It was a big turnaround type of week last week, and for next week the big question is whether that can remain. Forex markets remain in focus ahead of the September FOMC rate decision. We’ll be going into the Fed’s blackout window soon ahead of the September rate decision, and with stocks staying so strong of recent, it’ll be difficult for the Fed to backtrack too far from their taper tease. This is likely what was behind Friday price action, and I think there’ll be more squaring up ahead of the event. This week’s Forex forecast is below:
US dollar Finds Support at Big Spot
The US dollar tested a confluent spot of support over the final three days of last week, but sellers were unable to pose a lasting move, and this keeps the door open for bullish continuation themes in the Greenback.
Targets: 93, 93.37, 93.50
US dollar Daily Chart
EUR/USD teeters on the Brink of Support
I had looked into a EUR/USD setup ahead of the ECB rate decision, and that worked out beautifully. It was largely based off of a support build which caught a nice bounce; but that bounce evaporated on Friday and prices quickly rushed back to this key spot on the chart, plotted at around 1.1800. It looks to me like this wants to break down. The door was open for a morning star formation, but that flamed out, so now the heat is on that spot of support.
EUR/USD Daily Chart
EUR/JPY at a Big Spot of Support
Continuing with the theme of flipping on Euro pairs, I had looked at a bearish EUR/JPY setup ahead of the ECB rate decision, based largely on a bearish engulfing candlestick that had built. That setup also filled in beautifully, with prices breaking below the 130.00 psychological level and finding support at a big Fibonacci level at 129.66.
If I’m going bearish on EUR/USD, I like also flipping to bullish on EUR/JPY, looking for a hold of support with a quick pop above the 130.00 level. I don’t want to hold here for long, however, and I would look at my final profit target inside of 130.50.
EUR/JPY Daily Chart
AUD/USD Bulls Get Smoked
AUD/USD put in a remarkable recovery from the August lows, but last week sellers came back and made a noticeable dent in price action. Perhaps the most interesting item to me was the continued build of resistance at the psychological level of .7375. I had looked into that theme earlier this morning, but this one is going to remain on the bearish side of my ledger until that .7500 psychological level gets taken out. The Forex Forecast for AUD/USD will be set to bearish for the week ahead.
AUD/USD Daily Price Chart
AUD/JPY Course Correction
Similar to AUD/USD above, the pair had a meteoric rise from the August lows that got snuffed out last week. Also like AUD/USD, bears had little challenge re-taking control in a rather decisive manner: A quick bump on Friday was soundly priced-out, leaving a tombstone doji on the chart. I like this one for a straight shot down to the 80 psychological level.
AUD/JPY Daily Price Chart
GBP/USD with Breakout Potential
I could justify this one as a short, owed largely to the failed test of the high on Friday, followed by a dizzying reversal. But – EUR/USD and AUD/USD had that, too, and to a greater degree. GBP/USD, however, could remain really attractive for USD fade plays, and if that resistance inside of the 93 handle holds, bullish sets in GBP/USD could be a very attractive way of moving forward. This remains probably my favorite Forex pair for looking for USD-weakness. The Forex Forecast for GBP/USD will be set to bullish.
GBP/USD – look for breaks of 3892 to push into 3950, 3980 with a top end target at the 1.4000 psychological level.
GBP/USD Daily Price Chart
GBP/JPY Teetering on a Break
I had looked at a breakdown setup here last week that ended up not filling. Instead, prices caught a stern bounce off of the support that I had looked at, with prices jumping up for a test of the 152.50 psychological level. That move turned around and buyers came in to offer higher-low support ahead of the end of the week – but if we see a strong risk-on hue in the early portion of next week, GBP/JPY could explode higher. And if we don’t, if risk aversion prevails, I like the short-side of AUD/JPY a bit more.
GBP/JPY Four-Hour Price Chart
USD/CAD for Bullish USD Strategies
USD/CAD had a big week last week with both the Bank of Canada and Canadian Employment data on Friday. The chart responded with a similarly big week, capped by a really strong showing on Friday. There were multiple tests below the swing level at 1.2650, but the fact that bears haven’t yet been able to take over indicates that there might be more upside left, particularly in scenarios that end up showing USD-strength. The Forex Forecast for USD/CAD will be set to bullish.
USD/CAD Daily Price Chart
USD/JPY Holds the Range
USD/JPY continues to trade in a choppy channel, which can actually be a good thing for right now given the risk flares that have shown elsewhere. With prices holding around a key support level, taken from around the 50% Fibonacci retracement of the recent major move, I like the idea of longs here, targeting a push up to 110.25 followed by a breakout to 110.50.