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Weekly Forex Forecast (January 4 – 8, 2016)

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EURUSD finished 2015 in bearish form. Although the pair only lost 90 pips during the last trading week of the year, it failed to push above the December high at 1.1055. This alone indicates weakness that could trigger a move lower in the coming sessions.

The pair now looks ready to retest the 1.0800 key support level to start the new year. A close below it would be viewed as bearish and would likely open the door for a move to 1.0660 and possibly the 2015 low at 1.0470.

Some may argue that the consolidation last month is a bullish pattern following the massive one-day rally that took place on December 3rd. While that could prove to be true, a bullish continuation from current levels would run into significant resistance at former channel support near 1.1300, not to mention the December highs near 1.1020.

I have maintained a bearish bias here since late October of 2015 when the pair broke below ascending channel support. That bias remains intact as we enter a new year with the pair still trading well below the former support level.

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EURUSD support and resistance levels

GBPUSD lost additional ground during the final trading week of 2015. Although the pair failed to make it back to the 1.4980 handle as per my commentary from last weekend, the bears did manage to push prices to new eight-month lows.

This does play into my comment last week about maintaining a bearish bias as long as the pair continues to carve out lower highs and lower lows. This still seems to be the case and the bulls certainly aren’t showing any intention of reversing the current trend.

While there isn’t much to do at the moment, traders can watch for selling opportunities as the pair continues to push lower and take out additional levels of support. Of course the big level that everyone will be focused on in the new year is the 2015 low at 1.4565; break that and we could see a much larger bear trend develop.

GBPUSD support and resistance

USDCAD could give us an opportunity to get long in the coming sessions based on the 4-hour wedge that has been forming since the December high was carved out at 1.40.

Only a close above the resistance level would offer an opportunity to get long. On the other hand, if the bulls fail to hold the 1.3815 handle, we could see prices slide even lower before the next leg up materializes.

My immediate bullish bias will remain intact as long as the pair trades above 1.3815 on a 4-hour closing basis. That said, a close below this level would only temporarily negate the bullish bias as the longer-term uptrend would still be very much intact.

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USDCAD intraday wedge pattern

Not a lot has changed since the last time I covered AUDJPY. The ascending channel is still in place, leaving us on the sidelines for now. Only a daily close below the level would offer an opportunity to get short and could extend prices as low as 74.50 over the coming weeks and months.

I tend to not pay too much attention to the price action on the last trading day of the year due to the lack of liquidity. However, if last week’s bearish engulfing bar is any indication, we could see an immediate move lower to start the new year.

My bearish bias will remain intact so long as the pair trades below channel resistance near 91.50 on a closing basis. Key support comes in at the ascending channel support near 86.30 as well as 82, 80 and the 2012 low at 74.50.

AUDJPY ascending channel

NZDJPY has started to receive a lot of attention of late as the last trading day of 2015 appears to have broken below the trend line support level that we have been watching for several weeks.

However, I’m in no hurry to trade this break. My reasoning is two-fold…

  1. There is a chance that the trend line in question is in fact positioned a bit lower. If that’s the case, the pair has not yet breached the level.
  2. The price action surrounding the holiday season can be sporadic and ultimately misleading. For this reason alone, I don’t often trade the week before or after the holidays.

The only thing that would confirm the potential break would be bearish price action on a retest of the level as new resistance. The intraday charts may also provide additional clues that the pair has indeed breached the key support level.

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NZDJPY trend line support

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