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Weekly Forex Forecast (November 7 – 11, 2016)

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The EURUSD looks determined to retest trend line resistance that extends from the current 2016 high at 1.1615. Friday’s close above the 1.1122 handle appears to be significant and could lead to at least another 40 to 50 pips of upside in the week ahead.

With that said, the May trend line will likely put up a better fight than the 1.1122 level did last week. Considering this level extends from the current high for the year and rejected all four previous advances, chances are sellers will be keeping a close eye on the 1.1170/80 area.

While the 1.1122 handle will likely attract bids on a move lower this week, I’ll pass on buying the pair given my longer-term outlook for the Euro.

Be sure to take extra precaution this week given the US elections. In fact, taking a seat on the sidelines wouldn’t be a bad idea given the expected volatility and widening spreads.

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eurusd-key-levels

At 340 pips from open to close, last week’s GBPUSD rally was the largest since late February. The pair first managed to climb above the 1.2325 area on Thursday and finished off the week with a close above the 1.2500 handle.

So does this mean that the British pound is in the clear?

Not quite. It’s important to remember that as impressive as last week’s rally was and could continue to be, the pair is still in a steep multi-year downtrend.

From here I’ll be watching to see if buyers can manage a retest of the post-Brexit low at 1.2790. Bearish price action in this area could offer a compelling opportunity to get short.

But for now, I’m on the sidelines until something favorable materializes.

gbpusd-resistance

The AUDUSD has wedged itself (quite literally) into a corner. At most, this pattern has another twenty trading days worth of room. However, I doubt we’ll make it that far before either buyers or sellers decide its fate.

As you can see from the chart below, the upper boundary extends from the April high at 0.7834 while support comes from the current 2016 low at 0.6826.

Although the price action below may look messy and even random, I still believe that this structure could produce one of the best setups of the year.

With that said, the four-year downtrend keeps me constrained to a downside break. The decision to only entertain a bearish move is reinforced by the October 19th false break above trend line resistance.

I’m on the sidelines after having taken a couple of short trades over the last two months. A close below trend line support would expose 0.7565 followed by the September lows at 0.7440.

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audusd-wedge-pattern

NZDUSD has a few interesting formations occurring at the moment. The first is the potential five-month head and shoulders pattern that I first mentioned on November 2nd.

Keep in mind that the multi-month reversal pattern is far from confirmed and thus extremely speculative. For now, it’s merely a watchlist item.

The second price structure is the ascending channel that extends from the October low at 0.7034. I commented on Friday how buyers just recently began struggling in the 0.7340 area, which is simply an extension of trend line support from the October lows.

The 4-hour chart below illustrates how this pattern is coming together.

nzdusd-channel

At the top of last week’s range, we have a 1-hour structure that might signal exhaustion. On Friday I mentioned the idea that a close below this trend line could force buyers to give back at least a portion of recent gains.

Despite a few dips below the 1-hour level on Friday, buyers managed to keep the pair out of trouble ahead of the weekend.

This one still needs more time before it’s ready to give us a signal one way or the other, but it’s something I’m keeping a close eye on.

nzdusd-1-hour-chart

I don’t trade the EURCAD often, but the recent intraday price action is beginning to look attractive. I mentioned this ascending channel last week, noting that a close below support could re-expose the trend line that extends from the December 2015 low.

See the Weekly Forex Forecast from October 17th for more details.

At the moment the pair is bumping its head on the September high at 1.4924. But as I mentioned last week, a move higher from here would quickly find sellers at the 1.5000 handle.

Regardless of where the rally finally capitulates, I won’t be interested until we see a close below channel support. At which time I will reevaluate market conditions to decide if it’s worth pursuing.

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eurcad-ascending-channel

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