Weekly Forex technical forecast June 8 - 12

The past trading week came under the light of high-yield and major currencies’ strength versus the US dollar. The greenback’s weakness was not related only to the political processes happening in the United States but also to the overall risk-on sentiment across the financial markets. The US dollar index dropped 1.36%, passing the lead to other currencies. Stock indices rallied, safe-havens declined, commodities kept recovering.

GBP/USD: Bullish

The British Pound overperformed the rest of the majors versus the US dollar last week. GBP/USD surged more than 300 pips (four-digit quotes), closing Friday 32 pips below the psychological round-figure handle of 1.2700 dollars per pound. Besides, Sterling rallied versus the Japanese yen as GBP/JPY soared +568 pips, while EUR/GBP declined -0.90%. Everything points to a sustainable recovery for the British pound ahead.

From a technical point of view, the GBP/USD currency pair is still in the long-term downtrend on the weekly timeframe. The chart setup below shows that the recent upside rally is nothing but a retracement from the recent bottom. The Ichimoku Cloud trend indicator has a bearish leading span, the rate is below the cloud, while both lines are just about to perform a bullish crossover. What happened last week was that the rate tested an essential resistance level that comes together with the bottom band of the cloud. So far, the test cannot be considered as successful because there’s no weekly close above the resistance.

Secondary indicators confirm the previous suggestion as the weekly ADX is in the negative territory, although the bearish momentum eased significantly. Fast and sensitive Stochastic RSI crossed the overbought threshold from below, pointing to the consistent demand for GBP/USD, but did not reach an extremely high level yet. Therefore, the upcoming week will be crucial for the next direction of the trend. If the bulls were able to complete the reversal pattern on the weekly timeframe, then the long-term technical sentiment would shift to bullish. Otherwise, a deep rebound south might be on the agenda for several upcoming weeks.


USD/JPY: Bullish

The Japanese Yen was the only major currency that declined versus the US dollar last week. The USD/JPY currency pair tested an important psychological mark of 110.00 yens per dollar, which should have long-term consequences for the technical outlook. The main reason for such a divergence with the rest of the major currency pairs is that USD/JPY reflects the risk appetite of the equity markets. Besides, carry-trade speculative flows helped EUR/JPY and GBP/JPY cross-rates to accelerate the bullish recovery.

The technical analysis of the weekly timeframe below points to several key events that happened last week. First of all, USD/JPY closed the week above the Ichimoku Cloud, which never happened in 12 weeks. Second, the leading span performed the bullish crossover and increased the positive surplus. Third, the ADX and DI indicator delivered a strong buy-signal as green and red lines crossed each other. Stochastic RSI oscillator has enough room to go north before reaching extremely overbought levels. Given all that, USD/JPY has good chances to complete the bullish reversal pattern on the weekly timeframe and continue the upside action. If the defensive barrier of 110.00 yens per dollar was taken off the table, then the bulls could eye 111.00 and 112.50 in extension.


AUD/USD: Neutral

Although the Aussie had an impressive rally versus the US dollar and Japanese yen last week, the long-term technical outlook is not so clear yet. The AUD/USD currency pair has a clear V-shape reversal pattern on the weekly timeframe below. The bearish phase turned into the bullish rebound and the pair reached the same level where the sell-off started in January. On the other hand, last week’s close rate is slightly below the weekly open, which leaves an open question about further upside potential. Besides, the Aussie bulls faced strong supply at the psychological round-figure resistance at 0.7000 because of postponed sell-orders placed by real-money accounts.

Two scenarios are on the agenda for the week ahead. The first one suggests a breakthrough on the upside and potential acceleration of the bullish rally. The second option is a bearish rebound towards recently breached former resistance now support at around 0.6900, U-turn, and another test of the 0.7000 handle. Technical indicators assume both options. Williams Alligator turned the bullish eating mode on as its lines crossed each other and formed the right order to proceed with the northwards movement. Relative Strength Index crossed the middle level from below and left more room before reaching overbought conditions. Williams %R oscillator went into the overbought territory, pointing to the only concern for AUD/USD in terms of the upside potential. However, that might not be the issue as this indicator is very sensitive to such sharp price swings as traders noticed last week.


USD/CAD: Bearish

The USD/CAD currency pair accelerated the bearish slide this past week. The exchange rate dropped -2.54% or 350 pips, finishing the trading week at 1.3421, the lowest rate in 12 weeks. Besides, that was the third weekly candle in the red, which formed the bearish continuation candlestick pattern.

The technical sentiment is bearish due to several factors. First of all, USD/CAD crossed the middle line of the Bollinger Bands indicator, sliding into the negative zone. Second, the rate dropped below the 61.8% Ichimoku Retracement Level, opening the door towards the next target at 1.3300. Third, Chaikin Oscillator increased its value in the distribution zone, charting the lowest level since February 2019.

Everything points to further weakness of the pair, however, several factors might limit the downside potential this week. The Loonie is traditionally dependent on the price of the black gold, so the pace of the recovery in the oil market might have an additional influence on USD/CAD. On top of that, the market’s sentiment about the greenback could also change the forecast for the Loonie from the fundamental point of view. Macroeconomic reports add risks for the volatility in the week ahead, so it is also important to keep an eye on the economic calendar.

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