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. An initially eye-popping headline number for Friday’s NFP report did not tell the whole picture. The unemployment rate rose, there was a decrease in average hourly earnings growth and downward revisions to previous months numbers. The good headline number has slightly increased the chance of a Fed rate rise this year, but given the unwillingness to hike aggressively and the global uncertainty around Brexit, the Fed will likely need a lot more compelling data before they do anything. We must note that stocks are up with the S&P500 trading near it’s high, and stocks have been a key consideration in Fed actions over the past few years (whether they should be is another question altogether). The index remains range bound for now so wait.
- Sell GBP/USD. Trend – MT is bear fast. The UK continues to feel the economic consequences of both the Brexit and the uncertainty around it’s future. While the BOE is conducting itself in a supportive manner toward equity markets, the pound remain pressured and this situation is likely to continue. There will be bounces (and possibly quite sharp ones) but the correct strategy is to continue to sell.
- Sell USD/JPY. Trend – MT is bear normal. We touched the key 100 level again on Friday with the next target being the Brexit low at 99.00. Continue to sell the pair, but carefully as we may well turn sideways here, in particular if stocks remain strong. The reason for yen strength? Possibly has to do with Japanese asset managers and corporations raising long yen hedges on their foreign holdings more than safe haven flows. As always beware of the risk of intervention by the BOJ.
- Wait AUD/USD. – MT is sideways normal. The AUD remains strong on the back of it’s higher yield despite the unresolved political situation and a ratings downgrade by S&P. Essentially it is one of the best in a bad bunch. Gold and stock prices are supportive of the Aussie. Look to buy on a break of 76.00. Additionally, there are good opportunities on the crosses to buy AUD.
- Sell EUR/USD. Trend– MT is bear normal. Aside from Brexit, the banking crisis in Italy may be coming to a head. Italy’s banks are in a shabby state and unlike Greece, they may well be too big to save. We want to watch closely how the market reacts to the flow of news on this story. In the meantime we can continue to sell.
- Buy NZD/USD. Trend – MT is sideways normal. The kiwi is the flavor of the month and is now in a bull normal MT on both daily and weekly charts. There is not much data this week to knock things off course so we can continue to buy. Also good opportunities on the crosses to buy Kiwi.
- Wait USD/CHF. – MT is bear volatile. While the weekly hammer mentioned in the previous weeks report failed to lead to further selling, we remain within the broader sideways range. The SNB’s Jordan reiterated there goal to weaken the Franc, which they view as significantly overvalued. We transition to a bull MT on a break of .9850.
- Wait USD/CAD. – MT is sideways normal. Oil sold off heavily this last week (7.5%) and oversupply is plaguing the market. Job growth in Canada is stalling and the trade deficit is at record levels. Look to buy the breakout into a bull MT on a close above 1.31 (as long as Oil continues to head lower).
- Buy EUR/GBP. Trend– MT is bull fast. We need to be wary of a sharp reversal in this MT and if the Italian bank news flow gains traction then we may see a fair amount of profit taking. Buy for now, but best suited to short-term traders and keep stops tight.
- Wait EUR/CHF. Trend– MT is sideways normal. Wait for now.
- Wait AUD/JPY. – MT is bear normal. This pair should only be sold in correlation with stocks and risk-off.
- Wait NZD/JPY. – MT is sideways volatile. Wait for now, as above.
- Sell GBP/JPY. Trend – MT is bear normal. Continue to sell.
- 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.
- Sell GBP/NZD. Trend – MT is bear fast. Our 1.77 target was reached. Continue to sell. Still one of my fav plays, but remember stops should be kept relatively tight in this MT.
- Sell EUR/NZD. Trend – MT is bear fast. Continue to sell. Another one that I have conviction in at the moment. Same as above regarding stops.
- Sell AUD/NZD. – MT is bear normal. Look to sell, with a target at the very juicy 1.0000 key level. You can bet a lot of stops are sitting around there with the previous low at 1.0020
- Sell EUR/AUD. Trend– MT is bear fast. Continue to sell for a move towards 1.45 but keep stops tight on profits.
- Sell GBP/AUD. Trend – MT is bear fast. Continue to sell, same as above regarding stops.
- Buy AUD/CAD. Trend– MT is bull fast. Continue to buy. Could be a goodie if Oil keeps selling off.
- Sell GBP/CAD. Trend – MT is bear normal. Continue to sell.
- Wait EUR/CAD. – MT is sideways normal. Wait for now.
- Buy NZD/CAD. Trend – MT is bull fast. Continue to buy, same as AUDCAD .
- Sell GBP/CHF. Trend – MT is bear normal. Continue to sell.
- Wait CAD/CHF. – MT is sideways normal. Wait for now.
- Buy NZD/CHF. Trend– MT is bull fast. Continue to buy for a move towards 0.75.
- Buy AUD/CHF. Trend – MT is bull fast. Continue to buy for a move towards 0.76.
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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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