In this weekly Forex forecast, I’m going to show you exactly how I’m trading EURUSD, GBPUSD, USDJPY, EURAUD, and XAUUSD through December 25, 2020.
Watch the video below, and be sure to scroll down to see the charts and key levels for the week ahead.
The EURUSD has worked out beautifully since closing above 1.20 on December 1st.
I discussed that breakout before it occurred several times on this site.
I also announced my November 27th long entry on the Daily Price Action membership site.
I’ve since added to that position twice, and I’m interested in adding to it again this coming week.
As I mentioned on December 18th, key support for the EURUSD is between 1.2170 and 1.2200, which was Wednesday’s high.
Resistance is near 1.2330 but will depend on how the euro reacts to it this week.
My target remains 1.2500, which has been the case since October.
Disclosure: I hold a EURUSD long position.
The GBPUSD bullish scenario that I’ve mentioned recently is alive and well.
We’ve reviewed the bullish potential several times on this site.
However, GBPUSD needs to close a month above falling wedge resistance near 1.3380 to confirm the breakout.
Until then, buyers could struggle a bit.
On Friday, we saw some of that when GBPUSD bulls failed to keep the pair above 1.3480 into the close.
I still think the pound can rally in 2021, but buyers have work to do.
Lastly, GBPUSD doesn’t have the cleanest price action right now.
Others like EURUSD, AUDUSD, NZDUSD, and USDJPY are more favorable, in my opinion.
The USDJPY just closed the week below an eight-year trend line.
I mentioned this level on December 9th, where I stated that a weekly close below 103.60 would open the door to 101.00.
That’s the location of the trend line from late 2012.
We also looked at how USDJPY reacted to this level on December 15th.
If you’re a lifetime member, you know the December 14th candle was not a bullish pin bar for buying.
In fact, I told DPA members that I was only interested in shorting USDJPY.
There were three reasons why the December 14th candle wasn’t a buy signal.
First, USDJPY has been carving lower highs since February.
Even the massive 1,050 pip rally in March failed to carve a higher high.
As long as those lower highs persist, sellers are in control.
Second, the way USDJPY was “weighing” on the 103.60 area signaled that a breakdown was imminent.
I sometimes call this “heavy price action”.
It can be beneficial in determining whether a market is about to break lower or not.
The third reason why USDJPY hasn’t been a buy is that the pair has been sideways since November.
Any bullish candle like the December 14th pin bar is insignificant without momentum.
USDJPY broke 103.60 on Wednesday and retested the area as new resistance on Friday.
As long as the pair stays below that area this week, I like the idea of looking for shorts.
The move lower is likely to be full of retracements, but I continue to like USDJPY toward 101.00, as I have for months.
I haven’t discussed the EURAUD for some time, mostly because the pair has been indecisive all year.
However, that appears to be changing.
Two weeks ago, EURAUD sellers secured a weekly close below a multi-year trend line.
That level could be the neckline of a massive head and shoulders reversal.
As long as the EURAUD stays below the 1.6150 resistance area on a weekly closing basis, I like the pair lower toward 1.5700.
If this is, in fact, a bearish reversal pattern, the EURAUD could lose significant ground in 2021.
We nailed the recent XAUUSD (gold) bottom near $1,750.
If you saw the November 28th forecast video, you know what I’m referring to.
Following that bounce from channel support, XAUUSD closed above $1,850 on December 7th.
However, XAUUSD failed to hold above the level in the following days.
So why should $1,850 serve as support now?
As I mention in today’s video above, gold bulls managed a weekly close above $1,850 last week, something they failed to do previously.
That weekly close above $1,850 should trigger a retest of the $1,900 resistance area this week.
A daily close above $1,910 or so should confirm the break from the bull flag below and send XAUUSD much higher in 2021.