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Weekly Forex Forecast (October 16 – 20, 2017)

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EURUSD bulls look ready to capitulate following an impressive run so far in 2017. The 1,750 pip rally that began with the January 3 low is the longest since before the mid-2014 landslide that cost the pair 3,500 pips.

We’ve been following this ascending channel (see chart below) for more than a month now. The bearish pin bar that formed at 1.2040 was the first sign that buyers were tiring. Then came the “heavy” price action near key support at 1.1875.

See this post for the three warning signs that a turn lower was likely.

Just last week I commented that the EURUSD would face a new round of selling pressure below 1.1875. This area of resistance has been on our radar for quite some time.

Not only did sellers defend the 1.1875 resistance level on Thursday of last week, but they also showed up again on Friday. In fact, Friday’s session reached a high of 1.1874 before sliding 58 pips into the close.

As mentioned on Wednesday, there’s a chance the pair could be carving a head and shoulders pattern. That said, it’s going to take a daily close (5 pm EST) below 1.1670 to confirm the formation. Until that time, the single currency is range bound.

A close below 1.1670 would pave the way for a move toward the next key support at 1.1490. It would also open up the measured objective just below the 1.1300 handle.

Alternatively, a daily close back above 1.1875 would delay the bearish outlook and expose 1.2040 resistance.

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EURUSD support and resistance on the daily chart

The GBPUSD looked poised for a retest of the confluence of support at 1.3020 last Thursday. That is until news came out that launched the pound sterling higher by more than 100 pips.

I had no stake here, so the sudden spike was of no consequence. As I pointed out last week, I’m more interested in how the pair handles the ascending channel that has been in place since the start of 2017.

That doesn’t mean you can’t or shouldn’t trade the range in the meantime. A price action signal from 1.3250 support or 1.3445 resistance could produce a favorable opportunity.

As for me, I’m much more interested in what’s happening with the EURUSD at the moment. Even the EURGBP looks more appealing than the GBPUSD from a technical standpoint. More on this shortly.

I’m going to sit this one out for now. Given the terminal nature of channel support and long-term trend line resistance, it’s only a matter of time before we get a significant breakout one way or the other.

GBPUSD ascending channel on the daily time frame

USDCHF bulls are refusing to go down without a fight. The pair carved a bearish pin bar on October 6 after testing the confluence of resistance just above 0.9770.

However, as mentioned last Tuesday, sellers failed to close the October 6 session below the 0.9770 horizontal level. That left me on the sideline as I didn’t want to sell into a level that was still serving as support.

But there’s another reason I’m not interested in selling the USDCHF.

Apart from being slightly bearish the EURUSD, the USDCHF is coming off a multi-year range low. The 0.9435 area has attracted buyers since August of 2015 and did so again in May of last year.

In fact, it was a 110 pip bullish pin bar on May 3, 2016 that triggered a move back to the range ceiling at 1.0330. And considering the pair is once again coming off this long-term support at 0.9435, there may not be much supply at or near current levels.

As always, a market is range bound until it isn’t. So as long as the 0.9435 area holds as support on a daily closing basis, we have to respect the idea of a move back toward the range top at 1.0330.

USDCHF confluence of resistance

On the 5th of October, we looked at two resistance levels that could trigger a reversal for the EURGBP. The first was 0.8925 and the second 0.8980. However, I mentioned in that commentary that I suspected bulls wanted to take prices to 0.8980.

Just 24 hours later that retest came to fruition. That turned our attention to the 0.8980 handle last weekend. The idea was to watch for bearish price action for a return to 0.8744.

Thursday’s session reached a high of 0.9032 just before a sharp selloff that would eventually close the pair back below 0.8980. This resulted in a bearish rejection candle and a quasi-engulfing pattern if you use the candlestick’s range.

From here I favor a move back toward the September low at 0.8744. A break below that would target the 0.8600 handle and perhaps even the current 2017 lows near 0.8370.

Keep in mind that all of this is unfolding following the break of channel support on September 12. That was a significant breakdown in the sense that it ended the uptrend which began in May.

The 0.8880/90 area could also attract a few bids on the way down. But this could offer an opportunity to get short if you missed an entry during Thursday’s selloff.

As always, the decision is yours. My preference is to continue to watch for selling opportunities for an eventual retest of last month’s low at 0.8744.

And because of the September 12 break of channel support, my bias will remain tilted toward the current 2017 lows near 0.8370. It would take a daily close above 0.8980 to alter that bias.

EURGBP bearish rejection candle from key resistance

We discussed the EURAUD cross in the October 1 weekly forecast. At the time the pair was moving to retest wedge resistance near 1.5140.

A few days later buyers managed a daily close above the level. However, I wasn’t interested in buying the pair given the fact that prices were more than 100 pips above the mean as measured by the 10 and 20 EMAs.

When a market becomes overextended to the upside, you have to ask yourself: who is left to buy?

The EURAUD gave its answer on Thursday when sellers closed the pair back below the key level. That signaled a false break to the upside which is a sell signal in and of itself. I made a similar comment in the member’s area as soon as Thursday’s session closed.

A false break on one side of a pattern usually results in an extended move in the opposite direction. If the EURAUD stays true to form, it’s only a matter of time before wedge support gives way to lower levels.

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EURAUD false break of wedge resistance

Leave a Comment:

33 comments
Anetor E.K says

Thanks Justin. U ar a Genius.

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    Justin Bennett says

    You’re very welcome.

    Reply
Roy Peters says

The UsdChf pair seems to be whipsawing and consolidating. I expect a move lower to that support. However the market may have other ideas.

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    Justin Bennett says

    Perhaps, but I’d rather take a ‘wait and see’ approach.

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Sydwell says

If the market becomes overextended,you must ask yourself “whose left to buy”….ask yourself that,you definitely won’t buy that pair,I’m short on EU cos it looks set to break that ascending channel on way or another only a matter of time,thanks Jb

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    Justin Bennett says

    You’re welcome.

    Reply
Darius says

About eurusd I think that there will be strong support before 0.8744 because there is trendline.
conecting something like 2015 11 22 and 2017 09 27 lows.

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    Darius says

    I meant eurgbp

    Reply
Mr.Quoc says

Thank you so much

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    Justin Bennett says

    Anytime. Thanks for commenting.

    Reply
Darius says

I do not get this overextended stuff. Why do they care if this is overextended? If the target price is lets say 1.55822 then even if it is overextended you bought cheaper, you sold high. So that means you should by using this logic.

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    Justin Bennett says

    Do a search on this site (right sidebar) for mean reversion. It’s a concept that has been around for a very long time; not something I made up.

    Reply
      Darius says

      thank you, will need to take a look

      Reply
Michele says

Ottima analisi dettagliata e precisa

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Abovee122 says

Great job you are doing @JB. All your analysis are on point.
The EU is weaker than other pairs now. But it will still retrace up to 1.1900 area before it will fall. The EURAUD will also still fall but it will retrace a litlle about 50 to 100 pips before finally falling to the bottom. All I see is by Tuesday or Wednesday we would have gotten a clear picture of the market to get the best opportunity.

What is JB view about AUDNZD. I see an opportunity to go long at the present level having gotten a good support this last week. What do you think boss?

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    Justin Bennett says

    Glad to hear that. I don’t have an opinion on AUDNZD at the moment.

    Reply
Joe says

Pls how do I get signals from you, I am newbies and I need signals

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    Justin Bennett says

    I don’t offer signals. If you’re truly passionate about trading, I suggest you learn how to trade rather than just follow someone esle.

    Reply
khanyi says

Please help me I need a reliable broker

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KnightHawk says

Appreciate your insight!!!! Have a great week!

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    Justin Bennett says

    Always a pleasure. Same to you. Cheers.

    Reply
AFEEZ says

First time of reading details analysis of your price action. I am so much impressed and appreciate your efforts. Your analysis is an eyes opener for the trading week and also an insight for those ready to learn naked price action. thank you very much.

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    Justin Bennett says

    That’s great to hear. Let me know if you have any questions.

    Reply
Femi says

Hi Justin! Your analysis is top notch on eurusd. Pls kindly look into eurjpy. You discussed it last week I suppose?

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Zoey says

Thanks you with the weekly forecast, is really helping. Your analysis is great!
I hope to have more weekly commodities forecasts ( and/or daily commdities setups): gold, silver, oil,…

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    Justin Bennett says

    You’re welcome. I only trade currencies.

    Reply
      Zoey says

      I start learn to trade, thanks Justin for your lessons, it is very helpful!

      Reply
Steven says

It toke me some time to reconise the false breakout but thanks for confirmation.

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Peter says

Your analysis is impeccable, thank you.

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Cho Cho Nwanne says

Sir you are doing a very nice job here.. But Still can’t watch your webinar, couldn’t load.

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