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. A rate hike in June is now back on the cards and the USD has rejected the attempt to break below the key 93 level with the formation of a three white soldiers candlestick pattern on the weekly charts. Technically we can look for dollar strength with a move back towards 100 over the next few months.
- Wait GBP/USD. – MT is sideways normal. Lasts weeks BREXIT poll results came out in favor of the UK staying in the European Union. Economic data also improved. I like to have a little bit of long GBP pound exposure heading into the June vote as my base case remains the UK stays, but I think better opportunities exist to be long GBP on the crosses.
- Wait USD/JPY. – MT is sideways normal. The strength of the yen has been a talking point at this weekends G7 talks, with Japanese officials concerned about it’s strength. Given that the MT has turned sideways and the Japanese jawboning, better opportunities may be found elsewhere for now.
- Sell AUD/USD. Trend – MT is bear normal. The AUDUSD continued to sell off on the back of divergence in monetary policy between the US and Australia. From a macro point of view, if anything develops out of China because of this article, then it will pressure the Aussie. Note my base case is that a slow down in China remains a major headwind for AUD and we eventually see the pair back down around 60 cents (though it may take a stock bear market to achieve the target).
- Wait EUR/USD. – MT is sideways normal. The divergence trade is back on the cards, both in terms of monetary policy and economic performance. Look for a break below 1.1175 for a shift to a bear market type. This remains a higher conviction trade for me.
- Sell NZD/USD. Trend – MT is bear normal. There are a variety of conflicting forces in play with the NZD. On the one hand we have a central bank in an easing cycle and weak dairy prices. On the other we have capital inflows (as seen by the hot stock market) and record net migration and booming tourism. NZD also provides the opportunity earn yield as it’s interest rate remains much (in this world of zero rates) higher than many of it’s peers. Overall I like to sell the kiwi after the recent run-up but I will maintain a healthy dose of caution until the stock market starts to weaken.
- Buy USD/CHF. Trend – MT is bull normal. The initial 0.98 target discussed here was met and pair has now broken out into a bull MT. The run-up has been quite strong so a pull-back is expected buy on a dip.
- Buy USD/CAD. Trend – MT is bull normal. We now have a divergence between oil and the CAD with Oil remaining in a bull MT. I like to buy CAD here but also using a more conservative approach as I would have expected a greater period of consolidation after the previous bear especially considering that oil continues to move higher. Also, watch out for the Bank of Canada this week. They have been reasonably positive so a shift to a more dovish stance could surprise the market.
- Sell EUR/GBP. Breakout – MT is bear normal. The break of the 4 hour MT mentioned here last week saw us quickly take out the .7750 level and we are now in a bear MT. Look to sell.
- Buy EUR/CHF. Trend – MT is bull normal. Continue to buy but careful of the hammer formed on Friday indicating a minor double top may be in place.
- Sell AUD/JPY. Trend– MT is bear normal. Continue to sell but with caution as we may be turning sideways. Possibly wait for a break of .7850.
- Wait NZD/JPY. – MT is sideways volatile. Still looking for a below 72.50 to initiate shorts, though wary of BOJ.
- Wait GBP/JPY. – MT is sideways volatile. Wait for now.
- Wait EUR/JPY. – MT is sideways volatile. Wait for now.
- Wait CAD/JPY. – MT is sideways volatile. Wait for now.
- Sell CHF/JPY. Trend– MT is bear normal. Continue to sell.
- Buy GBP/NZD. – MT is bull normal. Look to buy, but possibly wait for the price to bottom and reverse on one of the lower timeframes.
- Wait EUR/NZD. – MT is sideways normal. Wait for now.
- Sell AUD/NZD. Trend– MT is bear normal. Continue to sell.
- Buy EUR/AUD. Trend – MT is bull normal. Buy, but careful as we may well turn sideways here.
- Buy GBP/AUD. – MT is bull normal. Buy but on a pull back only.
- Sell AUD/CAD. – MT is bear normal. Continue to sell.
- Wait GBP/CAD. – MT is bull fast. Buy but on a pull back only in this MT.
- Wait EUR/CAD. – MT is sideways volatile. Wait for now.
- Wait NZD/CAD. – MT is sideways normal. Wait or now.
- Buy GBP/CHF. – MT is bull fast. We have had the break into a bull MT at the completion of an inverse head and shoulders pattern. Look to buy for an eventual move back towards 1.5600. Wait to stalk an entry in this MT.
- Wait CAD/CHF. – MT is sideways normal. Wait for now.
- Wait NZD/CHF. – MT is sideways normal. Wait for now.
- Sell AUD/CHF. – MT is bear normal. Sell but low conviction as turning sideways.
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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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