The Forex Calendar For This Week

This week there are several news events traders should be aware of before they open any positions:

Monday is free of them.

On Tuesday, however, we can expect the Reserve Bank of Australia Rate Statement and a speech by the RBA Governor Lowe. The Reserve Bank of New Zealand’s Inflation Expectations will also be announced.

On Wednesday will be announced the US Crude Oil Inventories and the Reserve Bank of New Zealand will announce its Official Cash Rate, Monetary Policy Statement, Rate Statement and then there will be a press conference.

On Thursday will be announced the US PPI and the Reserve Bank of Australia Monetary Policy Statement.

And finally, on Friday we can expect the British GDP, Manufacturing Production, Preliminary GDP, the Canadian Employment Change, Unemployment Rate and the US CPI and Core CPI.

The GBP/USD Downward Trend Should Continue

The pair entered the support zone around 1.3020  -1.2990>>>  and I think it should begin a correction to the upside.

Unfortunately, I also think the butterfly won’t reach its limit completely, the downward trend is very strong and the pair appears to be heading inexorably to the downside to test the historical low at 1.1986 from 1st January 2017.

A signal for a renewal of the downward trend would be the breakout below the RSI divergence on the D1 time frame.

If the pair breaks out below the support around 1.3020 – 1.2990 we could expect the next strong support zone for the GBP to be the zone around 1.2750 - 1.2650.

We Should Expect An End Of The EUR/USD Consolidation And A Breakout Below 1.1510

I think that at this stage we should give up on the idea for a rally to 1.1800 – 1.1850, let alone toward 1.2000.

The pair has been forming a sideways consolidation for two and a half months. The fact that that there was a breakout below the symmetrical triangle that I drew in a previous post  as well as the fact that the consolidation that lasted for ten weeks did not remain above 1.1710 for long should point us to the expectation for an end to that consolidation and a continuation of the downward trend.

I think that every rally should now be viewed as corrective, as gathering of liquidity and an attempt for a drop below the local low at 1.1507, which should open the way to 1.1350 –  1.1300.

There Are Two Scenarios For The GBP At This Stage

The hike of the interest rate of the Bank of England and the monetary policy report not only did not have a positive influence on the GBP, which, instead of rallying, it fell compared to the USD with almost 110 pips and has almost reached the support zone around 1.3020 – 1.2990>>>  as I thought it would last week.

At the same time the RSI divergence on the D1 time frame remains at this stage.

I think that now there are two scenarios for further development:

The first scenario is for a test of the local low at 1.2957, a formation of a double bottom and then a trend reversal with a target at 1.3570.

The other scenario is for a breakout below the local low and a continuation of the depreciation toward 1.2750 – 1.2700.

The Market Expects The Announcement Of The FED Interest Rate

That announcement will come out later today and the markets are, as expects, consolidating while waiting for it.

Preliminary data suggests no change in the interest rate, although surprises are always possible.

Yesterday the USD/JPY pair rallied with over 150 pips (from  110.74 to 112.14), after which a new butterfly pattern was formed on the H4 time frame, which hinted that the drop is impending, but the USD won’t begin depreciating before the news come out.

I think the pair will fall at least toward the main trend line of the upward trend (in dark blue).

In case of a breakout the drop could last to around  110.00 – 109.50.

The alternative scenario – in case the trend line holds, is for a renewal of the upward movement of the USD.

I Expect A Breakout To The Upside And An EUR/USD Rally To 1.20+

I expect the consolidation to end soon and for the pair to finally pick a direction.

A clear symmetrical triangle with a height at its base of 325 pips - from 1.1851 to 1.1507 - is forming on the H4 time frame.

The breakout of that triangle is impending and if it is above the resistance trend line then we can expect a rally to 1.20+.

The alternative scenario is for a breakout to the downside, below the support trend line, after which I think there will be a depreciation toward 1.1300 – 1.1280.

I think that the more probable scenario is for a rally toward 1.20+, after which we should be looking for an entry for medium term short positions.

GBP/USD Will Test The Support In The Zone Around 1.3020 – 1.2990

The behavior of the pair clearly shows that it may test the support in the zone around 1.3020 – 1.2990 which has been marked on the D1 time frame.

The RSI divergence on the D1 time frame remains valid for the moment, but I expect that during the move to the downside the indicator will test its trend line marked on the same time frame once again.

After that there are two possible scenarios to keep in mind: if the support holds the pair will begin moving to the upside to reach the limit of the butterfly pattern and the limit of the divergence>>>

Next week we will find out which scenario the market will pick.