Note that this is my current view, but if market conditions change my view can change too. Generally I will trade in alignment with what I have noted here, though I will wait for a set-up before I enter. I base my view on technical and fundamental information. This is my beliefs and you are welcome to have opposite ones. Having a plan is more important than the actual direction for me.
- Wait GBP/USD. – MT is sideways normal. The economic outlook is mixed for the UK, but overall more positive than many of it counterparts (particularly the Euro region). There remains a chance of Brexit but the base case is there will be a resolution, which would be GBP positive. My view is a Brexit would actually be more positive in the long run, though would lead to shorter-term volatility as market participants work through the implications. There is also the chance of UK rate cuts if global turmoil continues and inflation fails to materialize. It will be a busy week for UK data.
- Sell USD/JPY. Trend – MT is bear fast. The pair has been selling off in response to risk-off and I expect the trend to continue. We also need to be careful of liquidity risk at this point in time. There are major issues with Deutche bank, Sociate Generale and other banks, which could spiral out of control at any point. After the large move last week, caution is required as we may see a technical bounce, and we are in intervention territory with BOJ (there may have been some on Friday). Once equity markets bottom, I think yen is going to present a fantastic long-term buying opportunity. Currently targeting 105, then looking for aggressive buying opportunities.
- Wait AUD/USD. – MT is sideways normal. Be wary of a negative open to the Chinese stock market after a week off for new years. There are signs of a temporary bounce in US stocks on Friday which might be supportive of AUD. I do expect the AUD to head lower, over time, down to 60 cents vs. the USD, but technically, (considering the crosses) we may see a period of strength. RBA expected to keep rates on hold this year, and risk-off has not been as bad for the pair as could be expected.
- Buy EUR/USD. Trend – MT is bull normal. Continue to look to buy with low conviction. Be cautious as we have seen a topping pattern on the 4 hour chart and EUR is showing some reversal signs against the crosses. Personally, I continue to wait for a long-term selling opportunity on the back of increasing risks (Greece, Deutsche Bank, immigration), divergent monetary policy, an end to repatriation and deteriorating eurozone economic performance.
- Wait NZD/USD. – MT is sideways volatile. Possibly sell based on second bearish engulfing in sideways volatile MT. There is a dairy auction on Tuesday and I continue to expect the trend to be negative. Macro factors remain bearish kiwi.
- Sell USD/CHF. Trend – MT is bear normal. The pair should continue to head lower if risk-off continues, but I prefer to stalking a long-term buying opportunity around these levels. Immediate outlook is low conviction bearish.
- Wait EUR/CHF. – MT is sideways volatile. The pair sold off last week as anticipated, but we have now found support at 1.0950. Wait for now, but buys are OK.
- Sell USD/CAD. Trend – MT is bear normal. Look for low conviction selling opportunities. Oil up on Friday, but that indicates volatility and not a change on trend. I suspect we will have a sideways MT form, and eventually I will look for buy for a move above 1.50.
- Buy EUR/GBP. Trend – MT is bull normal. A weak reversal pattern formed on Friday with a bearish engulfing after a second attempt to push over .7850. Continue to buy but with caution.
- Buy AUD/JPY. Reversal – MT is sideways volatile. A bullish hammer on Thursday suggests a buy. This may have some legs as it was matched by a weekly bullish hammer on the S&P 500 and NASDAQ. Should only be a temporary bounce though.
- Wait NZD/JPY. – MT is sideways volatile. Also a bullish hammer, but lack of follow through and price action on kiwi crosses suggest underlying kiwi weakness. Wait for now.
- Sell GBP/JPY. – MT is bear fast. Sell, but only on a bounce. Low conviction now.
- Wait EUR/JPY. – MT is sideways volatile. Near the bottom of the range but no clear buy signal. A break of 126.00 would not surprise me.
- Buy CAD/JPY. Reversal – MT is sideways volatile. Bullish engulfing near the bottom of the range, gives a buy signal. Risk is high (as is reward) in this MT.
- Wait CHF/JPY. – MT is sideways normal. Wait for now.
- Buy GBP/NZD. Reversal – MT is sideways normal. Even stronger reversal pattern than last week now the 2.15 key level held. Look to buy.
- Wait EUR/NZD. Trend – MT is sideways normal. Wait for now.
- Buy AUD/NZD. Reversal– MT is sideways volatile. I like it as a buy on converging interest rate differentials. Bullish engulfing near the bottom of the range means buy in this MT.
- Sell EUR/AUD. Reversal – MT is sideways normal. We have a weekly hammer and double top in place. I think this is a good contrarian option right now. Based on a steady RBA and worsening EUR conditions.
- Wait GBP/AUD. – MT is sideways normal. Wait for now.
- Sell AUD/CAD. Trend – MT is bear normal. Look to sell.
- Wait GBP/CAD. – MT is bear normal. Some bottoms signs, so probably best to wait.
- Wait EUR/CAD. – MT is bull volatile. Bullish engulfing week cancels the contrarian opportunity mentioned last week. Wait for now.
- Wait NZD/CAD. – MT is bear normal. Turning sideways, best to wait.
- Wait GBP/CHF. – MT is sideways normal. First signs of bottoming, watch closely, I like this as a macro long-term buy.
- Wait CAD/CHF. – MT is sideways volatile. Wait for now.
- Wait NZD/CHF. – MT is sideways normal. Wait for now.
- Buy AUD/CHF. Reversal – MT is sideways volatile. Similar to EURAUD a potential buy.
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Economic calendar for the week ahead:
(MT = Market Type: Click for more information on market types.)
Trend: Market is trending in the direction I have listed and I expect it to continue.
Reversal: I am looking for a reversal against the current trend.
Breakout: The currency pair is breaking out of a range.
About the Author
Sam Eder is a currency trader and author of the Definitive Guide to Developing a Winning Forex Trading System and the Advanced Forex Course for Smart Traders (get free access). He is the owner of www.fxrenew.com a provider of Forex signals from ex-bank and hedge fund traders (get a free trial). If you like Sam’s writing you can subscribe to his newsletter.
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