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Weekly Forex Forecast (May 8 – 12, 2017)

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The Euro ended the week at a six-month high against the greenback after Thursday’s close above the 1.0950 handle. The strength came as a result of the first round of the French elections on April 23rd.

With the run-off results just in showing a Macron victory, one would think the single currency is heading even higher from Friday’s close. However, the risk of a “buy the rumor, sell the news” type of reaction does jeopardize that view.

We won’t have any answers until the market opens, but even then it may take a day or two for participants to digest the outcome in France that would establish a clearer direction forward.

For me, it all comes down to the technicals. As long as the EURUSD is gaining ground and breaking levels, the short-term trend is up, so buying seems appropriate.

With that said, I always combine my analysis with a big picture view. And although the chart below looks promising for bulls, it’s important to remember that a two-year range still caps the intermediate to long-term outlook.

Until that range high at 1.1600 to 1.1700 is breached, this is still a range play. That doesn’t mean the EURUSD won’t move higher as it very well could, but the larger range is a key factor here.

For the week ahead, key support comes in at 1.0950 while sellers will likely camp near the 1.1025 area.

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EURUSD range

The GBPUSD continues to trade in a relatively tight range following the 280 pip rally on April 18th. Like the EURUSD above, as long as the pound is trending higher, the buy side seems most appropriate in terms of positioning.

Last week I pointed out that buyers would likely camp near 1.2860. Sure enough, Thursday’s session retested the support area but closed the week 117 pips higher at 1.2977.

For the week ahead, the 1.3050 will likely serve as resistance if tested while the 1.2860 handle should continue to act as support.

GBPUSD range

I mentioned the USDJPY on Friday as one that I’d be watching following today’s French election. The pair went nowhere in the final 48 hours of the week, no doubt some hesitation ahead of the weekend’s main event.

It’s going to take a daily close above the 113.00/25 area to extend recent gains. A close above it would expose the next resistance level at 115.10 followed by 117.00.

On the flip side, a move lower would likely encounter buying pressure at 111.70 followed by 110.10.

As a side note, the pattern that has emerged since the current 2017 high appears to be a bull flag following the late 2016 rally. However, without a close above 113.25, there’s no confirmation to suggest higher prices are likely.

I’ll be keeping a close eye on this one particularly once markets have a day or two to digest any weekend volatility.

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USDJPY channel

The AUDUSD ended the week just below a level I mentioned on Wednesday. At the time of my post, the pair was trading at 0.7450 and as such was above wedge support near 0.7420

Shortly after that, prices plunged below the level and later found sellers on a retest of the level as new resistance.

What’s notable, however, is where the pair found support. We’ve been discussing the 0.7380 handle for more than a week now. It’s the 61.8% Fibonacci retracement from the December 2016 low to the current 2017 high.

The AUDUSD begins a new week somewhat boxed in between 0.7380 and 0.7420. But like the other currency pairs I’m featuring in this post, it will all depend on where markets open on Monday.

AUDUSD levels

The EURGBP has spent the last two weeks consolidating after retesting the 0.8300 key support area on April 18th. This region could be the neckline of a head and shoulders pattern, but nothing is confirmed just yet.

It’s going to take a daily close below 0.8300 to confirm the structure. Until that time there isn’t much to do here.

A close below 0.8300 would pave the way for a move toward 0.8100 and possibly the 2012 low at 0.7760. Alternatively, a move above the current 2017 high at 0.8851 would negate the potential reversal pattern.

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EURGBP head and shoulders

Leave a Comment:

2 comments
Shyam says

You mentioned EUR will rise if Macron wins. Reality was totally different. EUR fell like a brick.
Any comments?

Reply
    Justin Bennett says

    I never said the Euro would rise if Macron won. This is what I said…

    “With the run-off results just in showing a Macron victory, one would think the single currency is heading even higher from Friday’s close. However, the risk of a “buy the rumor, sell the news” type of reaction does jeopardize that view.”

    In other words, his victory was already priced in, hence the selloff we’re seeing now.

    Reply
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