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Weekly Forex Forecast (October 17 – 21, 2016)

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The EURUSD appears to have made a significant break to end the week. Friday’s session came to a close with the single currency 35 pips below trend line support that extends from the March 10th ECB low.

I mentioned this level on October 13th as an area that if broken, would likely trigger an increase in selling pressure. However, the July low at 1.0950 may keep any losses limited at least in the near-term.

Also, bear in mind that although the pair broke wedge support last week, the price is still contained within the broader range between the 2015 low at 1.0460 and the 2015 high near 1.1700.

But all in all, it would appear that we’re finally beginning to see the EURUSD breakdown from recent congestion. As such, I’ll be keeping an eye out for any compelling short opportunities near the 1.1000 region.

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eurusd-wedge-break

Not surprisingly, the GBPUSD lost new ground last week after the October 7th flash crash put the pair below the 1.2500 handle on a daily closing basis.

However, the more remarkable development last week came in the last three sessions. As you can see in the chart below, the pair carved out three consecutive inside bars, indicating that yet another breakout is forthcoming.

A move lower would likely encounter bids near 1.2000 while critical resistance doesn’t come in until 1.2500. Note that the lows from October of 1984 and May of 1985 at 1.1880 could also attract buyers on a push lower.

gbpusd-range

Despite losing ground for the second week in a row, the NZDUSD formed a bullish engulfing candle on Thursday after finding a bid at channel support.

However, buyers struggled to push the price above recent lows near 0.7130, allowing sellers to carve out a bearish pin bar on Friday.

But the pair is trading too close to ascending channel support to make for a favorable setup. As such, I’ll be on the sidelines until sellers manage a close below this area on a daily closing basis.

The only exception to the idea I just mentioned would be a move back to key resistance at 0.7200, in which case any bearish price action near this area would offer a compelling opportunity to get short.

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nzdusd-ascending-channel

EURCAD has several attractive features at the moment. I’ll cover each one in the following three charts.

First up is what appears to be a fifteen-month head and shoulders pattern. I’ll be the first to admit that it isn’t the best-looking structure, but then neither was the NZDJPY head and shoulders that confirmed in June of last year, and we all know what happened there.

The same can be said about the CADJPY reversal pattern last October.

eurcad-head-and-shoulders-pattern

If we then zoom out even further, the ascending channel that’s been in play since 2012 comes into view.

And given the fact that the pair has moved between these two levels consistently for the last four years is an indication that the next move is likely to be lower.

eurcadweekly2_new

Last but not least is how trend line support – and the supposed head and shoulders neckline – looks on the daily chart.

This will be my focus in the week ahead. A daily close below the level would expose the lows from December of last year near 1.4060.

eurcad-trend-line

NZDCAD ended last week considerably lower after breaking below channel support on September 28th. The pair also closed the week just above the key 0.9300 handle.

From here traders can watch for a daily close below 0.9300 which would open up the door for a move lower toward 0.9090.

Alternatively, a move higher from current levels would likely encounter selling pressure near 0.9550.

All in all, I remain bearish here as long as the NZDCAD is trading below 0.9550 on a daily closing basis.

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nzdcad-support-level

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