Weekly Forex Forecast (July 10 – 14, 2017)

EURUSD bulls once again tested the confluence of resistance last week but were unable to break through. The area lies between 1.1430 and 1.1450 and is the intersection of horizontal resistance and the trend line from the August 2015 high.

Thursday’s rally triggered the second retest of this resistance area. For now, sellers are holding their ground, but we’ll have to see if they can do it a third time in the week ahead.

Key support comes in at 1.1250/80 which includes recent highs in May and June.

I’ll remain cautiously bullish as long as 1.1250/80 holds as support on a daily closing basis. If the area breaks down, it could lead to a larger pullback which is something we haven’t seen for quite some time.

A close above 1.1450 would keep the bullish momentum intact. Additional levels of resistance to be discussed if and when buyers close the pair above the level.

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Consolidation continued last week for the GBPUSD. Buyers advanced the pair quite aggressively at the end of June but failed to follow through last week.

From here, key support comes in at Friday’s low of 1.2865. Resistance can be found at Thursday’s high of 1.2980.

I’m going to stay on the sideline as I’ve done for several months. The sideways price action and lack of follow-through from both sides make trading the GBPUSD an overly risky endeavor in my opinion.

On Wednesday of last week, I mentioned that the 113.25 handle was the new “line in the sand” for the USDJPY. In other words, it was acting as a key pivot on a daily closing basis. Buyers confirmed this idea with Tuesday’s close of 113.27.

Following Wednesday’s commentary, the pair closed the next two sessions within the 113.25 support area. Buyers eventually gathered enough strength to push the USDJPY 100 pips higher during Friday’s session.

For the week ahead, the 114.35 area remains resistance, albeit a relatively minor level. The confluence of resistance at 115.00/20 is a much more substantial area that if tested could offer a favorable sell signal.

In summary, as long as the 113.25 support area holds on a daily closing basis, the 114.35 and 115.00/20 areas remain exposed.

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The AUDUSD is caught in a 50 pip range between 0.7565/70 support and resistance at 0.7620. We first discussed the idea of a move lower on June 30th.

The July 4th breakdown and sell signal on July 5th looked promising. And although Friday’s session failed to break through the 0.7620 resistance level, the idea to go short is being challenged.

I’m going to sit this one out for now until I get a better idea of which side is in control. Buyers have been in the driver’s seat since May, but the rejection at fourteen-month resistance does call into question how much longer they can hold out.

Key support for the week ahead comes in at 0.7565/70 with a close below that exposing the 0.7515 handle.

On Friday, I mentioned how the EURCAD was putting pressure on a long-standing trend line that extends from the December 2015 low. This level has directed price action to some degree since last year and appears to be doing the same even now.

Some readers questioned why I would use a level where the wicks of several daily candles have pierced it. You can see what they’re referring to in the chart below via the March 27th and April 24th sessions.

But there’s a big difference between a daily candle’s wick piercing a level and the session closing above or below it. In fact, those wicks that pierce the level sometimes form the pin bars we look to trade.

In the case of the EURCAD, the trend line from the December 2015 low has only been broken on a daily closing basis on two occasions – November 16, 2016 and April 24, 2017.

The former was a close below it, and the latter was a close above it. Both breaks triggered moves of more than 500 pips.

So you can see now why I say a daily close (5 pm EST) below this trend line could set up a selling opportunity. But there isn’t much to do without a daily close below it or bullish price action above it.

For the week ahead, key resistance comes in at 1.4965 while support remains the 1.4670 area for now. A daily close below that would expose 1.4470 which would also close the gap from late April.

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