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Weekly Forex Forecast (October 2 – 6, 2017)

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EURUSD bears finally managed a daily close (5 pm EST) below channel support last week. We have discussed the potential for a shift lower since the pair carved out the September 8th bearish pin bar from 1.2040.

Monday’s close of 1.1845 broke channel support along with the 1.1875 horizontal support area. Sellers took control of the following two sessions until buyers stepped up on Thursday and Friday to force a retest of the September 14th low at 1.1837.

Before last week, buyers hadn’t given up a handle since late April. Every time the pair has closed a session above a key level, they haven’t given it back.

It is true that the single currency has dipped below support levels since April. We’ve even seen a few lower wicks pierce the 1.1875 area starting with the August 31st bullish rejection candle.

However, buyers have always lifted the price back above support before the New York close at 5 pm EST. This has been the case since the single currency claimed the 1.0860 handle on April 24th.

This is an important observation because it offers some insight into the September 25th breakdown. While there are never any guarantees, I do anticipate at least one more leg down toward 1.1670.

In fact, I’m partial to a move toward the 1.1490 area and perhaps 1.1300 before it’s all over. I could be wrong, but it would be difficult to deny that the single currency was and still is in need of a pullback.

Any bearish price action from the 1.1840/75 resistance area this week could offer a favorable opportunity to get short. The first target would be the August low at 1.1670.

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EURUSD daily time frame after break of channel support

The GBPUSD continued its moderate pullback last week after finding selling pressure from the 2014 trend line. We discussed this level and the idea of a move lower in the September 17th weekly forecast.

Then on Tuesday, I mentioned how the pair was breaking below 1.3445 support on an intraday basis. Although buyers managed to close the pair back above the level before the 5 pm EST close, they failed to do so again on Wednesday.

Thursday retested the 1.3445 area as new resistance and encountered an influx of selling pressure in the process.

As long as 1.3445 holds on a daily closing basis, the GBPUSD is at risk of pulling back further. The first stop would be 1.3250 with a daily close below that exposing the 1.3020 area.

Alternatively, a daily close back above 1.3445 would suggest that buyers intend to regain control. It would also expose trend line resistance that extends from the 2014 high near 1.3540.

Trading range on the GBPUSD daily chart

As long as the 0.9435 support area is intact, the USDCHF is range-bound. We discussed the 900 pip range on Thursday which is formed by two levels that have held the pair in check since 2015.

Traders should respect the bullish connotations of this range, particularly given the bounce higher over the last three weeks.

There are two key levels I’m keeping an eye on at the moment. The first is the horizontal level at 0.9770. The area has capped every advance since the pair closed below it on May 19th.

It’s also the 38.2% Fibonacci retracement when measuring from the December 2016 high to the current 2017 low.

The second level of interest is the trend line that extends from the current 2017 high at 1.0334. Because this trend line begins at such a prominent high, chances are it will become a factor if tested.

Even if we do get a daily close (5 pm EST) above this confluence of resistance near 0.9800, I’ll need some additional confirmation before considering an entry.

The USDCHF can be choppier than other U.S. dollar pairs. The choppy price action can lead to an increase in false breaks. One way to combat that is to wait for confirming price action such as a pin bar.

I’m going to stay on the sideline for now. A daily close above the 0.9800 area followed by bullish price action during the retest could make for an attractive setup. Alternatively, a close below range support at 0.9435 would shift my focus lower.

USDCHF confluence of resistance on the daily time frame

The AUDUSD hit our target of 0.7820 last week. Those who sold the pair near 0.7980 made 150+ pips per last week’s trade idea.

Not surprisingly the Aussie caught a bid on Thursday. The buying pressure was strong enough to carve a bullish pin bar from the 0.7820 key support area.

However, buyers struggled to capitalize on the bullish formation on Friday and lost more ground ahead of the weekend.

From here a daily close below 0.7820 would signal the next leg lower. Alternatively, a push higher would likely encounter sellers near the 0.7955 area.

Note that 0.7730 is also the 50% retracement when measuring from the May low to the current September high. You’ll also notice that 0.7820 is the 38.2% Fibonacci retracement of the same range.

AUDUSD new range on the daily chart

I haven’t mentioned the EURAUD in quite some time. Like many of the crosses, there hasn’t been much to look at from a technical perspective.

However, that may be about to change. It appears we have a 1,600 pip wedge pattern in the works that if broken could lead to an aggressive move one way or the other.

One of my requirements for trading a break of consolidation is that the pattern must have at least three touches on both sides. As you can see from the chart below, wedge support has managed to do just that.

But we only have two points that form the resistance level. As such, I’m going to wait to see how the pair reacts in the 1.5140 area if tested over the coming weeks.

If sellers reject the advance and this wedge takes on a more definitive look, then we might have something here. I’ll be sure to keep an eye on this one and mention future key support or resistance levels once we have more information.

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EURAUD wedge pattern on the daily time frame

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7 comments
Rob says

Why not take a long position on the AUDUSD after this bullish pinbar at resistance level ? it also made a pullback to more then 50% of the entire pinbar… seems a textbook example of going for a long setup , ? can we not expect a pullback towards the mean ? in this article you seem to give the impression that it is bound to lower to 50 % fibo level instead of up ? I cant quite follow that..is it because it seems to be in the start of a downtrend and has broke below the 50 EMA ?

Reply
    Justin Bennett says

    You could, but I’m not sure I like the idea. Momentum shifted with the Sept. 21 break and the pair is no longer carving higher lows. Also, both the weekly and monthly charts printed a rather large bearish candle recently. That isn’t something I want to step in front of.

    Reply
      Rob says

      Last month printed a bearish pinbar rejected by the 50 EMA , do I see that correct ?… didnt look at the higher TF’s..

      Reply
        Justin Bennett says

        That’s one way to see it.

        Reply
Sydwell says

the requirements of the wedge touching at least 3times in news to me,I will note that down,thanks again Jb

Reply
    Justin Bennett says

    You’re welcome. That’s just one of my rules. It helps give the pattern more definition which can help when trading the eventual breakout.

    Reply
Roy Peters says

Price on the EurCad seems to be clustering as it nears the peak of the wedge.

Thanks.

Reply
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