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.
- Buy DXY Trend – MT is bull fast. The long-term pattern we have outlined here is now complete with the dollar index trading well above the 100 level. While we must be on guard for a technical reversal at major key levels like this, I do expect the dollar bull trend to continue. We have US Bond yields diverging from Bunds (and other government bonds), monetary policy divergence and sentiment clearly USD bullish on the back of Trumps expected stimulus. We also have markets anticipating “Trumpflation” (an increase in inflation on the back of Trumps policies), though I still think there are strong deflationary forces in play at the moment (deflation is typically good for the dollar and “Trumpflation” seemingly is too).
- Wait GBP/USD. – MT is sideways normal. We have shifted back into a sideways normal MT on daily charts (still bearish on weekly charts). I still see signs of bottoming in the GBP with Brexit fears easing and a neutral central bank. I would not want to buy vs. the GBP until 1.20 is tested again and held given the expected USD strength, though I do think there remains a long-term opportunity to be accumulating GBP here vs. the EUR.
- Buy USD/JPY. Trend – MT is bull fast. USD strength combined with an unwinding of long yen positions has seen the pair rise rapidly since the US election. Continue to buy, though keep stops tight on your initial position as this MT can reverse quickly when profit taking kicks in.
- Sell AUD/USD. Trend – MT is bear fast. Falling gold prices and a rapid drop in iron ore (after a sharp rise) along with USD strength have pushed us out of the 20 week sideways quiet MT. In the current environment this technical pattern provides a high conviction shorting opportunity.
- Sell EUR/USD. Trend – MT is bear fast. We continue to see the EUR pressured on the back of the divergence in bond yields and worries over anti-euro sentiment. Look to sell targeting first 1.0525 then 1.0465 and 1.00 beyond that. Don’t expect it to get there in a straight line and note this market type can reverse sharply so keep stops on entries tight.
- Sell NZD/USD. Trend – MT is bear normal. The kiwi remains pressured on the back of USD strength and a central bank prepared to cut rates, despite some positives for the pair that I have outlined here in the past. Both daily and weekly charts have flipped to bearish now. Look for selling opportunities.
- Buy USD/CHF. Trend – MT is bull normal. The SNB continue to struggle to hold back the tide of CHF appreciation with EURCHF pressuring lows. Also I think that if we do get a global risk-off scenario, or some sort of shock in the Eurozone the CHF will appreciate greatly and the SNB may be blown out of the water. For these reasons I prefer short EURUSD rather than long USDCHF.
- Buy USD/CAD. Trend – MT is bull normal. The CAD is holding up against the USD and is strong on the crosses (which happens sometimes when the USD is strong). This is on the back of a large one-day bounce in oil. But I would not be counting my chickens yet if I was a USDCAD bear. Oil has a strong negative correlation with the USD and if this dollar bull trend continues then Oil is going to struggle. Given the impotency of OPEC, the boost that Trump will give to the shale oil industry in the US and the supply imbalances currently in play, I think Oil is likely to head much lower. We may get a bounce on the upcoming OPEC meeting but I anticipate it will be short lived. Continue to buy USDCAD.
- Sell EUR/GBP. Trend – MT is bear normal. I think the 69 to above 90 in the EURGBP on the back of Brexit fears was well overdone, and in the long-term expect to see the pair trade back towards the 69 figure. The daily MT remains bearish. Look for a move back towards 0.8330.
- Sell EUR/CHF. Trend – MT is bear normal. Continue to sell with a target at 1.0625.
- Buy AUD/JPY. – MT is bull normal. Look to buy, but with caution
- Buy NZD/JPY. – MT is bull normal. Look to buy, but with caution as we are at resistance.
- 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 fast. Continue to buy.
- Buy CHF/JPY. Trend – MT is bull normal. Continue to buy.
- Buy GBP/NZD. – MT is bull fast. Look to buy on a break over 1.7750.
- Wait EUR/NZD. – MT is sideways normal. Wait.
- Wait AUD/NZD. – MT is sideways normal. Wait.
- Wait EUR/AUD. – MT is sideways normal. Wait.
- Buy GBP/AUD. Trend – MT is bull normal. Continue to buy.
- Sell AUD/CAD. Trend– MT is bear fast. Continue to sell.
- Buy GBP/CAD. Trend – MT is bull normal. Continue to buy.
- Wait EUR/CAD. – MT is sideways volatile. Wait.
- Wait NZD/CAD. – MT is bull volatile. Wait.
- Buy GBP/CHF. – MT is bull normal. Look to buy on a break above 1.26.
- Wait CAD/CHF. – MT is sideways volatile. Wait.
- Wait NZD/CHF. – MT is sideways volatile. Wait.
- Wait AUD/CHF. – MT is sideways extreme. Wait.
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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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