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Weekly Forex Forecast (January 9 – 13, 2017)

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After struggling for much of December, EURUSD bulls made some progress last week. And although the single currency lost significant ground on Friday, the losses were mild compared to other majors such as the British pound and New Zealand dollar.

For this reason, the Euro isn’t one of my preferred currencies to short at the moment.

From a technical perspective, we can see that the 1.0515 handle still stands as support. At the same time, the momentum has been bearish since May, which rules out any ideas of buying the EURUSD.

Instead, I’ll be watching to see how the pair reacts to a retest of the 1.0650 area. This was the December 30th high as well as several session highs between November 21st and December 14th.

Alternatively, a daily close back below 1.0515 could also offer a compelling opportunity to get short. But until one of these two things occurs, I’ll remain on the sideline.

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EURUSD range

Sellers were less kind to the GBPUSD than they were the EURUSD last week. Not only did Friday’s 150 pip selloff wipe out all of Thursday’s gains, but it also put the pair back below 1.2326 on a weekly closing basis.

We’ve had our eye on this level for quite some time. It was the initial target following the pair’s December 15th break of trend line support among other things.

Although last week’s price action appears to be a false break, it’s important to note that neither of the last two weeks has closed above the 1.2326 handle. It would seem then that this level is holding up as resistance on a weekly closing basis.

From here traders can watch for selling opportunities on a rotation back toward the 1.2326 resistance level. Key support comes in at 1.2090, which is the location of several lows from October.

GBPUSD false break

Like the GBPUSD, the NZDUSD also failed to hold a key level as new support on Friday.

The 0.6970 area had previously held as support from mid-June through mid-December. But when the December 16th session closed below it, we began watching for selling opportunities on a retest of the level as new resistance.

Such an opportunity never materialized. Instead, buyers closed the pair well above 0.6970 on Thursday of last week.

But as I’ve mentioned in the past, a false break on one time frame is nothing more than a bullish or bearish signal on a higher time frame. In this case, I’m referring to the weekly bearish rejection candle that formed as a result of last week’s price action.

From here I’ll be watching to see how 0.6970 holds up as resistance over the coming sessions. As mentioned on Thursday, I won’t be taking on any exposure here due to my current NZDCAD position. More on this shortly.

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NZDUSD false break

The Australian dollar may finally be turning the corner against its New Zealand counterpart. We’ve had our eye on what could be an inverse head and shoulders pattern on the AUDNZD since early November. And while the pair has struggled some of late, the price structure remains intact.

But a more immediate opportunity materialized with last week’s break of trend line resistance. This level extended from the October 26th high and had previously rejected three separate advances.

All of that changed after Wednesday’s session. Following the close above trend line resistance, we were watching for the 1.0420/30 area to hold as new support.

Sure enough, the pair never fell below 1.0423 and went on to close the week at 1.0484.

If the inverse head and shoulders has any chance of succeeding, we’ll need to see buyers continue to push prices toward the 1.0765 neckline.

However, as noted last week, the 1.0500 and 1.0600 areas could offer some resistance on the way up. For anyone still on the sideline, a breach of either area could provide a buying opportunity with the right bullish price action.

AUDNZD resistance levels

As mentioned above, I remain short the NZDCAD from 0.9343. The entry came after the pair failed to hold a trend line as new support. This particular level extends from the August 2016 low.

This failure left a weekly bearish pin bar in its wake, which is what prompted my short entry. In fact, the NZDCAD was the only pair in last week’s forecast that had formed a valid signal.

By the end of Friday’s session, the pair had closed below the 0.9225 support level. We discussed the potential for this break last Wednesday.

You may also recall that a close below 0.9225 would expose 0.9080, which is my final target. From here I’ll be interested in adding to my position, but only if I see the pair respect 0.9225 as resistance on a daily closing basis.

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NZDCAD technical break

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