Let’s kickoff the weekly forecast with a pair that everyone is surely watching these days – EURUSD. As I mentioned on Friday, the bulls face a critical test to start the new week. In fact they face two critical tests should the first level fall.
The pair finished the week 30 pips below upper level resistance as shown in the chart below. This provides us an opportunity to watch for bearish price action early in the week.
If this level fails to hold we can turn our attention to the 1.1035 handle, a level that has acted as strong resistance on three separate occasions since mid March. Any bearish price action at this level could present a favorable selling opportunity, while a daily close above it could trigger a larger rally to 1.1250.
Summary: Watch for bearish price action at 1.0835 on a test of upper level resistance. If this level fails to hold watch for bearish price action on a retest of 1.1035. Key support comes in at 1.0655 and the multi-year low at 1.0470.
Next up is GBPUSD, a pair that gave some mixed signals at the end of last week. Friday’s price action on the 4 hour chart hinted at the idea of a continued rally above the 1.4980 key level.
However the lack of bullish price action on a retest of the level as new support left us on the sidelines. Now it seems the pair is more likely to see further downside after carving out a bearish pin bar on the daily time frame.
If we throw the weekly chart into the mix we can see a bullish engulfing bar that formed last week. An engulfing bar at a swing low like this can often signal a bottom, however the fact that the pair failed to close above 1.4980 doesn’t offer much bullish conviction.
So what does all of this mean?
It means we need to see more from the pair before putting any capital at risk. Always remember that your first job as a trader is to protect your capital, making money comes second.
Summary: On the sidelines for now waiting for a better signal to go short.
EURGBP is a pair that I first mentioned on April 9th. What initially caught my attention was the break of trend line support on April 8th which eventually lead to a confirmation of the double top between March and April.
Although the double top has been confirmed, the pair has remained buoyant as it continues to range between .7162 and .7225. This leaves us in need of further bearish conviction before considering a short entry.
From here we can watch for bearish price action on a retest of .7225. However do keep in mind that any push to the downside may be limited by key support at .7162.
Those looking for a more sustained move to the downside can wait for a daily close below .7162 and then watch for bearish price action on a retest as new resistance.
Summary: On the sidelines for now waiting for a daily close below .7162 followed by a retest as new resistance. Key support comes in at .7014. A daily close above .7225 would negate any short-term bearish momentum and could trigger a move back to .7290.
USDCAD has run out of steam following a nine-month rally that resulted in a massive gain of 2,200 pips. The pair first stalled at 1.2800 in late January and subsequently retested the level on several occasions over the month of March with no success.
The support area during this time was equally impressive. The 1.2375 area held the line between late January and mid April. However the bearish pressure proved too strong on Wednesday of last week as the pair closed 90 pips below the area that had previously been so strong.
We have yet to see the pair retest broken support as new resistance, which brings us to the outlook for the coming week. From here we can watch for bearish price action on a retest of 1.2375 as new support. Any rotation lower from this area would find strong support between 1.2000 and 1.2046.
Summary: Wait for a move back to 1.2375 and then watch for bearish price action. Key support comes in at 1.2046, giving us 330 pips to work with.
Last but not least is AUDCAD. I mentioned this pair at the start of last week noting the potential head and shoulders pattern that has developed on the weekly chart.
For now the market is holding firmly above the neckline at .9410. Only a daily close below this level would confirm the reversal pattern and could trigger a much larger move down to the .8570 area.
Also of note is the descending channel that is best seen on the weekly time frame. This channel started one year ago and has remained strong since.
Given the potential head and shoulders and recent rejection from channel resistance, any bullish momentum will be hard to get behind. Instead I prefer keeping an eye out for selling opportunities on a close below .9410.
Summary: Standing aside for now. A daily close below .9410 would have us looking for selling opportunities to capitalize on the potential for a larger move down to weekly channel support at .8570.
