Forex Trading Opportunities for the Week Ahead 25 July 2016

B-JUL-25

I plan my trading for the week ahead each weekend. Here are the Forex trading opportunities I will be stalking 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. 

  • Buy DXY  Trend – MT is bull normal. The dollar index remains within the long-term technical structure, suggestive of a move back towards 100. Last week was quiet on the data front but saw steady appreciation of the USD. This week we have FOMC which may give us more clues as to if we will see a rate hike this year. With stocks at highs, improvements in employment data and the general “stability” of the market after Brexit, we may get some hawkish comments. As a reminder, longer-term I like the dollar for three reasons. Firstly, we are in a deflationary environment (a squeeze on dollar supply), secondly the divergence between the policies of the Federal Reserve and other Central Banks, and thirdly it’s safe haven status for when we do eventually get that big stock market sell-off.
  • Wait GBP/USD. – MT is sideways normal. The pound was relatively steady last week until a special PMI report came out showing both the services and manufacturing are suffering in the aftermath of Brexit. Of particular note the new orders component cratered, suggesting businesses have pulled investment. While the MT has shifted into neutral mode, we can look to sell on a confirmed break of 1.3050. The consolidation period that is to be expected after a move the magnitude of Brexit should come to an end soon and I expect to see more downside.
  • Sell USD/JPY. Reversal – MT is sideways volatile. Since the key 100 level was taken out, we have anticipated a shift to a sideways volatile MT. We now have this along with a bearish engulfing candle after resistance at the Pre-brexit high was taken out. MT theory suggests that we will now see a move back down to the 100 level to form a double bottom before we head higher again. Of course theory does not always pan out in in practice, but it helps us to understand the odds. Fundamentally, the market is anticipating a souped up easing program from the BOJ on Friday, if they disappoint (a decent chance) then that may be the catalyst for the move lower.  I prefer to be short here (or below 105.25) and then to be buying if we see the 100 level again.
  • Wait AUD/USD.  –  MT is sideways volatile. In last weeks report we noted the formation of a busted double top and bearish engulfing candle. The Aussie continued the sell-off on the back of a dovish RBA, who opened the door to another rate cut in August. We can expect the sell-off to continue this week targeting .7400 and then .7250. Watch out for inflation data this week, which will be a key determinant of the RBA’s strategy.
  • Sell EUR/USD.  Trend–  MT is bear normal. The Euro continues to trend lower. Economic data is not great, nor terrible and the ECB is singing the same old “we stand ready” tune. Technically we are holding below the key 1.10 level and I expect more downside here. Watch out for the “stress test” results on Italian banks this coming week.
  • Sell NZD/USD.  Trend – MT is bear normal. In the RBNZ’s unscheduled economic assessment they announced further macro-prudential measures to cool the housing market and to protect banks in the event of a downturn. They then announced that more rate cuts were likely and that the high NZD is an impediment to economic performance. The currency sold off all week ending in bear MT territory. Given the speed of the decent, I suggest a conservative approach with a wide stop and part of your position on a pull back.
  • Wait  USD/CHF.  – MT is sideways normal. Fundamentally, we can expect a further rate cut from the SNB later this year. Technically we have turned sideways for now, but if you like the pair I would not begrudge buying.
  • Wait USD/CAD.  – MT is sideways normal. The continued slide in the price of oil lead to USDCAD’s first real attempt to break above the 1.3150 level on Friday. This failed and we are now sitting back withing the range. Oil is looking tenuous so I still like to buy on a confirmed break of 1.3150 in conjunction with a lower oil price.
  • Wait EUR/GBP. – MT is sideways normal. I think best to wait on this one for now.

Crosses

  • Wait EUR/CHF.  – MT is sideways normal. Wait for now.
  • Sell AUD/JPY. Reversal – MT is sideways volatile. Technical sell in this MT. Sell on a break of 78.50 or short from here if aggressive.
  • Wait NZD/JPY. – MT is sideways volatile. Wait for now.
  • Wait GBP/JPY.  – MT is sideways normal. Sell on a break of 1.3750.
  • Sell EUR/JPY. Reversal – MT is sideways volatile. This is one I like. We have a busted attempted to break the 118.85 high leading to the formation of a minor double top. A good selling opportunity in this MT.
  • Wait CAD/JPY. – MT is sideways volatile. Also a potential for a reversal. Wait for a breakout in USDCAD first.
  • Wait CHF/JPY.  – MT is sideways volatile. Another reversal potential but I like EURJPY and CADJPY better.
  • Wait GBP/NZD. – MT is bear volatile. Wait or possible sell.
  • Wait EUR/NZD.  – MT is bear volatile. Wait or possible sell.
  • Wait AUD/NZD. – MT is bull normal. But lots of reversal candles. Wait.
  • Sell EUR/AUD.  Trend– MT is bear normal. Spinning tops mentioned last week lead to buying, but sellers came back on Friday and we are just holding onto the bear MT. Sell but watch out for a switch to a sideways MT.
  • Wait GBP/AUD. – MT is sideways normal. Wait for now.
  • Wait AUD/CAD. –  MT is bull volatile. Can look to buy dips but lower conviction. Will likely turn sideways.
  • Wait GBP/CAD. –  MT is sideways normal. Wait.
  • Wait EUR/CAD. –  MT is sideways normal. Wait for now.
  • Wait NZD/CAD. – MT is bull volatile. Wait for now.
  • Wait GBP/CHF. – MT is sideways normal. Wait.
  • Wait CAD/CHF.  – MT is sideways normal. Wait for now.
  • Wait NZD/CHF. – MT is bull volatile. Wait for now
  • Wait AUD/CHF. – MT is bull volatile. Wait for now.

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(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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