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 volatile. The DXY is lagging near the bottom of the wider range discussed last week. There is little chance of a rate rise on July, and given the feds unwillingness to hike over the last few years despite low unemployment and stocks near highs we can’t really expect much more from them for the rest of the year. Of note the dollar has also not been performing it’s usual role as safe-haven despite risk-off, with the old equities down/USD up relationship breaking down. The US economy continues to tick along with manufacturing lagging the housing market and consumer spending (mostly as a result of the fall in Oil investment and the stronger USD). There is a little bit of US data this week but it will be overshadowed by the Brexit Referendum.
- Wait GBP/USD. – MT is bear volatile. After initial selling last week the GBPUSD recovered on easing Brexit concerns. This coming week financial markets will be dominated by the Brexit referendum, of which the GBPUSD will be the epicenter. My base case is that the UK will remain in the EU, but there is a seriously possibility that the vote will be a leave. Which ever way the outcome, it will move the markets. A stay vote will see the GBP and most likely risk assets in general rise. A leave vote will see the GBP sell off. How much will depend on liquidity. Given the blood we have seen on the streets in recent times with the lack of buyers (liquidity) available to step-up, the sell-off could be very large. I recommend you to this article on the SNB crises for some pointers on how to protect yourself if we do have a “bang moment”. If you do want to trade the outcome of the Brexit, I would recommend you set up a separate account with a minimum of capital with a broker that is not likely to chase you if the account goes into a negative balance.
- Sell USD/JPY. Trend – MT is bear normal. The USDJPY continues to trend lower on the back of JPY strength. Part of the strength is a continuation of the adjustment of rate hike/ easing expectations from both central banks, while other flows are a result of risk-off. We can continue to sell, but expect a sharp reaction to the Brexit Referendum.
- Wait AUD/USD. – MT is sideways normal. Data remains steady out of Australia and a little weak from China, but this upcoming week expect risk on/off to drive the pair.
- Wait EUR/USD. – MT is sideways volatile. The Eurozone economy remains tepid and there are really no signs that this is going to change. This combined with a central bank in a “holding” pattern means the EUR should stay relatively range bound vs. the USD (excepting if we have a Brexit). Of greater concern are the longer-term macro risks presented by over-indebted periphery (and to be honest core – here’s looking at you France and Italy) nations, the immigration situation, a invasive and non-business friendly bureaucracy and of course continued euro-skepticism. These factors combine to keep my long-term view bearish.
- Buy NZD/USD. Trend – MT is bull normal. While I remain wary of buying at these levels, the NZD is supported by capital in-flows from China and to the hot stock market, and from construction and net-immigration. Dairy prices are holding steady, though remain below the cost of production for most farmers. GDP moderately surprised to the upside last week, but the numbers are not great in and of themselves.
- Sell USD/CHF. – MT is bear normal. The SNB kept rates on hold and reiterated that they could go lower. They also gave the obligatory “we stand ready to support the markets in the case of a Brexit” line. Look for a break of the 4 hour sideways MT at 95.70 to target the lows around .9450.
- Wait USD/CAD. – MT is sideways normal. Last weeks reversal call worked out, but a bounce in the oil price and a change in risk sentiment near the end of the week turns us sideways.
- Wait EUR/GBP. – MT is sideways volatile. We had a sell signal in this market type on Thursday, but, of course, I advise caution heading into this weeks event.
- Sell EUR/CHF. Trend– MT is bear normal. Look to sell.
- Sell AUD/JPY. Breakout– MT is bear normal. We got the break below .78 discussed in last weeks report and we can continue to sell.
- Wait NZD/JPY. – MT is sideways normal.
- Sell GBP/JPY. Trend – MT is bear normal. Continue to sell.
- Sell EUR/JPY. Trend – MT is bear normal. Continue to sell. There is lots of downside potential.
- Sell CAD/JPY. – MT is bear fast. Look to sell but wary of a sharp reversal.
- Sell CHF/JPY. Breakout – MT is bear normal. Look to sell.
- Sell GBP/NZD. Trend – MT is bear normal. Continue to sell but with caution as we have some bottoming here. Good time for existing shorts to take some profit.
- Sell EUR/NZD. Trend – MT is bear normal. Continue to sell.
- Sell AUD/NZD. Trend – MT is bear normal. Continue to sell.
- Sell EUR/AUD. Trend– MT is bear normal. Look to sell for a move towards 1.45.
- Sell GBP/AUD. Trend – MT is bear normal. Look to sell, but caution this week.
- Wait AUD/CAD. – MT is sideways normal. Wait for now.
- Wait GBP/CAD. – MT is sideways volatile. Had a bullish reversal pattern in this MT.
- Wait EUR/CAD. – MT is sideways normal. Wait for now.
- Buy NZD/CAD. Trend – MT is bull normal. Continue to buy.
- Wait GBP/CHF. – MT is bear normal. Wait.
- Sell CAD/CHF. Trend – MT is bear normal. Look to sell.
- Wait NZD/CHF. – MT is sideways normal. Wait for now.
- Wait AUD/CHF. – MT is sideways quiet. Wait for now.
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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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