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Weekly Forex Forecast (October 15 – 19, 2018)

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Important: I use New York close charts so that each 24-hour period closes at 5 pm EST.

Click here to get access to the same charts I use.

The range-bound price action for EURUSD continued last week with the single currency closing back above 1.1530. Sellers managed to clear the level earlier this month, and it did hold as resistance for several days.

However, Thursday’s close back above 1.1530 illustrated once more how indecisive EURUSD has become.

It’s no surprise that buyers defended 1.1530 as new support before the weekend. As long as the pair remains above it on a daily closing basis (using a New York close chart), the euro could claw back some of the late September losses.

Does that mean I’m buying EURUSD this week?

No, it doesn’t. Although the pair could regain some lost ground while above 1.1530, the fact is that this market lacks conviction. Neither buyers nor sellers seem ready to commit themselves which has been the case since June.

You could attempt a range trade here, but given the euro’s disrespect for key levels lately, I’d say your time and money are better spent elsewhere. Of course, that’s only my opinion. What matters most is following the set of rules you’ve devised for yourself.

Key resistance for the week ahead comes in near 1.1620. A daily close above that would expose 1.1720 which is yet another area that failed to hold a breakout last month. As mentioned above, key support for this week comes in at 1.1530.

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EURUSD daily time frame

Everything seemed to be going right for GBPUSD bulls last week. That is until Friday’s session came around.

After tagging the September 20th close near 1.3260 on Friday, buyers lost their nerve. Not only did the pound give back 75 pips before the weekend, but sellers also carved a bearish engulfing range in the process.

That isn’t an encouraging sign for GBPUSD bulls. It doesn’t mean the current rally attempt is over, but it does suggest that we may see this market pullback early this week.

If the pair losses some steam between Monday and Tuesday, I’d expect the 1.3050 area to attract a few buyers. The level served as a pivot in recent weeks and I have no reason to believe it won’t do so again if tested.

A daily close (New York close chart) below 1.3050 would expose 1.2940 and perhaps the confluence of support near 1.2800. Alternatively, a close above 1.3260 could extend prices to the next key resistance at 1.3450.

Just like the euro though, this market lacks conviction. Combine that with the volatility risk presented by ongoing Brexit negotiations and you have another situation where your time and money may be better spent elsewhere.

GBPUSD key levels

USDJPY was dragged lower last week by a slumping global equity market coupled with a weaker dollar. It would seem those who believe USDJPY is no longer a benchmark for risk appetite are gravely mistaken.

Of course, last week’s decline comes nowhere close to the bloodbath on the S&P 500, but the USDJPY still offers a way for Forex traders to take advantage of fear-based moves.

Even EURJPY bears had something to say last week despite a relatively stronger euro. See the October 10th commentary for more on EURJPY.

On Tuesday of last week, I wrote a post about USDJPY with a fairly bold title. I admit, using the word “collapse” when describing a market’s structure is a bold move, especially one that’s been trending higher all year.

But I had my reasons which I outlined in Tuesday’s commentary. Essentially, the market’s inability to extend the October rally past the 114.50 mark was a red flag. Not because it signaled a trend reversal, but because it was disproportionate to recent swing highs.

In case you missed Tuesday’s post, here’s the first chart I presented:

USDJPY swing highs and lows

Both the July and October swing highs you see above are disproportionate to the May high, especially this month’s move. As I mentioned on Tuesday, if buyers weren’t beginning to struggle, USDJPY would’ve targeted 115.30 or even 116.00 this month.

That didn’t happen. Instead, we got a reversal pattern of sorts at 114.50 followed by a daily close below 113.15. Buyers had little interest in defending the July high near 113.15, which meant Tuesday’s close opened the door to 112.15.

So far, USDJPY bulls are hanging on to 112.15 support as I thought they might. It’s why I highlighted the 112.15 level last week.

Despite holding above it on a daily closing basis (New York 5 pm EST), I see no indication of a forthcoming bounce and every reason to stay cautiously bearish. My stance could change as things unfold, but as of now, I’m no less pessimistic about USDJPY than I was early last week.

If you’re searching for an opportunity for this week, it would be prudent to wait for a daily close below the 2018 trend line support. The level extends from the year-to-date low which suggests a break of this level could turn the tide in favor of sellers.

And if you’re still short from Wednesday’s retest of 113.15 resistance, a close below the 111.80 area could offer a chance to scale the position.

Below trend line support we have 110.80. It’s by no means a perfect level, but it did play an important role throughout 2017 and again beginning in June of this year. 110.80 is also the 38.2% Fibonacci retracement of the year-to-date range.

A close below 110.80 would open the door to 109.80 followed by the 108.50 region. And if USDJPY should bounce from 112.15 and retest the 113.15 resistance area this week, I will be on the lookout for a sell signal.

USDJPY key levels on the daily chart

I wrote about U.S. crude oil in last Sunday’s forecast. Instead of suggesting longs in favor of the longer term uptrend though, I warned against buying oil at its current price of 74.20.

My concern was two-fold. On the one hand, we had an ascending channel on the weekly time frame. The market had just retested resistance for the third time and also carved a bearish rejection candle in the process.

The second reason I turned relatively bearish had to do with the upward sloping flag on the daily time frame. In my experience, the implications of an upward sloping flag are similar to a rising wedge in that they both suggest exhaustion from buyers.

I also posted a recap of my thoughts on crude oil as well as what I posted in the member’s community last week. You can see that post here.

For the week ahead, key support comes in at the 70.00 handle with key resistance up near 73.00. Given the two technical structures mentioned above, I favor selling retests of new resistance for an eventual move to the 67.00 support area.

Note that there’s a confluence of support in the 67.00 region. It’s the intersection of a key horizontal level and ascending channel support. A close below that area, however, would suggest a more significant pullback is on the horizon.

Crude oil daily time frame

Gold bulls punched a big hole in the bearish narrative last week. Thursday’s pop higher not only cleared the trend line from the April high, but it also closed the day (New York 5 pm EST) above the 1215 area.

You can see how buyers defended 1215 during Friday’s session. As long as the market remains above this level on a daily closing basis, gold stands a very good chance of reversing the six-month downtrend.

That said, if I were you, I’d remain (cautiously) bullish as long as the market stays above 1200 on a daily closing basis. That seems to be the line in the sand for now.

If you’re hesitant to jump aboard the gold bullish bandwagon, consider this…

Last week’s bullish close completed two consecutive weeks of gains. Gold hasn’t had two consecutive bullish weeks since April. And while it didn’t occur at the very bottom of this swing low, last week’s price action also carved a bullish engulfing range.

Furthermore, consider that although this month is far from over, if October closes positive it would be the first positive month since March. In other words, it would break a six-month losing streak.

A word of caution to would-be buyers though. As a result of Thursday’s surge, the daily mean as represented by the 10 and 20 EMAs is down near 1200. With this in mind, we may see further consolidation before the next leg higher materializes.

Key resistance moving forward is found at 1235. This is the December 2017 low and an area that served as a pivot throughout July of this year. A close above that would expose the 1260 area.

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Gold daily chart

Leave a Comment:

21 comments
Nazmul Hasan says

Thank you sir…

Reply
    Justin Bennett says

    You’re welcome, Nazmul. Have a great week!

    Reply
Thulani says

Outstanding Material

Reply
    Justin Bennett says

    Thanks for that. Glad you’re finding it helpful.

    Reply
Mohd Asri bin abdullah says

Good explanation.. tqvm Justin..

Reply
    Justin Bennett says

    Cheers. You’re very welcome. Have a good week.

    Reply
Sherly says

EU rebound to 1.1620

Reply
South Africa says

Once again thanks for your enlightenment sir, but I have two questions. The EURUSD & GBPUSD are positive correlation pairs yet they’re both telling deferent stories, but the GBPUSD is in alignment with its negative correlation pairs like the USDJPY & USDCHF. My question is, is it normal for pairs that correlate together to tell difference stories at time? And I also see a patter that looks like Head and Shoulders forming on the EURUSD on the D1 chart and W1 am I correct?

Reply
    Justin Bennett says

    Correlations are dynamic, never static. You’re better off analyzing a market on its own merits than trying to rely on correlations.

    Reply
    likho says

    Also stuck in that perspective about these pairs but I’m choosing to focus on gbpusd

    Reply
Manuel says

Thank you sir…

Reply
    Justin Bennett says

    You’re welcome, Manuel.

    Reply
Augustus says

Hello Mr justin,i have tried reaching you both on instagram and n whatsapp but no reply from you

Reply
    Justin Bennett says

    Use the contact form on this website.

    Reply
      Augustus says

      I have used it twice,still no reply.

      Reply
        Justin Bennett says

        I try not to answer emails on the weekend in an attempt to have a life outside of this website. 😉

        I’ll respond this week.

        Reply
Jane Winston says

Thanks for the great analysis Justin! I have been loving this month so far as a short-medium trader, so many swings to ride. I find your analysis very helpful in my trade selection & trade management. Keep up the great work.

Reply
    Justin Bennett says

    You’re welcome. The price action has certainly improved over what we saw in September.

    Reply
Damilare says

Thank your sir.

Reply
    Justin Bennett says

    My pleasure.

    Reply
Muhammad kolo says

Is good to be good

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