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Weekly Forex Forecast (May 18 – 22, 2015)

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EURUSD continues to pull out all the stops, literally. The pair has climbed 925 pips since the April low at 1.0520 with the bulls finishing last week on a high note with a close above the 1.1390 key level.

Friday’s session left us with a bullish pin bar that also turned out to be a bullish engulfing bar. Although not at a swing low, this formation signals that the bulls remain in control, at least for now.

From here we can watch for a buying opportunity on a rotation back to the 1.1390 area which should now act as support. Do keep in mind that this rally is getting a bit overextended on the daily time frame, so sideways price action to start the week is not unlikely.

Summary: Potential to buy Friday’s bullish pin bar/engulfing bar on a retest of 1.1390 as new support. Key resistance comes in at 1.1530.

EURUSD key levels on the daily time frame

GBPUSD has also enjoyed an impressive rally over the past four weeks. The pound has gained 1,100 pips on the US dollar since the multi-year low was set in April.

In the wake of this rally the pair has carved out a well-defined ascending channel that is best seen on the 4 hour chart. Equidistant channels such as this make our job that much easier when searching for potential buying and selling opportunities.

With the pair ending the week at channel resistance as well as key horizontal resistance, we want to wait for a move lower before looking for a buying opportunity. That opportunity is likely to occur in the area of confluent support at 1.5525.

Summary: Watch for bullish price action on a move back to the 1.5525 support area. This area is marked by channel support in combination with the February high. Key resistance comes in at 1.5815. Break that and we could see a move back to channel resistance.

GBPUSD ascending channel on the 4 hour time frame

Like many other pairs, AUDUSD has benefited from USD weakness over the past four weeks. The pair has rallied 600 pips from the triple bottom that was put in between March and April.

The strong close during Wednesday’s session put the pair firmly above the key .8030 level. At that time I mentioned to keep an eye out for bullish price action on a retest of the level as new support.

As expected, the market found resistance at .8160 and later retested .8030 as new support during Friday’s session. Although the bulls were able to keep the pair supported above the key level to close the week, they weren’t able to produce anything that would justify a long position for us.

From a mean reversion standpoint it’s likely that we are still a few days away from seeing a continuation of the current rally. This is evident by our moving averages, which have acted as dynamic support on three separate occasions since crossing over on April 17th.

Summary: Watch for bullish price action as our moving averages begin to move in on the .8030 handle. Key resistance comes in at .8160 and .8295.

AUDUSD key support area on the daily time frame

USDCAD has struggled ever since the bulls lost their grasp of the 1.2380 handle on April 15th. While there isn’t much for us to do at the moment, the 4 hour chart looks to be primed for a breakout over the coming week.

While it’s important for us to let the market make the first move, a break to the upside does appear to present the more favorable risk to reward ratio. The 1.2380 level has also yet to be tested as new resistance which gives us another reason to believe that a break higher isn’t altogether unlikely.

That said, the gradual slide lower over the past four weeks doesn’t offer much confidence for those with a bullish conviction. But as always the market will make the final decision as to which way this pattern will break.

Summary: Wait for a 4 hour close beyond support or resistance and then watch for a retest as new resistance or support respectively. Key horizontal support comes in at 1.1815 while key resistance resides at 1.2380.

USDCAD wedge on the 4 hour time frame

Last but certainly not least is EURCAD. I mentioned this pair at the start of last week noting that we should watch for bullish price action on a retest of 1.3388 as new support.

While we never got that retest, an even more important level is upon us. The bulls managed to push the market higher during Friday’s session to close the week just below the key 1.3765 level.

This level can be seen acting as support in January and later acted as resistance on several occasions between March and April. More recently this level was responsible for rejecting the bullish advance on May 7th.

The price action since March hints at an inverse head and shoulders pattern that is best seen on the daily time frame. If the market does indeed treat this as a reversal pattern, we could be looking at a move to 1.4080 and possibly 1.4480 over the coming weeks.

As always, a close above the neckline is needed in order to confirm the pattern and set up a potential buying opportunity.

Summary: Wait for a daily close above 1.3765 and then watch for a retest of the level as new support. Key resistance comes in at 1.4080 with the potential for a measured move up to the 1.4480 area.

EURCAD potential inverse head and shoulders pattern

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