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Weekly Forex Forecast (May 9 – 13, 2016)

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EURUSD lost ground last week after carving out a bearish pin bar from former channel support that extends from the 2015 low. I mentioned this level on Wednesday just before the pair lost an additional 90 pips.

I’ll maintain a bearish bias so long as the pair remains below former channel support (see chart below) on a daily closing basis. Only a close above this level would open the door to higher prices.

For the current week, EURUSD will likely catch a bid at the 1.1340 handle if tested. A break below this level would expose the April low at 1.1210.

With the pair relatively congested at current levels, those interested in trading the Euro may find some of its crosses more appealing. I simply don’t see an opportunity for a sustained move higher or lower for the Euro versus the US dollar, at least not without a proper catalyst.

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EURUSD bearish pin bar at key resistance

The fate of GBPUSD is uncertain after Friday’s close back below the trend line that extends from the August 2015 high. This break occurred after the pair failed to hold above the 1.4670 handle on May 3rd, a session that formed a bearish engulfing candle that spanned 240 pips.

I’ve mentioned the 1.4670 level on several occasions as one that GBPUSD would need to break to sustain higher prices. And although last Tuesday’s price action broke above the level, it failed to hold the break on a closing basis.

However, we may see a bid form near the 1.4390 area in the week ahead. But the real question is, how much follow through will this level garner, if any?

I’ll continue to stand aside until the pair either closes above 1.4670 or closes below the 1.4050 handle.

GBPUSD bearish engulfing pattern on the daily chart

NZDUSD offers what is arguably the best opportunity in the week ahead. Although the price action since January 20th has been relatively bullish, the combination of technical patterns that have developed recently points to further losses.

I mentioned the potential for a double top on Friday, noting that a break of the neckline would expose a confluence of support at 0.6550. See last week’s post for an in-depth look at the price structures that have developed in recent weeks.

From here traders can watch for a close below the 0.6806 handle which would confirm the double top and expose the objective at 0.6550. On the other hand, a bounce from current levels would delay the bearish bias and possibly expose 0.6880.

Keep in mind that the RBNZ is set to release its financial stability report followed by a speech from Governor Wheeler between 5 pm EST and 9 pm EST on Tuesday. This event could trigger an increase in volatility early in Wednesday’s session.

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NZDUSD possible double top pattern on the 4-hour time frame

EURGBP is another pair I’m keeping a close eye on due to the potential for a head and shoulders reversal. I mentioned this pattern last Wednesday just as the Euro cross was testing the 0.7930 handle.

As expected, the subsequent selling pressure caused the pair to lose 50 pips in the following session. And although EURGBP managed to bounce back on Friday, buyers were unable to overtake Thursday’s high, hinting at the possibility of continued weakness.

That said, I won’t entertain a position here until the pair closes the day below neckline support that extends from the March 10th low. Once broken, we can begin watching for selling opportunities for a move toward 0.7700.

Those who are more conservative can wait for a break of the 0.7700 support level before considering a short entry. If confirmed, the measured objective for this pattern comes in at 0.7386.

EURGBP possible head and shoulders reversal on the daily chart

GBPAUD continued to churn higher last week after breaking above former channel support near 1.9300. The pair is now up 360 pips since my commentary on April 29th and looks set to close the open gap from February 19th of this year.

From here traders can watch for buying opportunities for a move back to the February 19th closing price of 2.0125. This level also lines up with channel resistance that extends from the September 2015 high. See the post at the link above for more information on this setup.

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GBPAUD open gap on the daily chart

Leave a Comment:

7 comments
Solomon Oyeniyi says

Justin, great analysis for the week ahead.
Thanks.

Reply
nick robinson says

gbpchf daily has a nice inverse head and shoulders to look at aswell

Reply
    Justin Bennett says

    Thanks, Nick. We’ve actually been talking about this one in the community for a few days now.

    Reply
chatchai says

thank so much

Reply
    Justin Bennett says

    You’re welcome. 🙂

    Reply
Rajat Puri says

Firstly would like to thank you for making such a huge difference to our lives by sharing your knowledge with us. I have just one query. When should we enter after a pattern gets confirmed and activated with a technical breakout. Should we wait for the last kiss pull back or enter at market.

Reply
    Justin Bennett says

    You’re welcome, Rajat. That’s really up to you as it has to be an entry method that you’re comfortable with and one that resonates with your personality. The “best” way is the one that works best for you.

    Reply
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