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Weekly Forex Forecast (June 13 – 17, 2016)

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EURUSD continues to look vulnerable after failing to hold above the 1.1357 handle during last Thursday’s session. The bearish engulfing pattern that formed, as a result, hinted at the idea of a retest of 1.1217.

This idea looks all the more likely now with the pair hovering just 30 pips above the critical support level. A close below it would expose trend line support that extends from the December 2015 low.

But as promising as these breaks may seem, trading the Euro carries with it a great deal of risk at the moment.

The upcoming vote on whether Britain should exit or remain as part of the EU will have repercussions that extend beyond the British pound. We witnessed this on Friday when the single currency plummeted 50 pips on news that the exit camp had reached a record 55% of those polled.

Also, the FOMC is scheduled to make a highly anticipated rate decision this Wednesday at 2 pm EST. The outcome of this decision will undoubtedly trigger an increase in volatility for the US dollar.

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EURUSD key support and resistance levels

The indecisiveness of GBPUSD over the last four months is a direct reflection of the looming “Brexit” vote. The pair remains range bound between 1.3834 and 1.4768, which will likely continue until the much anticipated June 23rd decision.

Friday’s selloff managed to break below the key 1.4347 level before finding support at the trend line that extends from the February high at 1.4668. A close below this level would expose 1.4050, an area that served as support in both March and April.

A move higher this week would find a confluence of resistance that resides between the previously mentioned 1.4347 handle and 1.4315.

However, given the uncertainty surrounding the pound and this week’s FOMC decision, I won’t be trading GBPUSD anytime soon.

GBPUSD indecision on the daily chart

GBPCAD worked out well for us last week, netting those who took both short setups approximately 8R (14% profit if risking 2% of your account balance).

The first setup came after the pair broke below the 1.8825 handle, a critical horizontal level, six-week trend line support as well as the 38.2 Fibonacci retracement when measuring from the April low to the current 2016 high.

The second entry was simply a continuation of the first. The 4-hour close below the key 1.8500 support level was a hint that the bearish pressure wasn’t going to let up anytime soon.

Friday’s latest “Brexit” poll which showed that 55% of Brits will vote to leave the EU helped GBPCAD find our profit target near 1.8110 before the weekend.

GBPCAD short entries on the 4-hour chart

But as profitable as last week was for shorts, it may have only been the prelude for what’s to come. Since January of last year, GBPCAD has been forming what could turn out to be an eighteen-month head and shoulders reversal.

What’s intriguing about the pattern, aside from the structure itself, is where the potential measured objective lies. The 1.5300 objective also served as a multi-year support between 2011 and 2013.

This one needs a bit more time to develop before it can be considered tradable, but the potential reward is well worth the extra patience.

However, as noted earlier, the June 23rd “Brexit” vote makes trading any GBP pair unfavorable at the moment. For this reason alone, I won’t be initiating any new positions in the currency until the dust settles.

Want to see how we are trading these setups? Click here to get lifetime access.

GBPCAD potential head and shoulders pattern on the weekly chart

While it isn’t at the top of my watch list, EURNZD is teetering on a critical support level, making it one worth keeping an eye on over the next couple weeks.

The 1.5840 handle acted as a key pivot between March of 2014 and February of 2015. The level subsequently served as support on two separate occasions in December of last year.

A daily close below 1.5840 would open up the door for a retest of 1.5400, a level that influenced price action between July of 2014 and May of last year.

EURNZD key support level in focus

Immediately following last Wednesday’s RBNZ rate decision, NZDJPY jumped higher by 150 pips, breaking the upper boundary of the ascending channel I mentioned on Monday.

Despite attempting to hold above the former resistance level with a 4-hour bullish pin bar, the pair eventually surrendered the bullish breakout after running into trend line resistance that extends from the February high.

At the moment, the post-RBNZ rally appears to have exhausted itself. In fact, Friday’s selloff nearly erased the entire central bank inspired rally.

With this in mind, our attention returns to channel support in the week ahead. A 4-hour close below the lower boundary would expose the multi-year low at 72.53.

Want to see how we are trading these setups? Click here to get lifetime access.

NZDJPY false break on the 4-hour chart

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