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Weekly Forex Forecast (September 4 – 8, 2017)

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The EURUSD rally looks to be in trouble following Friday’s close. Buyers remain in control for now, but the weekly close below the 1.1875 handle suggests a pullback is likely over the coming sessions.

The 1.1875 level is the 2010 low. It also attracted sellers in early August of this year which kept the pair range-bound until buyers stepped in on August 25th.

I’ve been labeling this level as a “must hold” area for buyers. Note that EURUSD bulls haven’t given back a key level since this rally began in April.

Those levels include 1.0860, 1.1100, 1.1300, 1.1490 and 1.1670. So, if buyers have indeed surrendered 1.1875 to sellers, it would be the first time in five months.

We should have a definitive answer as to whether bears will stand their ground at 1.1875 within the first 24 to 48 hours of the new week.

Although Friday’s break is significant, it’s going to be difficult to secure a favorable risk to reward ratio given that channel support is just 100 pips below current levels. As such, waiting for a close below channel support or even 1.1670 may be prudent.

Either way, Euro bulls appear to be in trouble. It’s going to take a daily close (5 pm EST) back above 1.1875 to reverse the bearish outlook. Until that time, I will favor selling strength but won’t act until a favorable opportunity presents itself.

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EURUSD ascending channel

The GBPUSD spent last week consolidating just below the confluence of resistance at 1.2970. This area is the intersection of a key horizontal level and the trend line that extends from the March low.

So far sellers have held their ground, keeping prices below the region on a daily closing basis. Friday’s candle does carry a hint of bearish sentiment, but the lower wick is too long to call it a sell signal.

I’ll continue to keep an eye on the 1.2970 resistance area in the week ahead. A bearish pattern such as a pin bar could offer a favorable opportunity to get short. I passed on the August 29th pattern given its smallish size relative to the two previous candlesticks.

Key support for the week ahead comes in at 1.2770. The pair may also encounter buyers at last week’s low of 1.2850.

GBPUSD resistance

Following the August 15/16th sell signal, the GBPJPY hit a low of 139.27 before rebounding the same day. As of Friday’s close, the pair is now back to where it started at 142.80.

This is a resistance level that dates back to July of last year. As long as sellers keep prices below 142.80 on a daily closing basis, the immediate downside risk remains.

However, the lack of a proper sell signal has kept me on the sideline. There’s too much uncertainty at the moment to justify an entry, particularly given the way buyers continue to challenge the 142.80 area.

If buyers manage a daily close above 142.80, we could see the GBPJPY retest former wedge support from the 2016 low. Alternatively, bearish price action from 142.80 would re-expose 140.50 with a break there opening the door for a move toward 138.65.

GBPJPY resistance area

Following the break above 4-hour wedge resistance on August 23rd, EURGBP buyers held their ground during the August 24/25th retest as new support. They even managed to push prices higher by more than 100 pips over the next two sessions.

However, as I mentioned in the August 28th commentary, I never buy upside breaks of bullish exhaustion patterns. In other words, if a market presents an exhaustion pattern yet buyers break resistance, I won’t consider going long.

The reason for this rule has everything to do with the potential for false breaks. In my experience, a break like the one we saw from the EURGBP on the 23rd has a 50/50 chance of being a false break. That’s a pure gamble which is enough to keep me on the sideline.

That upside break exposed a new resistance area at 0.9250/70. We discussed the significance of that level on the 28th of last month and again on August 30th. Sure enough, the influx of selling pressure triggered a 150 pip drop last week.

Monday begins with the EURGBP hovering just above key support at 0.9140. This is the 2016 high and is, therefore, a must hold level for buyers. If the pair closes below it, our attention will shift to channel support near 0.9030/50.

EURGBP ascending channel

I don’t trade the CHFJPY often. In fact, it hasn’t been on my radar for most of 2017. However, a comment from someone last week brought this potential head and shoulders pattern to my attention.

As you can see from the chart below, the left shoulder and head of the structure are complete. The only piece that remains uncertain is the formation of the right shoulder.

With that said, as long as 115.00/15 holds as resistance on a daily closing basis, there’s a good chance the right shoulder will finish forming within the next few weeks.

A daily close below 112.50 would confirm the 600-pip reversal pattern and expose the next key support at 110.20. It would also open up the measured objective which comes in just below the April swing low at 107.70.

The only reservation I have about this possible reversal pattern has to do with the highs from January. In my experience, the best head and shoulders formations tend to develop at extreme highs without much price action to the left of the structure.

Still, the shape of the CHFJPY since May does hint at exhaustion from buyers. As long as the 115.00/15 area continues to cap advances, the potential for an extended move lower remains elevated.

For full disclosure, I entered short last week at 114.65 based on the August 30th bearish pin/rejection candle. I will consider adding to the position should sellers manage a daily close below 112.50.

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CHFJPY head and shoulders

Leave a Comment:

24 comments
meir says

thank you for your great analysis, and i am following and reading you emails soon as i get them.
unfortunately i can not spend money wright now on webinars or any other classes. maybe in the
long run. thank you

Reply
    Justin Bennett says

    No problem at all. The free site has plenty of helpful content to keep you busy. Cheers.

    Reply
Roy Peters says

Chf/jpy looks very interesting indeed. Thank you for you analysis rundown.

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    Justin Bennett says

    I agree. You’re very welcome.

    Reply
Damola says

Justin is doing a great job. Thanks for the analysis.

Reply
    Justin Bennett says

    Thanks, and you’re welcome. Always glad to help.

    Reply
Sipho Ndlovu says

i just wanna first thank you for the weekly forecast it does helps a lot, i thought you will also talk about nzdusd. It has broken the head. i want to join you live webinar on Wednesday, would you please send me how can i join and what will be the topic. Thank you for the good work highly appreciated.

Reply
    Justin Bennett says

    You’re welcome, Sipho. There isn’t a lot to say about the NZDUSD. The levels I discussed in the last commentary are still in play.

    You can sign up again here: https://dailypriceaction.com

    Reply
Bentu Frederick says

thanks for the weekly forecast.I love the expertise and the confidence with which you analyse the market.I know you will walk me through.

Reply
    Justin Bennett says

    You’re very welcome, Bentu.

    Reply
Indra says

thanks for explanation justin…its make me confident to trade wisely

Reply
    Justin Bennett says

    Anytime, Indra.

    Reply
Nazmuddin says

thank you Justin, good analysis, it’s help my trading decision.

Reply
    Justin Bennett says

    You’re welcome. Pleased to know it helps.

    Reply
Priceless says

THANKS JUSTIN FOR YOUR GREAT SETUPS. AM ALSO GLAD YOU SHARED YOUR IDEA ABOUT CHFJPY. I MADE THE REQUEST LAST. LETS SEE HOW ALL PLAYS OUT.

Reply
    Justin Bennett says

    You’re welcome. And thanks for the comment about CHFJPY.

    Reply
Femi says

My take on EURUSD is that I will keep a watch on that trade until it gets closer to the confluence area of lower boundary of the channel around 1.1785. a break of that channel and a retest with a rejection candle would build confidence for bears to dominate the market. I would go short below the break of the channel once I spot a rejection candle around it. I am interested more in downward move because of the pin bar within the channel. I can’t wait to trigger a sell, this could be a good time for us this week if worked, all things being equal, as expected.

Reply
    Femi says

    Hi Justin
    I must also commend you for the great work you are doing. Your analysis is top-notch. I appreciate every bit of it. I tried to join the community. My payment was not accepted may be due to the type of card I use. I have a debit master card. Probably my card was not processed properly because it is not a credit card.

    Reply
      Justin Bennett says

      Thanks, Femi. Use the contact page to send me an email and we can figure out why the card isn’t working. Cheers.

      Reply
    Justin Bennett says

    I think that sounds like a good plan. Thanks for sharing.

    Reply
Sandile says

So inspiring man i follow you always

Reply
    Justin Bennett says

    It’s great to hear that. Thanks for following along and contributing.

    Reply
Linda says

What do you think about the possible head and shoulders on the gbp/nzd pair?

Reply
    Justin Bennett says

    Hi Linda, the head and shoulders should occur at a swing high. The one on GBPNZD has formed at the bottom of a multi-year swing low.

    Reply
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