Weekly Forex Forecast (April 3 – 7, 2017)

For the better part of March, the EURUSD looked relatively bullish, particularly the March 27th close above the 1.0825 handle. The level dates back to 1999 and was responsible for the February 2nd bearish pin bar earlier this year.

Moreover, 1.0825 is the 38.2% Fibonacci retracement when measuring from the 2016 high at 1.1615 to the current 2017 low at 1.0340.

All of this means that the March 28th close at 1.0814 was a significant development. It signaled that the earlier bullish break of 1.0825 was false and that a move lower was likely.

Note that the high of the very next session (March 29th) was 1.0826. Sellers have been in control ever since.

From here any retest of the 1.0712 handle could present an opportunity to get short. Key support comes in at 1.0635. A daily close below that would pave the way for a retest of recent lows near 1.0520.

Adding to the likelihood of further losses is the large 260 pip bearish engulfing pattern from last week. The move is more than enough to keep my bearish bias for the single currency intact.

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The GBPUSD ended last week on a bullish note. Friday’s 85 pip gain puts the pair just below minor resistance at 1.2570 to start the new trading week.

A review of the last few weeks suggests that this bullish momentum may continue. On March 21st, the pair broke free from a confluence of resistance at 1.2410. The break established a trade idea that I mentioned the very same day.

Last week’s low at 1.2376 was a spot on retest of former channel resistance as new support. The 1.2410 handle assisted with the bounce. It’s a level that has played a crucial role since late November of last year.

For the week ahead, resistance remains just above current prices at 1.2570. Above that, we have a level that’s been a factor since November 11th of last year at 1.2673. Support comes in at 1.2410.

One currency pair with perhaps more potential than any other this week is the AUDUSD. I commented on the chart you see below on Friday as a top trade idea for the month of April.

Although the uptrend that began this year is intact, buyers appear to be tiring. The way the pair rolled over last week unable to break the 0.7670 resistance area doesn’t offer much confidence if you’re bullish the Australian dollar.

But just because there are hints of a bearish scenario playing out doesn’t mean we have a confirmed setup. As long as the confluence of support at 0.7608 holds on a daily closing basis, the bulls have a fighting chance.

So what could trigger a break of the 0.7608 handle?

One potential catalyst is this Tuesday’s RBA rate decision at 12:30 am EST. There’s quite a bit of discrepancy surrounding what the central bank may do which could cause a big stir regardless of what they do or say this week.

No matter how the AUDUSD reacts, I’m only interested in a downside break. The long-term trend is bearish, and the weekly wedge pattern suggests an eventual continuation of the current trend.

Below 0.7608 the next key support comes in at 0.7500 followed by 0.7330. Alternatively, a move higher would likely encounter selling pressure at 0.7670 followed by wedge resistance near 0.7730.

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The contrast in Euro weakness and perceived strength of the British pound could be the beginnings of a substantial move from the EURGBP.

I’ve commented on the potential 840 pip head and shoulders pattern several times in recent weeks. The last mention of the structure came in the March 13th commentary.

For now, though, this is merely a watch list item. While I could trade the cross with the anticipation of a completion of this weekly structure, recent price action has been too choppy for my liking.

Also, with a measured move of 840 pips should things play out, I’m in no hurry to trade the EURGBP.

A daily close below the neckline at 0.8300 would confirm the bearish reversal pattern. It would also set the pair on a course toward the measured objective at 0.7460.

We looked at the AUDJPY on Thursday of last week. At the time the pair was trading just below the 85.35 handle, a level that’s served as a pivot since the new year began.

The idea was to watch for a sell signal from new resistance. However, Thursday closed at 85.51, which canceled out any notion of shorting the cross. I wasn’t interested in buying the pair on the break given the velocity of the 300 pip decline the week before.

By the close of Friday’s session, the AUDJPY had fallen back below 85.35. The drop was so severe that sellers nearly carved out a bearish engulfing candle. But Thursday’s apparent false break of 85.35 serves as a bearish signal just the same.

From here any retest of the 85.35 area is likely to encounter an influx of selling pressure. The next key support comes in at recent lows at 83.80. A daily close below that would expose the 82.50 handle.

Keep in mind that the AUDJPY will also be at the mercy of Tuesday’s RBA decision.

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