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Weekly Forex Forecast (June 20 – 24, 2016)

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EURUSD validated a level last week that has been on my radar for several months. Since its inception, the trend line that extends from the December 2015 low has been a bit questionable considering the volatility of the March 10th ECB low.

However, Thursday’s session low pierced this level by just three pips before reversing higher. This rebound solidifies the importance of the trend line, making it a key factor in our technical analysis moving forward.

From here any retest of the 1.1360 area will likely be met with an increase in supply, while bids are expected to develop near the 1.1217 handle.

That said, my bias remains weighted to the downside given the fact that the EURUSD has yet to close above former channel resistance from the 2015 low. But only a daily close below the 1.1060 handle would warrant further consideration for my part.

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Key levels on the EURUSD daily chart

At the risk of stating the obvious, GBPUSD faces one of the single most influential decisions in this week’s “Brexit” vote. The June 23rd referendum is an all day event and is sure to trigger an increase in volatility even before the final decision is given as bits and pieces of the outcome get leaked to the media.

However, it isn’t just the event itself that poses a danger for traders. The polls in recent weeks have caused the pair to swing 100 to 200 pips in the blink of an eye, which I can only assume will intensify as we approach Thursday’s session.

As for the technicals, GBPUSD enters this week at the 1.4347 resistance level. This area has acted as a key pivot since January and is also the May low.

A daily close above this level would open the door for a retest of the May high at 1.4740. Alternatively, a push lower this week would find support at the March and April lows near 1.4050.

Support and resistance on the GBPUSD daily time frame

NZDUSD offers what is arguably the best opportunity in the days and weeks ahead from a technical perspective. The rally that began at the start of June has placed the pair just 100 pips below a confluence of resistance at 0.7180.

The weekly chart below illustrates said confluence.

NZDUSD key level on the weekly chart

Note that 0.7180 is not only channel resistance that extends from the October 2015 highs but is also the February and March 2015 lows. This level will undoubtedly attract sellers if tested in the week ahead.

In addition, the 38.2 Fibonacci retracement when measuring from the 2014 high to the 2015 low comes in near 0.7200. Yet another hint that immediate gains may be hard to come by for the kiwi.

However, the 0.7053 handle that I mentioned on Friday is still holding as resistance on a daily closing basis. So until this level falls, NZDUSD will be vulnerable to further losses toward the 0.6960 support area.

In summary, I’m only interested in shorting NZDUSD while below 0.7180 on a daily closing basis. And as long as this ascending channel (shown in the chart above) remains intact, the odds of an eventual move lower toward 0.6550 must be respected.

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

NZDUSD confluence of resistance on the daily chart

EURGBP turned lower last week after once again finding selling pressure at 0.7930. I mentioned this area in early May just before the pair lost 350 pips, a move that eventually found support at 0.7563.

The price action throughout last week hinted at a turn lower, starting with the succession of bearish rejection bars between Monday and Wednesday and finished off with Thursday’s bearish engulfing candle.

From here, the next key support level doesn’t come in until 0.7735. Although, the 0.7830 handle could present some trouble for sellers on the way down.

EURGBP bearish engulfing and pin bar at resistance

GBPCAD is one of my “Brexit” plays. That is, it’s a currency pair that has the necessary technical implications should Thursday’s referendum end with Britain deciding to leave the EU.

To clarify, I have no intention of trading this or any British pound pair in the coming week. The increased volatility combined with unfavorable spreads will be enough to keep me on the sidelines for now. The same goes for the Euro.

However, should the Brexit camp win out, the potential eighteen-month head and shoulders on GBPCAD could present traders with a unique opportunity if the pair closes the week below neckline support near 1.8150.

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

Potential head and shoulders on GBPCAD

Leave a Comment:

6 comments
Margaret says

Isn’t the PA on NZDUSD H4 a bullish flag?

Reply
    Justin Bennett says

    Margaret, not that I can see. But if it were, a price structure that has been in place for 18 months would take precedence over one that’s been around for a week.

    Reply
Olalekan says

Great job, Great analysis.

Reply
    Justin Bennett says

    Thank you, Olalekan. Glad I could be of help.

    Reply
Julian says

Nice work… .Very good detailed explanation…Thank you..

Reply
    Justin Bennett says

    You’re welcome, Julian.

    Reply
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