Weekly Forex Forecast (January 16 – 20, 2017)

·    January 15, 2017

·      January 15, 2017

·    January 15, 2017

The EURUSD continues to consolidate between 1.0366 and 1.0650. And while buyers managed to send the pair higher last week, they were unable to breach the 1.0650 handle on a daily closing basis.

But although the bearish momentum has intensified over the past few months, I wouldn’t be surprised if we see additional gains in the near-term. The constant pressure on resistance suggests that demand outweighs supply at the moment, albeit by a narrow margin.

Should the pair close above 1.0650, the next key resistance doesn’t come in until the 1.0850 area. This level was the October 2016 low as well as the closing price for the November 14th gap down. It later served as resistance on December 8th.

Alternatively, a bearish pin bar from 1.0650 in the week ahead would make things interesting. The only challenge would be securing a favorable risk to reward ratio considering the 1.0515 handle lies just 130 pips below current levels.

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EURUSD resistance

The GBPUSD reached our final target last week at 1.2090. This is the level I mentioned following the December 15th break of trend line support.

While there was a false break of the 1.2326 area on January 5th, this level still appears to be resistance for the coming week.

However, keep in mind that 1.2090 isn’t likely to go down without a fight. We’d have to go all the way back to 1985 to find prices sub 1.2090.

Because of this, the GBPUSD isn’t a pair that interests me at the moment. But any bearish price action from 1.2326 could offer an opportunity to trade the 230 pip range.

GBPUSD range

I mentioned the USDJPY on Thursday noting how the 114.55 handle could dictate the pair’s immediate future. And sure enough, just before the session closed, buyers managed to push the pair back to 114.70 after setting a session low of 113.75.

But after a brief showing of strength, buyers let prices slip on Friday. The USDJPY would go on to close the week at 114.48.

While this close is obviously below 114.55, it isn’t enough to convince me that support has failed. One thing I pointed out last Thursday is that prices such as 114.55 are better thought of as areas rather than precise levels.

At the moment, we don’t have enough information to call it one way or the other. But I will be keeping a close eye on the 114.55 area throughout the coming week for directional cues.

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USDJPY key support

The AUDNZD continues to carve out what could be the right shoulder of an inverse head and shoulders pattern. This was a possibility I first mentioned back in early November of last year.

Although far from complete, last week’s price action did find buyers in the 1.0500 region as anticipated. The area is marked by two swing highs from last month and continues to hold as support.

In fact, Friday’s low was 1.0500 to the pip.

But that doesn’t mean we won’t see more consolidation to start the week. With that said, as long as the 1.0500 area holds on a daily closing basis, I continue to favor buying dips.

A minor level of resistance comes in at 1.0600, which outlines two swing lows from last October as well as a late November swing high.

While this area could attract a few sellers on the way up, my target remains the 1.0765 handle.

AUDNZD support

It’s been quite some time since I mentioned the GBPCAD so I figured a revisit was in order. Plus the pair retested a key area in the second half of last week at 1.5940. This is the 2016 low, aside from the October flash crash low, which can vary widely depending on your broker.

Still, the 1.5940 area is no doubt significant. But there’s something else at play here that I first mentioned on June 1, 2016.

For those who have been following me since that time, you’ll know that I’m referring to the massive 2,800 pip head and shoulders pattern.

Here’s how that structure looks today (see the link above for the original commentary).

GBPCAD head and shoulders

So far, the pair has traversed 2,100 pips of the measured move, but that leaves 700 pips unaccounted for. It also means that our final target for the GBPCAD remains the 2011 to 2013 lows at 1.5300.

As for the coming week, we’ll need to see the 1.5940 handle break down on a daily closing basis as confirmation that sellers remain in control. Otherwise, there’s a chance of a relief rally toward the 1.6400 area.

Either way, I favor selling into strength until the pair reaches the 1.5300 measured objective. 

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GBPCAD range

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  1. Is it reasonable to view this pattern as a Cup and Handle with an upward move preceding a downward move to the 1.5300 level?

  2. Good morning Justin. Every time you post long term position like GBPCAD today, I see how bad my long term tracking is. I tend to forget about such setups after while and you remind me few days/weeks later that actually the target was finally reached… What is your advise for tracking such a things? Thanks a lot!


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