Weekly Forex Forecast (May 7 – 11, 2018)

·    May 6, 2018

·      May 6, 2018

·    May 6, 2018

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Important: I use New York close charts so that each 24-hour period closes at 5 pm EST.

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Another week is behind us, and another support level is broken on the EURUSD. Sellers have made a habit of this since the single currency broke long-term wedge support on April 20.

Last Monday’s session broke the 1.2090 support level I mentioned on the 29th. The breakdown exposed the next key level at 1.1930 which is a level I pointed out in the previous forecast.

As expected, we saw some buying pressure at 1.1930 just before the weekend. Whether we get a sustained bid to start the week is anyone’s guess, but I’ll stay bearish as long as 1.2090 holds as resistance on a daily closing basis.

In fact, even if buyers were to overcome 1.2090, the April 20 close below wedge support is enough to keep me bearish for quite some time.

Below 1.1930 we have 1.1830 followed by 1.1710. However, I am anticipating a relief rally to materialize at some point. Whether it occurs at 1.1930 or 1.1830 is unknown, but I’ll stay patient and wait to sell on strength.

EURUSD key levels on the daily chart

Similar to its EURUSD counterpart, the GBPUSD ended Friday’s session with a three-week losing streak. Unlike the Euro, though, the pound began its descent with a bearish engulfing week. I mentioned the pattern in the April 22 weekly forecast.

Since the April 17 swing high, the pair is down a massive 840 pips. And if we treat the highs from January 25 and April 17 as a double top, we’re looking at a move to 1.3200 over the next few weeks.

We get that from the 580 pip range between 1.3760 and 1.4340. Measuring 580 pips below the 1.3760 pivot gives us 1.3180, or 1.3200 to be a tad conservative.

However, keep in mind that sellers need to get through 1.3300 support first. I do expect quite a lot of buying pressure to materialize in this area if tested.

As for resistance, the GBPUSD closed last week below the 1.3600 area. You can see how this region capped advances in September of last year and January of this year.

Speaking of last year, note that 1.3494 was the 2017 close. It’s no coincidence that the pair bounced from this area just before the weekend.

I’m going to stand aside for now. I would be interested in selling on strength, but at the moment the 1.3600 resistance level and the 2017 close at 1.3494 acting as support don’t allow for a favorable risk to reward ratio.

gbpusd daily chart

I posted an intraday chart of the USDJPY in the member’s area on Thursday showing an upward sloping flag that had developed. As you may well know, it’s an exhaustion pattern that suggests an imminent reversal.

At the time the pair was trading at 109.40. Just 24 hours later the USDJPY carved a low for the week at 108.64, resulting in a drop of 76 pips.

The support level I pointed out to members was 108.50. While sellers didn’t quite retest the level on Friday, the bounce from 108.64 was undoubtedly a result of the lows that developed between late January and early February.

usdjpy 1-hour chart

However, if we draw a trend line from the March lows, we can see how this level also played a part in Friday’s bounce.

It’s going to take a close below this trend line to expose downside targets. One of those is 108.50 followed by the 107.40/70 area. Looking higher, I’d expect any retest of 109.50/60 to attract an influx of selling pressure.

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usdjpy 4-hour time frame

Last Wednesday I mentioned how the GBPJPY was likely to encounter selling pressure at 150.70 if tested as new resistance. Sure enough, Monday carved a high of 150.85 before settling at 150.41 at the close.

That was the only up day for the pair last week. The next four sessions went on to produce a loss of more than 300 pips.

It isn’t surprising to see how the pair found support near 147.00 on Friday. This area is represented by ascending channel support that extends from the 2017 low. This was another level I pointed out last weekend.

Apart from 150.70, attempting to identify horizontal levels on the GBPJPY can be challenging. That said, I do believe that 148.50/60 could attract an influx of selling pressure if tested as new resistance.

Those in search of a more substantial development to enter short might need to wait for a daily close (using a New York close chart) below ascending channel support near 147.00.

Be sure to review Friday’s post for more detail and a view of the twelve-month channel that I mentioned above.

gbpjpy ascending channel on the daily chart

I don’t discuss crosses like the GBPAUD often. The choppy and often unpredictable price action makes for a less than ideal environment.

However, every once in a while they do produce an opportunity worth some extra attention.

On Friday, the GBPAUD closed below the 1.80 handle. It’s a level that capped advances in December of last year and again this past February.

There is also a trend line that extends from the September 2017 low that appears to have broken down last week. That makes the 1.80 area a confluence of resistance that may produce a selling opportunity this week.

Key support from here comes in at 1.7620/50. A daily close (New York 5 pm EST) below that would expose the next key support at 1.7360.

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gbpaud trend line support on the daily chart

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  1. Hii Justin…nice analysis. From the past two weeks ucad is ranging between 1.28 and 1.29. can you plz throw some light on this pair?

    1. Perhaps this week, but the USDCAD price action has been ugly lately. There are much better opportunities out there in my opinion.

    2. it’s been ranging in a very balanced way between 1.28-1.29 & is yet to show us who is in control….patience

  2. I hope that my request will be under your favourite consideration. Thanks God’s will

  3. Great Analysis, Many thanks Justin.
    Is there any other mode of payment aside PayPal and Card payment, am having difficulties with this channels.

  4. I was thinking there is no room for the GA to move further down but your analysis have me thinking otherwise. Thanks again

    1. Supposed to break a level? Nothing in the market is “supposed” to do anything.

      As I mentioned above, the USDCAD is less than ideal for trading right now in my opinion.

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