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Weekly Forex Forecast (July 20 – 24, 2015)

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Last week’s selling pressure was a welcomed sight for EURUSD bears. This was particularly true considering the pair has lacked any real conviction over the last several weeks.

However sellers are about to face their first real test since the pair broke channel support on July 1st as the market ended last week at the 1.0820 key support level. This level can be seen acting as resistance in April and later acted as support in late May.

Although the situation in Greece appears to be easing, it is far from over. Therefore it’s a good idea to be vigilant if trading the EURUSD and expect increased volatility as the uncertainty surrounding Greece remains high, which is likely to be the case for some time.

Summary: A move back to recent lows at 1.0960 combined with bearish price action could make for a favorable short setup. A daily close below 1.0820 would expose the next key support level at 1.0658. Alternatively, a break back above 1.1050 would indicate strength and open up the door for a move higher.

EURUSD break of channel support on the daily chart

GBPUSD continues to defy the recent break of channel support. Rather than succumbing to USD strength, the pair has in fact rallied 140 pips since making the break of key support on July 7th.

This relative strength has kept me away from the pound at the moment as I don’t believe we’ll see much follow-through to the downside, at least not without a proper catalyst.

It’s always important to evaluate every setup in terms of the relative strength or weakness of each currency. In other words, if you want to play on USD strength (a short in terms of GBPUSD), you are likely better off going with something like AUDUSD.

How did I arrive at that currency pair?

A quick glance at the GBPAUD rally indicates that the pound has been stronger than the Australian dollar lately. Therefore an AUDUSD short will likely yield better results than a GBPUSD short, at least in the short-term.

Summary: On the sidelines for now as I prefer to play USD strength through a USDCAD long position or even an AUDUSD short position. Key resistance comes in at 1.5680 while support resides at 1.5500.

GBPUSD break of channel support

EURGBP has been range-bound since March and hasn’t provided much in the way of a favorable setup since that time. However last week’s pound strength and Euro weakness finally gave us follow-through to the downside.

The break below trend line support on July 14th was the start of the weakness, followed by the break below the March low which led to fresh eight-year lows on July 16th. Needless to say last week was a big one for EURGBP.

From here we could see a much larger decline take shape over the next few weeks and months. That said, I do expect some consolidation around current levels and possibly a retest of the area between 0.6986 and 0.7013, which should now act as new resistance.

Note: I am short from 0.7058 after the pair broke down from trend line support, a level that had been held on a daily close basis since March 11th.

Summary: Watch for a selling opportunity on a retest of the area between 0.6986 and 0.7013. Key support comes in at 0.6740 with a longer-term target of 0.6540.

EURGBP break of key support

AUDJPY continues to be one of my favorite currency pairs with untapped potential and I am still short from the July 1st bearish pin bar. But before we get into the details, it’s important to take note of the broader pattern that broke down recently as it’s this breakdown that is most likely to provide follow-through for any short positions.

AUDJPY weekly chart

AUDJPY break of ascending weekly channel

As you can see from the chart above, the pair has now closed below former channel support for the past two weeks. This gives those with a bearish outlook confidence, but true conviction to the downside has been hard to come by since the pair broke below the level on July 6th, plummeting 170 pips from the July 26th closing price.

However, as long as former channel support (new resistance) holds on a daily close, I will maintain my bearish bias here. In addition to former channel support, the 91.90 horizontal level appears to be taking on a new role as resistance as well, capping several attempts at a move higher over the past two weeks.

Immediate support from current levels comes in at 91.00, with a break there exposing 90.20 and then 89.35. If we begin to see a move to risk-aversion, the 86.40 area is a very real possibility over the next several weeks. This area is the 38.2 Fibonacci level from the 2008 low to the 2013 high and is also represented by the 2013 lows.

Summary: Those not currently short can watch for selling opportunities below 91.90. A more conservative approach would call for a daily close below 91.00 with bearish price action on a retest as new resistance. Alternatively, a daily close back above former channel support would expose higher prices. Key support below 91.00 comes in at 90.20, 89.35 and 88.50.

AUDJPY key levels in focus after downside break

I have been bearish on CADJPY for some time now. It all started with the balancing act that was taking place above the key 100 handle. The four-month rally appeared to be running out of steam in mid July, and sure enough the pair lost its balance on June 29th, plummeting more than 170 pips from the June 26th closing price.

This gap down, which went unfilled, fueled additional selling that soon saw the pair below channel support. Fast forward to today and we see CADJPY trading at levels the pair hasn’t seen since mid April.

To the upside, immediate resistance comes in at the 97 handle while support can be found at the recent lows of 94.50. Below that would see the fifth retest of trend line support from January of 2013.

As a side note, the broader picture for the pair looks to be “topping” in nature, with the pair carving out a lower high last month. Only a break below the two-year trend line around 93.00 would give this idea further conviction, but would also mean a much larger correction for the pair with a possible revisit of the 77.00 area over the next several years.

Summary: Watch for selling opportunities while below 96.12. Key support comes in at 94.50 as well as trend line support from 2013 at 93.00. A break there would open up the possibility of a much larger correction for the pair.

CADJPY key support levels in focus

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3 comments
BensonAng says

Thanks for the wonderful awesome weekly update, im still holding on to the short CADJPY & AUDJPY trade call since your first postings.
Thank God theres Justin’s update & guidance.

God blessed.

Reply
    Justin Bennett says

    You’re welcome. Glad you enjoy it.

    Justin

    Reply
Justin Bennett says

Hi Laura,

My opinion of EURGBP remains the same, although there isn’t much to do at the moment.

Justin

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