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Weekly Forex Forecast (December 26 – 30, 2016)

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Apart from Thursday’s session, the EURUSD spent last week trading in a 130 pip range. The consolidation is something I mentioned last weekend as a probability given how aggressively the pair has lost ground since December 8th.

As for key levels, nothing has changed from the last weekly forecast. The 1.0460 handle will likely continue to attract sellers, and as long as it holds on a daily closing basis, an eventual push through 1.0366 support seems likely.

But even a close above 1.0460 wouldn’t necessarily negate the bearish bias. Just 55 pips above 1.0460 we have the November and early December lows at 1.0515.

All in all, my outlook for the single currency favors selling into strength. Additional downside targets to be discussed if and when we get a daily close below 1.0366.

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EURUSD key levels

GBPUSD bears made significant progress last week. Not only did they retest the 1.2326 handle, but they also managed a daily and weekly close below it.

All of this transpired following the break of wedge support, an idea I mentioned two weekends ago.

Last week, we were watching for a 4-hour close below 1.2326. That move came on December 22nd and resulted in a quick drop toward 1.2226.

With the pair now below 1.2326, any retest of this area over the coming sessions should get the attention of sellers. As such, I’ll be watching for bearish price action from this area to signal that downside pressures remain.

A move lower from current levels would likely encounter support at 1.2090. This area served as support on three separate occasions back in October.

GBPUSD new resistance

On December 11th, we discussed how the sideways price action on the AUDUSD was likely a continuation pattern. At the time the pair was trading at 0.7450.

Just days later, sellers confirmed our suspicion. Following a retest of resistance at 0.7500, the pair went on to lose 365 pips over the next eight sessions.

So where to from here?

With the May low at 0.7150 just 25 pips below last week’s close, there’s a decent chance of a bounce in the coming week.

However, I don’t anticipate any bullishness to have a lasting impression. The momentum of late no doubt favors sellers, and a level that could become more important than 0.7150 is 0.7065.

This area served as support on a daily closing basis in early February. A retest of 0.7065 would also complete the symmetry per the move that began on November 8th.

From November 8th to November 21st, the pair lost approximately 460 pips. Take that same distance and measure lower from the December 14th high and we end up near 0.7065.

With this in mind, I favor selling into strength for the week ahead.

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AUDUSD range

At the start of last week, the NZDUSD was treading water above channel support but below the 0.6970 handle.

As such, we were looking for a daily close below channel support near 0.6945 as a sign that further losses were likely. That close came just 24 hours after the forecast was released.

Two sessions later on December 21st, the pair retested former channel support as new resistance. The result was a bearish rejection candle.

The pair once again finds itself in a tight range to start the new week. To the upside, the 0.6920/30 area is likely to attract offers while the horizontal 0.6840 level is likely to trigger an influx of bids.

However, given the recent break of channel support, I see no reason why the NZDUSD won’t trade towards the May low at 0.6685 over the coming days and weeks.

NZDUSD descending channel

Since cracking rising wedge support on December 16th, the NZDJPY has lost 250 pips. I first mentioned this reversal pattern on December 15th.

Then last week we discussed how a close below 81.00 would expose the next support at 79.40. Just hours after that commentary was released the pair did just that.

The plan for the week ahead is pretty straightforward. A retest of the 81.00 area would likely attract sellers. And as long as the level holds on a daily closing basis, my bearish bias will remain intact.

A move lower would likely encounter support at 79.40. This level was a key pivot for the pair between October of 2015 and January of this year.

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

NZDJPY rising wedge

Leave a Comment:

2 comments
Marc says

Merry Christmas Justin, hope you are well and enjoy your time off. I was wondering if by any chance you might could include USDJPY in your weekly outlook. I would really appreciate it and keep up your work. It is such a pleasure for me to read your work. Thanks a lot

Marc

Reply
    Justin Bennett says

    Hi Marc, thanks for the kind words. I had a short break, but it was excellent nonetheless.

    There isn’t much to report on the USDJPY, which is why I’ve been leaving it out of the forecast.

    Happy Holidays.

    Reply
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