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Weekly Forex Forecast (March 6 – 10, 2017)

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Despite making no real progress last week, the EURUSD certainly wasn’t idle, particularly in the final 24 hours of trade.

On Wednesday I shorted the pair at 1.0588 on a retest of a level that extends from the February 16th high. I had mentioned the 4-hour wedge pattern on February 27th, and the subsequent false break to the upside had me watching for a selling opportunity.

The pair lost ground over the next 24 hours and even closed below the 1.0520 handle. This level has been on our radar for several weeks. It’s served as a pivot since November 24th of last year and is also very near the 2016 close.

Seeing this, I decided to add to my short position just below 1.0520. But Friday’s rally proved Thursday’s breakout to be false. Luckily, I had trailed my stop, so the result of both positions was a breakeven trade.

Typically I would consider the possibility that a more accurate location for the level is 1.0500. And that may very well be the case.

However, the fact that 1.0520 is four pips above the 2016 close and is also the 61.8% Fibonacci retracement from the current 2017 low at 1.0340 to the current 2017 high at 1.0823 leaves me convinced that Thursday was a false break of support.

For the week ahead our attention turns back to the 1.0635 resistance area. The region has been directing price action since mid-November and also boasts several factors that make it one to watch going forward.

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EURUSD range

The GBPUSD started last week with a close below 1.2400. This is a critical area we’ve been tracking for several weeks now. Per last weekend’s forecast, Tuesday’s close suggested that a move toward the 1.2200 area was likely.

Sure enough, the pair continued lower over the next three sessions and eventually found a bid just above 1.2200. In fact, Friday’s session low was just 13 pips above 1.2200.

By the end of the day, buyers had pushed the pair into positive territory. The afternoon rally carved out a bullish rejection candle, hinting at the idea of further gains this week.

An early week decline toward the 1.2250 area could provide an attractive buying opportunity. However, keep in mind that Friday afternoon moves can sometimes be deceptive due to thin trading conditions ahead of the weekend.

Key resistance comes in at the 1.2400 area while a move lower would likely find a bid in the 1.2200 region.

GBPUSD bullish rejection

I mentioned the NZDUSD on Wednesday of last week. At the time we were watching the pair punch a hole in the 0.7133 handle on an intraday basis. But to open up downside objectives, sellers needed a session close below the level.

While they weren’t able to get the job done on Wednesday, the next 24 hours put the NZDUSD 73 pips below the level on a daily closing basis.

There was no setup here, at least not for me, as the pair has yet to retest former support as new resistance. With that said, we may not have to wait long to see buyers make a run at 0.7133.

Although Friday closed in the red, the long lower wick suggests that we may see a move higher to start the new week. On top of that, buyers managed a session close back above the 0.7040 level, which is the key support level I mentioned on Wednesday.

For the new week, the range between 0.7040 and 0.7133 will likely be a factor. Buying from current levels may be profitable, but given the bearish pressure lately, the safer play may be to wait for a sell signal from resistance.

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NZDUSD range

Last week’s sprint higher on the EURJPY wasn’t too surprising. Sure, the pair closed below the key 119.50 handle the previous week, but the trend line from the January 17th low triggered Monday’s surge.

On Thursday I commented on a few levels that could prove significant over the coming sessions. The most important one, in my opinion, is the confluence of resistance around the 121.25 handle. This is the intersection of a key horizontal level and a channel extension from the level that attracted bids on February 27th.

It’s going to take a daily close above the 121.25 area to secure a push higher this week. Not only is it the intersection of the two levels I just mentioned, but it’s also the 50% retracement from the December 2016 high to the current 2017 low.

A close above 121.25 would expose the 123.80 area. However, there is also a minor level at 121.80 that traders should keep an eye on should the pair advance higher this week.

Alternatively, a move lower from current levels would likely encounter buyers near 119.50. This area served as a pivot between the 7th and 24th of February.

EURJPY descending channel

Unlike the EURJPY, the AUDJPY isn’t looking quite so healthy. Sure, the pair carved out a small bullish pin bar on Friday, but the two-month rising wedge pattern suggests bids may be drying up.

But as I pointed out on February 27th, nothing is confirmed until we get a close below wedge support. Until that time, the bulls are in the driver’s seat.

A daily close below support would expose the 85.35 handle. This area served as resistance back in early January before flipping to support between January 23rd and February 9th. A close below 85.35 would pave the way for a retest of the wedge low at 83.73.

Alternatively, a push higher would likely encounter sellers near last week’s high of 87.40. A close above that and we could see another retest of wedge resistance in the 88.40 region.

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AUDJPY rising wedge

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2 comments
Alfonso Furlong says

Good afternoon from Mexico. Forget EURUSD until march 15, while rates don’t move this pair will be at the same region. Somenone said don’t trade a pair before a fundamental news & a los traders bought Dollar Index before Trump’s adress the last week & hold the position waiting Janet Yellens on friday, the result was to loose 86 PIPS, until now, plus the new price in a minutes. In france, Marine Le Pen had a legal trouble so it is hurting Euro. These issues make EURUSD very volatile, more than normal

Reply
    Justin Bennett says

    Alfonso, all good points. It comes down to whether this type of movement suits you. It’s also important to adapt to market conditions. Right now, shorter-term swing trades have been the winning formula due to the range bound conditions.

    Reply
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