Weekly Forex Forecast (Oct 12 – 16, 2015)

by Justin Bennett  · 

October 11, 2015

by Justin Bennett  · 

October 11, 2015

by Justin Bennett  · 

October 11, 2015

EURUSD continues to churn higher inside of this larger eight-month channel. However the bulls are not out of the woods yet as they still face resistance at the trend line off of the August 7th low as well as the September high at 1.1450.

To the downside, support comes in at former range resistance at 1.1280. Break that and we could see the pair return to the September low at 1.1100.

Although the support and resistance levels are fairly well outlined, the recent price action is still a bit too choppy to warrant a trade, at least for me. As such I will stand aside and wait for a more favorable trade setup to materialize.

Summary: From here traders can watch for bullish price action on a retest of the 1.1280 key level. Key resistance comes in at the trend line off of the August 7th low as well as the 1.1450 horizontal level. Do keep in mind that any trade in these conditions is best treated as a range trade, especially while prices remain inside this eight-month ascending channel.

EURUSD support and resistance levels on the daily chart

GBPUSD appears to have made a false break after failing to hold above the key 1.5330 handle during Friday’s session. The pair managed to close above the level during Thursday’s session on the back of a weaker US dollar, however this false break hints at the idea that further weakness is in store.

This is not the first time the pound has failed to respect a level after breaking out. The close below the 1.5170 level on September 29th and again on the 30th looked like a clean break below a support level that had been in place since June.

However the bulls had other plans as the pair spent the next few sessions churning higher and eventually closed back above the level on October 6th.

These false breaks make it harder to rely on raw price action and also question whether or not GBPUSD is the best pair to represent a play on pound weakness. More on this idea with the next two pairs.

Summary: Watch for bearish price action at 1.5330. Key support comes in at 1.5170 and 1.4980. Alternatively, a daily close back above the 1.5330 area would negate the bearish bias and expose the next key resistance level at 1.5465.

GBPUSD false break on the daily time frame

Keeping with the theme of pound weakness, GBPJPY formed a bearish pin bar on Friday at the 184.20 resistance level. This area can be seen acting as support and resistance in late 2014 and more recently supported the pair on several occasions in September.

The only thing that is off-putting about the current setup is the fact that we have trend line support just 200 pips below current levels. This trend line extends off of the October 2014 low and has been tested on three separate occasions since its inception.

However a 50% entry of Friday’s pin bar could still produce a favorable risk to reward ratio. Therefore I like the idea of going short from the 184.20/30 area in the coming week.

In the bigger picture, the idea that GBPJPY recently carved out a major top is still in play. Of course for this idea to materialize we would need to see a break below the twelve-month trend line from October of last year.

Summary: Opportunity to trade Friday’s bearish pin bar. Key support comes in at 182.50 and trend line support from October of 2014. A break below there would open up the potential for a retest of 178.60. Alternatively, a daily close above 182.30 would negate the bearish bias in the short-term.

GBPJPY bearish pin bar at resistance

One of my favorite trade setups going into last week, and the only one that I traded, was the head and shoulders reversal that had been forming on GBPCAD since early August.

The reversal pattern was confirmed on October 2nd, and as you can see from the chart below the neckline was retested as new resistance last week. In fact the retest was so precise that it came within 1/10 of a pip from the September low at 2.0029.

From here a move to the 1.9555 handle looks likely in the coming sessions. This level played a role as both support and resistance in June and July and is also the February high.

A break below this level would expose the measured objective at 1.9100. Do note that this level is particularly close to trend line support that extends off of the August low from 2013.

Summary: For those who are not already short, it is important not to chase. Instead, another retest of the 2.00 area could present a favorable opportunity. Otherwise a close below 1.9555 would be needed to set up a valid short opportunity. Alternatively, a close above 2.0029 would negate the bearish bias and expose the 2.0170 handle.

GBPCAD head and shoulders reversal

I mentioned the five-month trend line that has developed on EURAUD last week, noting that bullish price action in this area could present a favorable opportunity to get long.

While last week’s bearish close does not negate the idea, it does mean that we will need to see an extremely convincing bullish signal at this level before considering an entry.

That said, be sure not to dismiss the possibility of a daily close below the trend line, which would signal a potential change in trend that would offer traders an opportunity to watch for a sell signal to get short.

In the event of a move higher, key resistance comes in at 1.5775 and 1.6250. However if the bears are able to crack this support area, the next key levels of support don’t come in until 1.5140 and 1.4770.

Take note of the 1.5457 handle in the chart below, which intersects nicely with trend line support. This level can be seen acting as support in 2007 and later rejected an attempted rally in 2010.

Summary: Watch for bullish price action above 1.5457. Key resistance comes in at 1.5775 and 1.6250. Alternatively, a daily close below the 1.5457 handle would open the door for a move to the next key support levels at 1.5140 and 1.4770.

EURAUD five-month trend line support

After two weeks of sliding lower, AUDNZD made a move on Friday that appears to hint at the possibility of a turn higher. On the 4 hour chart, the bulls were able to push the pair past a resistance level that has been in place since September 25th.

While not a buy signal in and of itself, this break could set up a favorable long opportunity in the week ahead.

One reason I like the long side from here is due to the 450 pip range that has been in place since June. That combined with the fact that the pair is coming off a three-year downtrend is reason enough to favor the bulls as long as the 1.0870 handle is upheld on a daily closing basis.

Summary: Watch for bullish price action on a retest of former trend line resistance on a 4 hour basis. A key resistance area and target can be found at the three-month range top between 1.1300 and 1.1346. Alternatively, a daily close below 1.0870 would negate the bullish bias and turn our attention lower.

AUDNZD break of 4 hour resistance level

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