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 quiet. Despite a week with a number of major news pieces, the dollar index remains in a sideways quiet MT. First off, last weeks FOMC meeting saw the Federal Reserve hike rates by 0.25 basis points. The response to the meeting was bearish with the USD selling off. This was because there was an expectation of greater confirmation that there could be four rate hikes this year. Instead the more likely outcome was perceived to be three. Near the end of the week we saw an escalation of the trade conflict between China and the U.S., with President Trump initiating an estimated 60 billion in tariffs on China in response to intellectual property violations. China responded with 3 billion in tariffs on U.S. goods, a complaint to the WTO and a strongly worded statement. This has been bad for risk with the the Yen strengthening and stocks selling off heavily. Traditionally, this should be bearish for USD, but I think we need to watch this space to see how it plays out.
- Buy GBP/USD. Trend – MT is bull normal. The main event for the GBP last week was the BOE meeting. There was a hope that the BOE would strongly signal a rate hike in May. They did not do that, but that does not take the rate hike off the table at all. There was an initial rally and immediate sell-off and the GBP is now basically flat from the event. Some market participants view the meeting as more hawkish than was initially perceived. On the Brexit front there is progress towards a deal on transition. We have moved back into a bull MT and I expect the pair to continue towards the high at 1.4340, but my conviction is not as strong as it was pre-event.
- Sell USD/JPY. Trend – MT is bear normal. The bear MT has resumed on the back of risk aversion. Stocks have sold off dramatically and the yen is benefiting from safe haven flows. This is concerning the BOJ, and there is talk of intervention. There is no major support until we get to 99.00 so if stocks continue to sell-off then the pair could have a fair way to fall.
- Sell AUD/USD. Trend – MT is bear normal. The yield differential between the AUD and USD has flipped with US rates now higher than Australian rates. Data has not been great and considering the sell-off in stocks and trade war fears the AUD should continue to trend lower. In saying that, the sell-off has not been as strong as expected so some caution is required if stocks bounce/ trade war fear ease in the coming week.
- Wait EUR/USD. – MT is sideways quiet. The EUR remains range bound, perhaps caught between the conflicting drivers of a dovish ECB and a less hawkish than expected Federal reserve and trade war fear. Wait for now.
- Wait NZD/USD. – MT is sideways normal. The Kiwi, like the Aussie is showing more strength than might be expected in the face of the sharp fall in stocks at the end of the week. Data is not great and the RBNZ remains dovish. Given the lack of follow through, there is a chance the pair will bounce if trade war tensions do ease in the coming week.
- Buy USD/CHF. Trend – MT bull normal. While we remain in the bull MT, a close below 0.9450 would be bearish for the pair. This could be expected if the risk-off flows continue.
- Buy USD/CAD. Trend – MT is bull normal. The pair sold off last week both because of USD weakness and some progress on the NAFTA agreement. The strong oil price may be helping the CAD too. But we still remain in the bull MT, the BOC has been ambivalent about when the next hike will be and NAFTA is by no means resolved. Buying remains the correct strategy, but wait for some bullish momentum first.
- Wait EUR/GBP. – MT is sideways normal. After a busted breakout attempt at .8950, we have seen the pair move steadily lower. This could be a sign that with Brexit tensions easing the market is refocusing on the divergence in monetary policy between the UK and Europe. We have attempted to breakout of the weekly sideways MT, but no luck as yet with a long-tail Doji forming off support. This is indicative that we may remain range bound for now, but watch for a close below 0.8700.
Crosses
- Buy EUR/CHF. Trend – MT is bull normal. Continue to buy.
- Sell AUD/JPY. Trend – MT is bear normal. Look to sell.
- Sell NZD/JPY. Trend – MT is bear normal. Continue to sell.
- Wait GBP/JPY. – MT is sideways normal. Wait.
- Sell EUR/JPY. Trend – MT is bear normal. Continue to sell.
- Sell CAD/JPY. Trend – MT is bear normal. Continue to sell.
- Sell CHF/JPY. Trend – MT is bear normal. Continue to sell.
- Wait GBP/NZD. Trend – MT is bull normal. Continue to buy.
- Wait EUR/NZD. – MT is sideways quiet. Wait.
- Sell AUD/NZD. Breakout – MT is bear normal. Look to sell.
- Wait EUR/AUD. Trend – MT is bull normal. Continue to buy.
- Wait GBP/AUD. Trend – MT is bull normal. Continue to buy.
- Wait AUD/CAD. – MT is bull volatile. Wait.
- Buy GBP/CAD. Trend – MT is bull normal. Continue to buy.
- Buy EUR/CAD. Trend – MT is bull normal. Continue to buy.
- Buy NZD/CAD. Trend – MT is bull normal. Continue to buy.
- Buy GBP/CHF. Trend – MT is bull normal. Continue to buy.
- Wait CAD/CHF. – MT is sideways normal. Wait.
- Wait NZD/CHF. – MT is sideways normal. Wait.
- Wait AUD/CHF. – MT is sideways normal. Wait.
Other Markets
- Wait USDSGD – MT is sideways normal. Wait.
- Wait USDCNH – MT is sideways quiet. Wait
- Buy Gold. – MT is bull normal. Look to buy.
- Buy Oil. – MT is bull normal. Look to buy.
- Sell S&P 500. – MT is bear normal. Look to sell.
- Sell DAX. – MT is bear normal. Look to sell.
- Wait Nikkei. – MT is bear normal. Look to sell.
- Wait T-Notes. – MT is sideways normal. 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.