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Weekly Forex Forecast (November 23 – 27, 2015)

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Just when it looked as though EURUSD was putting on the brakes during Thursday’s session, sellers came swooping in to take advantage of the inflated prices to end the week.

It’s no coincidence that the prior week’s close (November 13th) was 1.0761 and last week’s high was 1.0762. Sellers were clearly staked out in this area just waiting for the right time to strike; and strike they did.

The 1.0658 handle didn’t hold up quite as well as I would have liked to see, however it does appear to have held on a weekly basis.

I still have my short position from 1.1040 as I haven’t seen anything from the bullish camp to make me think that the single currency won’t retest the current 2015 low at 1.0470.

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EURUSD ascending channel on the daily chart

Similar to EURUSD, GBPUSD struggled in the final 24 hours of last week. Not only did the pair give up all of Thursday’s gains, it erased the entire week’s advance as well.

Friday’s price action hints at the idea that the prior day’s close above former channel support was a false break. Of course we’ll need to see how this week plays out, but the way last week ended signals that further losses are likely.

While GBPUSD may offer a favorable short opportunity, there is another pound-based pair that could generate more follow-through in the coming weeks. More on this later.

As you might expect, my bearish bias will remain intact while below last week’s high. Key support comes in at 1.4980 and 1.4740.

GBPUSD false break of former channel support

Is GBPAUD preparing to turn lower after a three-year rally?

While it’s too soon to claim that a major trend change is in the works, the head and shoulders that has been forming since July certainly hints at the idea of near-term weakness.

It isn’t the best looking reversal pattern I’ve seen, but then again neither was the NZDJPY reversal that occurred earlier this year. This reconfirms that chart patterns don’t always have to be pretty to be profitable.

The key here is that the pattern is valid based on three characteristics. The first is that the head is above the shoulders. The second characteristic is that the shoulders overlap one another. And last but not least, the entire price structure formed at a major swing high.

A close below the neckline near 2.0750 is needed to confirm the reversal and set up a short opportunity. Below that, key support comes in at 2.0020 with a measured objective at 1.9300.

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GBPAUD head and shoulders pattern

I mentioned the EURNZD bear flag pattern on Thursday of last week. At the time of that writing, the pair was retesting former channel support as new resistance.

The next 24 hours following that commentary saw the pair lose 180 pips and eventually settle at the 1.6200 handle to end the week. This support level was also mentioned in last week’s post.

The daily chart below shows the price action between October of 2014 and February of 2015. You can clearly see why I believe 1.6200 and 1.5660 will be key factors over the next several weeks.

EURNZD key support and resistance levels

While the initial opportunity from last week’s break is behind us, a close below 1.6200 could offer traders a second chance opportunity to take advantage of any further weakness.

I remain short from 1.6370. Only a close back above former channel support would negate my bearish bias. Key support from current levels comes in at 1.6200 and 1.5660.

EURNZD bear flag on the daily chart

CADJPY remains at the top of my watch list after last week failed to produce a break of the three-month wedge pattern.

While the bulls did manage a 100 pip rally at the start of last week, the final 48 hours erased all but 10 of those pips. This leaves the pair dangerously close to wedge support that extends off of the 2015 low at 87.33.

Given the slope of the pattern, the longer price remains contained, the better for anyone looking to enter short on a break of support, myself included.

I should also note that the November 9th bearish pin bar remains intact. Although the pair found a bid early last week, the high of the pin bar at 93.24 is untarnished.

I’ll be looking lower as long as the pair trades below the head and shoulders neckline on a closing basis. Key support from current levels comes in at wedge support near 91.80 as well as horizontal support at 89 and 87.33.

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CADJPY wedge pattern on the daily chart

Leave a Comment:

2 comments
Sal says

Justin, I like your call on CAD/JPY I had actually gotten in short last week but got taken out on a spike after I set myself up at break even. I decided to get back in today even though I wasn’t wild about the daily candle and let the long term move and trend play itself out. I am shooting for somewhere in the 89.20 range (double bottom off that weekly candle) but I could definitely see it plowing further long term. Thanks for your input and work.

Reply
    Justin Bennett says

    Sal, you’re welcome. I’m glad to hear you are enjoying the content.

    CADJPY appears to be finding some selling pressure at current levels (92.30).

    Reply
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