Weekly Forex Technical Outlook – 27th October

EURUSD (1.105): EURUSD has declined sharply after testing resistance near 1.148. Prices broke through the minor support at 1.1132 and in the process the rising price channel as well. Expect another leg down to test the lower support zone at 1.0977 through 1.0944 in the near term ahead of a correction. In the event that prices rally without testing support, a retest to the minor support at 1.1132 could be tested for resistance. This level could see new sellers overwhelm EURUSD which could test the downside. Plotting the median line, we notice that after prices broke the median line, it is currently testing the median line again which shows some confluence with the minor support at 1.1132. As such, it makes this level a key to further direction in EURUSD. The Stochastics oscillator remains strongly in the oversold area and we expect prices to range between 1.1132 through 1.0977/1.0944.

GBPUSD (1.53): GBPUSD has failed to rally after the initial breakout and has fallen back below the short term support/resistance level of 1.534. We expect to see a modest decline, perhaps to 1.5215. The falling wedge/triangle pattern remains in play as we anticipate another leg down before prices can rally. Alternatively, if prices fail to test support at 1.5215, GBPUSD could potentially rally above 1.534 but we expect this to be a short lived rally, unless prices manage to break above the short term highs of 1.5475. The Stochastics remains in the oversold area for the moment and the conditions are ideal for prices to make a higher low, to be confirmed by the Stochastics as well.

USDJPY (120): USDJPY remains very choppy as the chart shows. The initial break out of prices to the downside saw a rejection near 118.4 and subsequently a rally back to the upside. Prices have repeatedly failed near 121 level and the current reversal we see could potentially be a leg lower. Support at 118.4 is likely to be tested more firmly this time around should USDJPY move to the downside. There is a minor support at 120.195 which could offer a bounce in the short term but as long as 121 cannot be breached, the bias remains to the downside.

USDCAD (1.31): USDCAD has recovered strongly after bouncing off support near 1.285 level. Prices are back to the broken support level at 1.318, which could act as resistance. Failure to rally above 1.318 through 1.3265 could see USDCAD set up for another leg lower. To the upside, there is limited room for further rally as the strong resistance zone at 1.33 could cap any rallies. A successful test of resistance between 1.318/1.3265 could see a test back to 1.297 and eventually to 1.2792. The Stochastics oscillator currently points to a hidden bearish divergence which confirms the near term view to the downside in USDCAD.

USDCHF (0.982): USDCHF has seen a strong rebound after prices found support near 0.955 through 0.95 region. With the resistance at 0.979 being cleared, any dips back to this resistance level could be tested for support. To the upside, the next major resistance at 0.988 remains likely for a test. There is a risk of a strong decline in the event 0.979 fails to act as support.