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Weekly Forex Forecast (December 28 – January 1, 2016)

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As expected, EURUSD managed to find a bid last week after retest the 1.0820 handle as new support. However, the holiday liquidity lull didn’t allow for much of a rally following the retest.

Upside gains remain capped by the 1.1020 level, which previously acted as resistance in mid December. Even if the bulls manage to punch through this area, former channel support that extends off of the 2015 low is sure to give buyers a run for their money.

All in all, I remain bearish here despite the recent surge in demand. The only thing that would change my bias would be a close back above former channel support near 1.1280.

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EURUSD key levels on the daily chart

GBPUSD continued its slow march lower last week after breaking below the 1.4980 handle. This area previously acted as resistance between March and April of 2015.

From here, traders can watch for bearish price action on a retest of this area as new resistance. Do keep in mind that the shortened holiday week will make liquidity hard to come by, so I don’t expect to see much in the way of movement until the first full week of 2016.

My bearish bias will remain intact so long as the pair continues to carve out lower lows and lower highs. Key support comes in at 1.4740 and 1.4565.

GBPUSD key support and resistance

Those who sold GBPJPY after the pair closed below the fourteen-month trend line are enjoying open profits in excess of 400 pips at the moment. And if last week’s price action is any indication, this move lower is just getting started.

Not only did the bulls fail to push prices higher after falling nearly 400 pips in the prior week, they allowed the pair to slip below the 180.50 handle on a weekly closing basis.

This level may offer an opportunity for traders to get short should a bearish signal present itself on a retest of the level as new resistance. Key support comes in at 175 and 169.50.

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GBPJPY new resistance level on the daily chart

AUDJPY continues to trade in what appears to be a corrective move off of the May and June highs. I recently commented on the larger descending pattern that could eventually produce a move toward the 74.50 handle in the coming weeks and months.

However, in order for such a move to materialize, we would need to see a close below channel support that extends off of the September low. Only then would we have enough justification to consider a short position for an extended move lower.

My bearish bias will remain intact as long as the pair trades below channel resistance on a closing basis. Key support comes in at the ascending channel support near 86 as well as 82, 80 and the 2012 low at 74.50.

AUDJPY ascending channel

NZDJPY remains at the top of my watch list after the bears failed to push prices below the four-month trend line last week.

The lack of movement of late isn’t all too surprising given the holiday season that is upon us. With that in mind, I would be surprised to see any real movement until the first full week of 2016 as most traders won’t return from their break until that time.

From here, the idea for NZDJPY is fairly straightforward. A close below the trend line that has been supporting prices since late August would likely trigger a retest of the 79.50 handle. A break below that would expose the September highs at 77.50.

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NZDJPY trend line support

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