The forex market is ending the week with potentially significant moves that may dictate next week’s direction.
Watch today’s video on the DXY, EURUSD, GBPUSD, USDCHF, and XAUUSD for the details. Remember to scroll down for some additional notes and annotated charts.
US Dollar Index (DXY) Forecast
The DXY is testing its 99.20 support today after breaking down on Wednesday. The dollar index is also below 100.20, a pivot that has been critical since April.
The downtrend is intact as long as the US dollar is below 100.20. However, traders should be mindful of the 99.00 support area to start next week.
A sustained break below 98.90 would open the door to 97.70. As mentioned in recent videos, the DXY did not thoroughly test the 2022 level in April. That could suggest a revisit in the coming weeks.
Conversely, a sustained break back above the 100.20-100.50 area would be bullish. So far, there’s no sign that it’s the likely scenario, but we must plan for all outcomes just in case.
EURUSD Forecast
EURUSD is hours away from closing the week above 1.1200 and 1.1275. I’ve discussed both levels in recent videos as ones to watch this week.
These are the range highs from July 2023 to August/September 2024. Last week, the euro closed below both levels, making this week’s close critical for its future direction.
However, the EURUSD price action hasn’t been ideal for trading for weeks, regardless of where this week’s candle closes.
In addition to 1.1200 and 1.1275, EURUSD is attempting a bull flag breakout on Friday. The top of the channel is 1.1320. So far, buyers have secured two 4-hour candle closes above the level, but we’ll see if they can hold the line.
If euro bulls can defend 1.1320, levels like 1.1425 and 1.1530 could come into play next week. The bull flag’s measured objective is 1.1900.
On the other hand, a failure to hold 1.1320 and 1.1275 would expose downside targets like 1.1200 and 1.1060.
GBPUSD Forecast
GBPUSD broke its bull flag on Monday and retested the level as new support on Tuesday. I shared this bull flag in the last Weekly Forex Forecast.
The pound is breaking above its 1.3440 resistance level on Friday. It’s an incredibly significant level from last September, making today’s breakout one to watch.
If GBPUSD holds above 1.3440 today, it could spark the next rally toward 1.3630. Above that is the 2022 high at 1.3750.
However, a failure to hold the line at 1.3440 next week would confirm a buy-side fakeout, opening the door to lower levels like 1.3300 and 1.3200.
But, for now, GBPUSD bulls are in control, with all eyes on 1.3440 next week.
USDCHF Forecast
USDCHF broke below its 0.8330 support on Tuesday, opening up the 0.8200 support area. The pair also broke its ascending channel that began with the April low.
That makes 0.8330 a confluence of resistance early next week. For now, 0.8200 support is holding with a sustained break below that, exposing the 0.8100 April lows.
A sustained break above 0.8330 could turn USDCHF bullish, but currently, that’s not the likely scenario.
XAUUSD (Gold) Forecast
Gold is breaking its bull flag on Friday, at least intraday. Bulls need to secure daily and weekly closes above $3,335 to confirm the breakout on the high time frames.
If XAUUSD bulls can do that and hold the line early next week, $3,500 could be next. A failure to hold above $3,335 next week would open up downside targets.
That said, given the long-term uptrend, I favor looking for gold longs. Combine that with Friday’s break, and you have a recipe for higher prices.
The measured objective of the bull flag (if it holds) is $3,650. I got that by projecting the height of the April range from the recent $3,120 low from May 15th.
