Forex Weekly Forecast & FX Analysis August 12 - 16.

S&P 500: Neutral.

The benchmark charted a long downside whipsaw on the weekly timeframe and finished the past trading week almost flat (-0.46%). Such a strong buy signal happens quite rarely, and the weekly chart below shows the reason why. The Index tested long-term 89-weeks simple moving average and bounced back north, in the same way, it did at the end of May this year. The past performance shows that the index gained 10.5% after that. If the bulls continued the buying pressure, the S&P 500 could appear above 3300 points for the first time ever. The nearest resistance is placed between 2938.3 points, the highest close rate in April, and 2959.0 points, the peak of May 2019. If the benchmark breached that resistance range, then the upside risk would have renewed with a target of 3028.3 points, the all-time high.

USD/CHF: Bearish.

The Swiss Franc was in demand among currency speculators this past week on the back of the risk-off sentiment. The market players continued purchasing safe-haven assets and currencies despite the rebound noticed in U.S. stock indices. What’s more, most of the price action was charted on Monday as USD/CHF dropped almost 1% in 18-hours bearish rally. The test of the local bottom at around 0.9700 handles suggests a further selling pressure for the pair. The daily technical outlook is also negative as the descending formation looks like a huge triangle with the baseline at 0.9720. USD/CHF has to close a day below that defensive barrier to resuming the downtrend, which could be even accelerated as the triangle’s workout distance exceeds 500 pips (four-digit quotes). MACD histogram is in the negative territory both lines crossed each other, signalling a bearish momentum. RSI is bearish with no sign of a possible bullish divergence so far. On the other side of the equation, the 34-days simple moving average could act as the resistance curve, limiting possible upside swings of the exchange rate. The level of 0.9846 might be considered as an attractive price to short USD/CHF from a conservative point of view.

USD/JPY: Bearish.

The Japanese yen failed to continue the retracement started in the Asian trading session early Tuesday. The upside swing was limited by Ichimoku’s resistance range between COnversion and Base Lines. Sellers stepped-in at around 107.00 yens per dollar, causing a sharp sell-off towards 105.80 support. After hovering around the 106.00 marks, the pair dropped to 105.27, the lowest rate since the plunge in January 2019. Even though the current price level is getting extremely oversold, the general downtrend should continue in the week ahead as the Ichimoku Cloud trend indicator is bearish with a large negative surplus of the leading span. The nearest resistance is coming at 105.67, the blue curve on the four-hourly chart below. Next target for the bulls might come at 105.92, the bottom band of the leading span. Short positions from those resistance levels are preferable.

USD/CAD: Bearish.

Although the bulls might have another attempt to lift USD/CAD towards the round-figure resistance of 1.3300, the overall upside retracement is coming to an end. The daily timeframe has a clear resistance level slightly below 1.3350 handles as the bearish whipsaw on August 7 confirms a large number of sell-orders placed there. The pair had one daily close above 1.3300, however that breakout might be false as there was no continuation to confirm it, while USD/CAD slid back towards the bottom of 1.3200 figure. Another concern is the weekend’s gap, which opened the trading 20 pips below Friday's close rate. Parabolic SAR had already reversed the sentiment as its dots jumped above the price last week. ADX mainline is declining towards the threshold, pointing to a weak bullish momentum. -DI line crossed +DI line, changing the colour of the indicator to red. The first target for short positions could be placed at 1.3100 as the demand for USD/CAD is still strong. However, once breached, the bears could accelerate price action on the way to re-test the local bottom at 1.3000. Mid-term shorts could be attractive.

NZD/USD: Bearish.

The New Zealand dollar could renew three-year lows in the upcoming week. The upside spike was short-lived, and NZD/USD bounced to the second Bollinger Band indicator with deviation 1 (yellow background on the daily chart below). After that, a bearish breakthrough signal was charted as the daily close below the bottom band of the first Bollinger Band (period 21 days, default deviation 2). Past week’s low at 0.6445 should be re-tested sooner rather than later given the recent bearish momentum and the speed with which the bullish correction ended. Those traders who missed the entry opportunity above 0.6550 during the upside whipsaw could consider placing sell-limit postponed orders below 0.6430, counting on a bearish breakthrough and acceleration as the bulls should retreat south if that level was breached by the exchange rate. Standing against such a strong downtrend is extremely dangerous as NZD/USD keeps falling declining since July 19, and the bottom is not achieved yet, according to the technical analysis.

USD/CNH: Bullish.

The Chinese yuan was one of the weakest emerging market currencies this past week as the People’s Bank of China intervened, causing a fundamental trigger to overcome technical issues. USD/CNH breached several resistance levels, which were standing for quite a long period. First, the local peak of 6.9743 was eliminated for the first time since the failed test in October 2018. Second, the pair crossed a strong psychological round-figure mark of 7.0000 yuans per dollar for the first time in a decade. Second, the upside swing continued towards 7.1000 resistance. The fact that the rate bounced back 7.0500 support on August 7 confirms that the correction is over, and the pair is ready to chart a new peak in the nearest future. The most modest assumption regarding a possible target is the round-figure resistance of 7.1500 for the week ahead. However, the bulls could have even a stronger rally given the sharp price action last week.