Daily Price Action

Weekly Forex Forecast (May 22 – 26, 2017)


After three weeks of consolidation, including the selloff that followed the May 7th run-off election in France, the EURUSD was unstoppable last week. The single currency gained 270 pips against the greenback, making it the largest weekly gain so far this year.

The pair did print a bearish engulfing day on May 18th, but as I’ve stated in the past, such patterns are irrelevant when they fail to break a key level. And as mentioned on Tuesday, the 1.1090 handle was the level of focus.

Signs of exhaustion from buyers are absent at this point which suggests the pair could further last week’s advance. However, with the next resistance just above Friday’s close at 1.1220, we’ll need to wait for a pullback or breakout before considering an entry.

Key levels of interest for the week ahead include resistance at 1.1220 with a close above that exposing 1.1355. A move lower would likely encounter buying pressure at 1.1090 with a break there paving the way for a move toward 1.0950.

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EURUSD resistance

The GBPUSD has been one of the holdouts concerning recent USD weakness, especially compared to its Euro counterpart. The pair has been trapped in a 130 pip range since closing above 1.2860 on April 27th.

Friday’s price action changed that. With a 1.3036 close, the pair now has its sights set on the next resistance level at 1.3100. However, there’s a good chance price will mean revert toward 1.2985/90 given the overextension as measured by the 10 and 20 EMAs.

From here traders can watch for buying opportunities on a rotation back to support at 1.2985/90. Additional upside targets to be discussed if and when buyers manage a close above the 1.3100 handle.

GBPUSD breakout

USDJPY was part of the May 14th weekly forecast. In it, I mentioned how the pullback between the 11th and 12th of May didn’t sit right with me. It seemed too aggressive given the bullish momentum we had seen up to that point.

In that forecast, I also said I wouldn’t be surprised if buyers gave up the 113.25 handle. Well, it turns out they not only gave back 113.25 but also surrendered the entire break above channel resistance that occurred on May 8th.

On Friday we revisited the USDJPY, namely the way the 111.70 handle was now acting as resistance. The level previously served as support throughout the month of February.

Dare I say the late Friday flight to safety, which once again involved headlines regarding President Trump, pushed the pair out of consolidation. The intraday charts appear to be rolling over after treading water below 111.70, but the first 24 hours of this week will help to confirm or deny that observation.

For the week ahead, the 111.70 area should continue to serve as resistance. A move lower from here will likely encounter buying pressure at 110.10 with a break there exposing the current 2017 low near 108.40.

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USDJPY false break

The GBPJPY broke down from a rising (narrowing) wedge on May 11th. I mentioned this particular reversal pattern one day prior noting how the 147.50/80 area was resistance.

It seems I was 18 pips off. Shortly after reaching a high of 147.98 on May 10th, sellers showed their hand by forcing prices below wedge support near 147.30.

The pair soon bounced from the 145.70 area, a level we discussed in the May 10th commentary. However, the selling pressure proved too great as 145.70 later gave way to the next key support at 143.70, another level that was on our radar.

For the week ahead the 145.70 resistance area could offer a selling opportunity for a move toward 143.70 and perhaps 141.85. Alternatively, a 4-hour close below 143.70 would also pave the way toward the next support at 141.85.

GBPJPY range

Following Wednesday’s 160 pip nosedive, the AUDJPY spent the remainder of the week hovering precariously above an eleven-month trend line. This level extends from the post-Brexit low and was instrumental in last year’s November 9th bounce.

I mentioned the ascending trend line on Wednesday noting that a close below it would expose 81.50. This area is the current 2017 low as well as the location of two swing highs in June and July of last year.

As of this writing, we’re still waiting for a daily close below the trend line, which appears to be near 82.50. However, sellers have also taken up a position just above 83.00, hence Friday’s close at 82.93.

A close below 82.50 would open up downside targets including 81.50 followed by 80.30. The latter was a key pivot in October and November of last year and is also the 50% retracement of the range between the 2016 low and the current 2017 high.

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AUDJPY trend line

Leave a Comment:

Costa Vranas says

Morning Justin. RE your Weekly Forex Forecast 22-26 May on the EURUSD pair why do you say… ” The pair did print a bearish engulfing day on May 18th, but as I’ve stated in the past, such patterns are irrelevant when they fail to break a key level.Can I read the candle formation on the close of the candle @ 17:00 EST as a bearish engulfing candle? Am I perhaps not understanding correctly, is it not rather a Bullish engulf?

    Justin Bennett says

    The EURUSD May 18th bearish engulfing candle closed the day (5 pm EST) above 1.1090. Therefore, it wasn’t a signal I would trade (go short).

Barb says

Justin, your trading examples all say “Want to see how we are trading these setups? Click here to get lifetime access. I have lifetime access. How can I see how you are trading the setups? Sorry, Justin, I am new….

    Justin Bennett says

    Barb, you can see the discussions for each currency pair in the Live Setups section in the member’s area.

Mahi says

Who can teach and can make a profitable trader definitely he can earn a lot of money from trading. Why this kind of trader wants to earn money from teaching people?

    Justin Bennett says

    Mahi, running two websites costs money, not to mention the thousands of hours of my life that I’ve committed to this site and the member’s area. Paying a few hundred bucks for a lifetime of learning is more than fair.

    And for those who don’t want to pay there are hundreds of lessons on the free site.

Endy says

Impressed by your effort to assist forex traders to success, but the technical expressions used in the forecasts are not understood by newbies like me. Justin, can you do anything about this?

    Justin Bennett says

    Endy, if you don’t understand something you’re more than welcome to ask. But if you spend some time browsing this site, you’ll learn the terms in no time. Cheers.

neeva says

Sir kindly tell the correct time for forex trading of EURUSD,GBDUSD,EURJPY & USDJPY.

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