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Weekly Forex Forecast (October 10 – 14, 2016)

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Last week gave further credence to the notion that the EURUSD is unfit for trading. After losing 57 pips on Thursday and setting a two-month low on Friday the single currency bounced back to end the session higher by 51 pips.

In other words, the volatility and indecisive price action continue.

From here traders can watch for the 1.1200 handle to attract offers while a move lower would likely encounter support near 1.1120. Keep in mind that even a close back above 1.1200 would have to deal with trend line resistance that extends from the 2016 high at 1.1615.

I’m going to remain on the sidelines until the pair can find its footing. Although, I will say that the sideways movement since the broad selloff between 2014 and 2015 is enough to keep my long-term outlook bearish.

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EURUSD daily chart

The consolidation period for the GBPUSD came to an end on October 3rd when the pair closed the day below the trend line that extends from the (former) post-Brexit low.

But the story that made headlines last week was Friday’s flash crash, a move that carved out an intraday low of 1.1991. I had mentioned the 1.20 area as potential support for weeks now so at least we can lean on that as a near-term bottom.

Despite a 450 pip recovery from session lows, buyers ultimately failed to close Friday’s session back above the 1.2500 handle. As such, any retest of this area is likely to attract offers.

Due to recent volatility and the currently overextended prices, I’ll continue to look elsewhere for trading opportunities.

gbpusd-crash

Despite struggling a bit on Friday, USDCHF buyers managed to end the week higher by 70 pips. We discussed the potential for such a move last Monday when the pair was trading near 0.9740.

But as I also pointed out on Friday, the fact that the pair was able to test channel resistance twice last week indicates that offers may be drying up. Of course, it will take a daily close above the 0.9800 area to confirm the breakout.

This one remains on my watch list with a daily close above 0.9800/15 exposing the 0.9950 handle followed by 1.0092. Alternatively, a move lower from current levels would likely find support at 0.9650.

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usdchf-descending-channel

AUDUSD is another pair that seems to be in no hurry to make a move. The Aussie has been range bound against the US dollar since July, confined by a lower boundary of 0.7440 and an upper limit of 0.7750.

On Thursday I commented on the multiple bearish signals over the last few weeks along with the retest of the 0.7565 handle. Sure enough, the pair ended the week just 22 pips above this level.

Although a break from this consolidation has been a long time coming, the terminal nature of the pattern means that a breakout is imminent.

However, the direction of the break is anyone’s guess. But as I’ve said in the past, given the three-year descending channel that’s intact I have to favor the downside for now.

I remain short from 0.7640 with the intention of adding to the position should sellers begin to regain control over the coming sessions.

audusd-terminal-pattern

After weeks of moving sideways with no clear direction, the NZDUSD made a significant break last week. The pair closed below the 0.7200 area to end Wednesday’s session, which turned our attention to downside objectives.

I mentioned the larger ascending channel on Tuesday just as the kiwi was putting pressure on the 0.7200 handle. The week ended with buyers retesting this area (0.7199 to be exact) but soon let prices slide back to 0.7166 to finish out the week.

I’ll be keeping a close eye on the August lows at 0.7200 over the coming sessions. Any bearish price action from here could make for a favorable opportunity to get short.

However, looking at the bigger picture I can’t help but notice the ten-month ascending channel. A close below the 0.7050 area would likely trigger a selloff that could see this 2016 rally begin to unwind.

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nzdusd-channel

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3 comments
Shaon Bhuiyan says

good view of this week. I am more interested in NZDUSD but this week seems more calm.

One question Justin, Which broker you use (mt4) ? (My broker has a different price at GBP.)

Reply
Jim says

Depends on broker type u use,market maker,ecn, ndd..news is the time market maker make money

Reply
    Shaon Bhuiyan says

    Jim,
    I have 3 ECN account with different reputed brokers and all of them have different price at GBP flash crash. one has 800 Pips, another has 1100 Pips and rest is 1600+ Pips!

    Reply
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