I plan my trading for the week ahead each weekend. Here are the Forex trading opportunities I will bestalking this week.
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 DXY. – MT is sideways normal. The USD rose last week but week end profit taking sees us stuck mid-range. Technically there is a decent chance we head back to at least .93, but otherwise direction at this point in a little unclear. Weekly charts show a strong topping pattern in place, but that is somewhat mitigated by the rise last week. The U.S. is now looking to impose an additional 10% tariff on 200 Billion of Chinese goods in an escalation of the ongoing trade spat with China. The USD and US stocks have risen while Bond prices remain steady despite the tensions which has confused some market participants. The U.S. economy continues to tick along decently enough and the Federal Reserve dot plot is forecasting 2 more hikes this year and 3 more next year. If this comes to pass I would suggest the USD will be much higher. The Fed remains hawkish and positive but is warning of risk associated with trade wars.
- Wait GBP/USD. – MT is sideways normal. Technically the pair continues to base, but as of yet the downtrend is not broken. There is an increasing chance of a rate hike in August. BOE Governer Carney seems hawkish and the economy continues to display signs of strength. Keep an eye our for average wage, employment and inflation data this week to confirm the positive stance. Brexit concerns are back in the headlines leading Brexit ministers resigning over Prime Minister May’s “soft” Brexit plan. Ironically, these resignations may allow an easier passageway for her plan – that is if she survives politically, and there is a real risk of a no-confidence vote. Initial murmurings from Ireland and the EU about the plan are cautiously positive. There are some important votes this week in parliament on Mon and Tues to be watched closely. President Trump was also sounding off that anything less than a full break will mean no free trade agreement with the U.S. but later softened his rhetoric. Note that given all the headline risk GBP has performed pretty well – given credence to the theory that a base is developing.
- Buy USD/JPY. Trend – MT is bull normal. The pair strengthened significantly this week to the surprise of some given the traditional risk-off correlation and the ongoing trade spat. But you really just need to look at US equities which are making new highs to know the market is not really in risk- off mode. We also need to remember that the cost of carry is much higher these days for USDJPY shorts. Also with US bond yields rising like they did over the past year it is likely that USDJPY plays catch up at some point. Note the rise in CNH may also be a factor as this impacts competitiveness. Japanese data has also been weak which is supportive of the rise.
- Wait AUD/USD. – MT is sideways quiet. We continue to consolidate around the key 0.7350 level. There is a weekly bullish hammer is in play which is often indicative of a bullish reversal. Base metal prices are struggling. Of note is the recent 17% fall in the price of copper. Copper is traditionally seen as a barometer for global economic performance (“Dr Copper”) and could be a sign of a slow down in China given the trade spat. The RBA remains benign but there are some pockets of good economic data out there. Watch out for China data this coming week to see how the economy is being impacted by the trade war. House prices continue to fall in Australia but this is not yet presenting a systematic risk. If rates start to rise (or even the cost of funding) then watch out.
- Wait EUR/USD. – MT is sideways normal. The basing pattern continues to play out. Note the 3 white soldiers reversal pattern in place on weekly charts confirming the bottom is in place (for now). With an easing of political tensions, some hawkish speak from the ECB there is decent chance the pair will head higher at least towards 1.1850. Of great concern would be an implementation of tariffs on European automobiles by President Trump – watch out for news on this. Data has been positive in the last week
- Wait NZD/USD. – MT is sideways normal. A strong reversal pattern has formed on weekly charts off the key 0.67 level. Dairy prices were down 5% at the last auction, but note that the weak NZD has been helping the dairy sector so it’s not as gloomy as it seems on the surface. Note also that so far the trade war between the US and China has been helping the sector too and demand is shifted to NZ products. But if things escalate further and start to pressure the Chinese economy the dynamic will likely change. I like to look for contrarian opportunities to get long NZD. In particular vs. CHF and JPY. Watch for increasing inflation pressures in this coming week.
- Buy USD/CHF. Breakout – MT bull normal. We have broken above the key 1.00 figure. With rising stocks and EURCHF breaking out into a bull MT and plenty of room to spare towards the key 1.20 level, CHF is my favored way to play the USD divergence theme along with JPY.
- Wait USD/CAD. – MT is sideways normal. There was a rate hike last week which improved the differential between US and Canadian rates. BOC Governor Poloz was relatively hawkish. But the CAD weakened on the day. This may have to do with that fact that Oil suffered its largest 1 day fall in 2 years on the same day. NAFTA concerns still exist and we have moved back into a sideways MT so best to wait for clear direction, though the price action is slightly favoring a re-test of the high near 1.34.
- Wait EUR/GBP. – MT is sideways quiet. We have rejected the recent high at 0.8850 (again) despite all the negative Brexit press. This is suggestive of GBP strength.
Crosses
- Buy EUR/CHF. Trend – MT is bull normal. Continue to buy.
- Buy AUD/JPY. Trend – MT is bull normal. Continue to buy.
- Buy NZD/JPY. Contrarian – MT is bear normal. Double bottom in place. Contrarian buy.
- Buy GBP/JPY. Trend – MT is bull normal. Continue to buy.
- Buy EUR/JPY. Trend – MT is bull normal. Look to buy.
- Buy CAD/JPY. Trend – MT is bull normal. Look to buy.
- Buy CHF/JPY. Trend – MT is bull normal. Look to buy.
- Buy GBP/NZD. Trend – MT is bull normal. Continue to buy.
- Wait EUR/NZD. – MT is bull normal. Failing at resistance. Wait.
- Buy AUD/NZD. Trend – MT is bull normal. Look to buy.
- Wait EUR/AUD. – MT is sideways quiet. Wait.
- Wait GBP/AUD. – MT is sideways quiet. Wait.
- Wait AUD/CAD. – MT is sideways normal. Wait.
- Wait GBP/CAD. – MT is sideways normal. Wait.
- Wait EUR/CAD. – MT is sideways quiet Wait.
- Sell NZD/CAD. Trend – MT is bear normal. Continue to sell.
- Buy GBP/CHF. Trend – MT is bull normal. Look to buy.
- Buy CAD/CHF. Trend – MT is bull normal. Look to buy.
- Wait NZD/CHF. – MT is bear volatile. Wait.
- Buy AUD/CHF. – MT is bull normal. Look to buy.
Other Markets
- Wait USDSGD. – MT is sideways normal. Wait.
- Buy USDCNH. Trend – MT is bull normal. Continue to buy.
- Sell Gold. Trend – MT is bear normal. Continue to sell.
- Wait Oil. – MT is bull volatile. Wait.
- Buy S&P 500. Breakout – MT is bull normal. Look to buy.
- Wait DAX. – MT is sideways normal. Wait.
- Wait Nikkei. – MT is sideways normal. Wait
- Buy T-Notes. Trend – MT is bull normal. Continue to 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.