Weekly Forex Forecast (November 6 – 10, 2017)

Following a five-day consolidation period, the EURUSD faltered on Friday dropping 86 pips from the session high. It marked the second day in a row that buyers had breached 1.1670 intraday yet failed to close prices above the level into the 5 pm EST close.

I mentioned the 1.1670 resistance area on Tuesday as the single currency was testing it for the first time as new resistance. So far, the level has held as resistance on a daily closing basis, which leaves my bearish bias intact.

For those still on the sideline, I’m not so sure the EURUSD will reach 1.1670 for a third time.

I pointed out this 4-hour channel (below) inside the member’s area last week. At the time the pair was trading at 1.1645 and had not yet broken below channel support.

Friday’s 4-hour candle that closed at 1 pm EST sealed the deal. The 1.1604 close put the pair well below channel support on a 4-hour closing basis.

I would suspect that any retest of the 1.1630/40 area as new resistance will attract an influx of sellers. The next support level comes in at 1.1490, which is one we’ve had our eye on for quite some time.

The 4-hour chart below is just one idea for those searching for an entry. I remain short from just below 1.1875 and have added to that position. I’ll continue to trade this one from the daily time frame.

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Did the GBPUSD break channel support last week?

Perhaps, but it’s too close to call in my opinion. We’ve had this ascending channel on our radar for several weeks now. Last Thursday’s reaction to the BOE decision tagged the support level at 1.3050.

However, the October low near 1.3020 could also put up a fight. With this in mind, I’m going to hold off on entertaining a short position until sellers clear 1.3020 on a daily closing basis.

A daily close below 1.3020 would expose the August low at 1.2770 followed by the June lows near 1.2615.

If this is the next iteration of the downtrend that began in 2014, we could see the pound sterling lose considerable ground over the coming weeks and months. A channel break, should it occur, would target the pattern’s low near 1.2125.

But as we all know, the Forex market doesn’t always play by the rules. As such, it’s best to approach the GBPUSD one level at a time.

On October 30 I commented on the USDJPY range between 113.15 support and 114.35 resistance. At the time the pair was trading at 113.45 and bulls looked like they might be in trouble.

However, despite punching through 113.15 support intraday, the session closed the day (5 pm EST) at 113.15 on the dot. Shortly after that, the pair caught a bid and eventually revisited the 114.35 resistance level on Friday.

We’ll see if this stair step rally can continue into the new week. Buyers do seem to be getting a bit tired at these elevated levels, but as always, the market is in an uptrend until it isn’t.

A daily close at 5 pm EST above 114.35 would expose the next key resistance at 115.40. Alternatively, a daily close back below 113.15 support would pave the way for a move toward 111.60. It would also suggest a possible change in direction.

Keep in mind that 114.35 is a significant resistance area. It capped advances in both May and July, so a daily close above it would be a major victory for bulls.

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The NZDUSD broke a significant support level on October 20. We discussed the breakdown the following Monday as the pair was retesting the former support level as new resistance.

Even Tuesday (October 24) tested the conviction of sellers. But ultimately, the NZDUSD sold off toward our target of 0.6820. In fact, the October 27 session low was 0.6818, just two pips below the May low that we were using as our objective.

Not surprisingly, the pair caught a bid after several days of consolidating above the 0.6820 handle. At the time of this writing, buyers have taken prices back into the 0.6900 region.

So is the downtrend finished?

The answer is an unequivocal no from where I’m sitting. There are never any guarantees in the market, but as long as the New Zealand dollar is carving lower highs and lower lows, I’m going to watch for selling opportunities.

That brings us to the confluence of resistance at 0.6985. It’s one of the more impressive value areas I’ve seen thus far in 2017.

Three levels intersect to form this area. First up is the trend line I mentioned last month. The trend line that extends from the September 2015 low is well worn and helped attract offers on the 23rd and 24th of October.

Next is the horizontal level at 0.6985. While it isn’t as apparent from recent price action, a look at the weekly chart shows how it served as a pivot between April and July of last year. It’s also the 38.2% Fibonacci retracement from the 2015 low to the 2017 high.

Last but not least is the descending channel that spanned the July 27 high at 0.7558 to the October 19 low at 0.7009. It’s more obscure than the other two levels but just as important. The channel floor was broken on October 20 session and should now attract sellers.

It isn’t clear whether or not the NZDUSD will make it as high as 0.6985 this week. If it does, I’ll be on the lookout for a favorable selling opportunity. If it doesn’t, I will wait for a daily close below 0.6820, unless an entry materializes on the 4-hour chart.

A daily close at 5 pm EST below the 0.6820 handle would target the May 2016 low at 0.6675. Alternatively, a daily close back above the 0.6985 resistance area would turn our attention higher. Until that time, I’ll remain bearish the NZDUSD.

Note that the RBNZ rate decision and statement are this Wednesday, November 8 at 4 pm EST. I’m going to hold off on doing anything here until the dust settles following Wednesday’s events.

We looked at the EURJPY last weekend as the pair was testing key support at 131.82. Not only is it a significant support level, but it could also be the lower boundary of a double top reversal.

The pair didn’t make much progress one way or the other last week. Through five days of trading, the EURJPY only managed to gain 41 pips. It leaves the Euro cross dangerously close to key support at 131.82 to start the new week.

From here the plan is the same as it was last week. Until sellers manage a daily close (5 pm EST) below 131.82, the EURJPY is range bound between 131.82 and 134.40.

A break lower would have us targeting the 129.30 area. It’s the equivalent of the current 250 pip range when measured from 131.82 support. It’s also the location of former ascending channel resistance from the December 2016 high.

If sellers were also to manage a break below that level, it could signal a more significant reversal. But for now, we need a daily close below the 131.82 handle before further consideration is warranted.

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