Weekly Forex Forecast (February 13 – 17, 2017)

by Justin Bennett  · 

February 12, 2017

by Justin Bennett  · 

February 12, 2017

by Justin Bennett  · 

February 12, 2017

The EURUSD broke down from a significant area last week at 1.0715. This is the intersection of channel support and a level that had supported the pair on the 3rd and 6th of February.

I commented on Tuesday’s breakout with an emphasis on how the 1.0715 area is now resistance. Just hours later the pair hit a session high of 1.0713 before selling off over the next 48 hours.

For the week ahead, the 1.0715 area will likely limit any advances. And while there is support near the 1.0620 handle, it seems the next stop for the single currency could very well be the 2016 closing price at 1.0515.

The calendar looks relatively quiet to start the week with things picking up on Tuesday and Wednesday via Janet Yellen’s testimony. But as we’ve witnessed so far this year, an event doesn’t always need a slot on the calendar to move the markets.

As always, prudent risk management is the best defense against volatility, regardless of whether it arises from scheduled or unscheduled events.

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EURUSD range

The GBPUSD continues to look unsettled. Although sellers pushed the pair below the 1.2415 support handle last Tuesday, buyers weren’t having it and promptly showed their stance by closing the session back above the area.

Tuesday’s bullish engulfing candle caused quite a bit of commotion across the Forex market. I noticed several entities take an interest in the formation as a buy signal.

From where I was sitting, it was nothing of the sort.

Sure, it was an engulfing candle, but it wasn’t a buy signal in my opinion. There hasn’t been any momentum here since mid-October of last year. Furthermore, the candle in question formed in the middle of a 700 pip range.

The lack of direction combined with the fact the pair was trading in the middle of its range neutralized Tuesday’s bullish movement. Also, with the U.S. dollar back on the offensive and the pound outperforming other major currencies, the GBPUSD isn’t a great place to look for a contrast in performance at the moment.

GBPUSD range

The recent pullback in the USDJPY looks corrective, particularly given last Thursday’s close back above the 112.55 area. This is the location of the two swing lows from mid to late January, which later served as resistance from the 6th to the 8th of February.

From here any retest of the 112.55 handle could present a buying opportunity. With that said, a trend line from the January 3rd high at 118.60 is what stunted Friday’s advance. As such, waiting for a close above this level might be the more prudent approach.

A close above this trend line would expose key resistance at 115.10. The chart below illustrates how this level served as support on January 6th before transitioning to resistance in late January.

Note that this week kicks off with Japan’s preliminary GDP at 6:50 pm EST. Although, this is a bit of a non-issue for me as I don’t particularly like to open positions in the first 24 hours of the week.

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USDJPY new support

The AUDUSD spent last week consolidating within the previous week’s 170 pip range. The consolidation wasn’t much of a surprise given the pair’s 500 pip ascent since late December.

While I do think the Aussie bulls have some fuel left in the tank, the pair is fast approaching an area that could be troublesome. I mentioned the significance of the 0.7750 region last Thursday, noting how it’s the intersection of the August and November 2016 highs along with a trend line from the 2016 high, which was carved out on April 21st.

This confluence of resistance is strong enough for me to consider fading the rally if we get a retest of 0.7750 over the coming sessions. However, like any counter-trend idea, I’ll want to see bearish price action in this region before considering a position.

For the coming week, any retest of the 0.7608 handle is likely to encounter buying pressure. There is also another area of support near 0.7640. Given Friday’s break of 4-hour wedge resistance, this level could attract bids moving forward.

AUDUSD resistance

Although I have placed the NZDUSD last, it certainly isn’t last on my watch list. In fact, if buyers manage to retest the 0.7240 area in the coming week, the pair could offer one of the more compelling opportunities.

I mentioned last week’s breakdown on Friday, noting that Thursday’s plunge below 0.7240 could open the door to further losses. However, to secure a favorable risk to reward ratio, I’ll need to see a retest of the 0.7240 handle as new resistance.

Since September of 2016, the 0.7240 area has acted as a key pivot for the pair. And judging by the last two weeks of price action, there’s no doubt that it’s a significant level.

The first support level on my radar comes in at 0.7120. Although this range offers a potential profit of 120 pips, last week’s bearish engulfing candle suggests the NZDUSD could depreciate for an extended period.

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NZDUSD new resistance

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