for buyers to declare a full retreat during Friday’s session.

From here a rotation higher could present a favorable selling opportunity. The 82.82 handle was a level I had marked on my chart before Friday’s meltdown. The level served as support on Wednesday and Thursday and just so happens to be the 50% retracement of last week’s range (weekly bearish pin bar above).

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NZDJPY key technical break

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  1. Hi Justin

    I just wanna say that your setups are accurate. I took the trade on NZD/JPY and realised a profit and also today with GBP/USD.

    Your price action is always spot on.

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