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 Trend – MT is sideways normal. The dollar index continues to oscillate around the key 92 level. The Federal Reserve was rather hawkish in this weeks FOMC, signalling a further rate hike this year and possibly four more next year. Next up on the agenda is President Trump’s tax reform discussion. We need to remain cautious with the Korea situation as escalation would be seen as bad for the dollar. President Trump has ordered more sanctions. The POBC (People’s Bank of China) has been instructed not to do any business with North Korean clients and is unwinding existing relationships. North Korea is considering a Atomic Bomb test in the Pacific Ocean. Hopefully nothing will come to pass but there is real risk here. I am watching for a contrarian buying opportunity, but would need to see the index close back above .93 and EURUSD close below 1.1840 (or preferably 1.1800).
- Buy GBP/USD. Trend – MT is bull normal. The pair remained range bound last week, responding to different drivers each day. Data continues to be good and is supportive of the BOE newly hawkish stance. But market particiapants did not like Prime Minister May’s Brexit speech on Friday as she did not mention the “divorce” payment of 20 billion which the UK government has earmarked to pay. Overall the trend and fundamentals remain bullish.
- Buy USD/JPY. Trend – MT is sideways normal. The BOJ retained its dovish stance as expected and the Yen continues to weaken. We do need to be concerned with geopolitical risk, but otherwise we can expect the pair to head towards the 114.50 key level.
- Wait AUD/USD. – MT is sideways normal. The Aussie sold off on the back of firstly a hawkish FOMC statement and then a dovish speech by RBA Governer Lowe and a ratings cut by S&P of China (from A+ to AA-). Iron Ore and gold have been selling off. We have a minor double top in place but need to wait for a break below .7900 before initiating short trades.
- Wait EUR/USD. – MT is sideways quiet. The Euro continues to fail to hold the key 1.20 level. The primary event of the moment is the German Federal Election, where the incumbent Challencor Angela Merkel is expected to win. This will be good for the Euro but the majority of the move will be priced in. Euro-zone data remains positive and the ECB hawkish. I think there are opportunities to trade this both ways with a clean break above 1.21 or below 1.18 both options.
- Wait NZD/USD. – MT is sideways normal. There is an election this weekend in New Zealand. The polls have been mixed but are now showing a bias towards the incumbent National Party retaining power. This is good for the Kiwi. The last dairy auction showed a price rise of 0.9%. The Kiwi may well head higher on the back of a national win, but we need to remember we have a dovish Central bank whom has promised intervention at these levels.
- Wait USD/CHF. – MT is sideways normal. We bounced for a third time off major support at 0.9450 and formed a large bullish reversal pattern. This is indicative of further upside, but we want to see a close above 0.9700 to confirm the bull MT. Fundamentally, the SNB remains extremely dovish and would like to see the Franc weaken further.
- Wait USD/CAD. – MT is bear volatile. We have shifted into the transitionary bear volatile MT. This is on the back of USD strength more than anything. We can watch for BOC Governor Poloz’s speech on Wednesday for more indications about the next rate hike. Oil continues to hold about the key $50 level which is bullish for CAD.
- Sell EUR/GBP. Trend – MT is bear normal. With the change in tone from the BOE, it puts the BOE on track to raise rates before the ECB. Concern remains around Brexit and we look to be consolidating here. Technically this is to be expected after the sharp sell-off and the bearish outlook remains intact.
- Buy EUR/CHF. Trend – MT is bull normal. Wait.
- Wait AUD/JPY. – MT is bull normal. At key resistance. Wait.
- Buy NZD/JPY. Trend – MT is bull normal. Continue to buy.
- Buy GBP/JPY. Trend – MT is bull normal. Some profit taking would be appropriate here.
- Buy EUR/JPY. Trend – MT is MT is bull normal. Continue to buy.
- Buy CAD/JPY. Trend – MT is bull normal. Some profit taking would be appropriate here.
- Wait CHF/JPY. – MT is bull normal. Wait.
- Buy GBP/NZD. Trend – MT is bull normal. Continue to buy.
- Sell EUR/NZD. Trend – MT is bear normal. Sell, but make sure election results align with the trade.
- Sell AUD/NZD. – MT is bear normal. Look to sell.
- 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 normal. 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 sideways volatile. Wait.
- Buy GBP/CHF. Trend – MT is bull normal. Continue to buy.
- Buy CAD/CHF. Trend – MT is bull normal. Continue to buy, but be careful of a reversal here.
- Buy NZD/CHF. Trend – MT is bull normal. Look to buy.
- Sell AUD/CHF. Reversal – MT is sideways volatile. Look to sell.
- Wait Gold. – MT is sideways volatile. Wait.
- Buy Oil. Trend – MT is bull normal. Continue to buy.
- Buy S&P 500. Trend – MT is bull normal. Continue to buy.
- Buy DAX. Trend – MT is bull normal. Continue to buy.
- Sell T-Notes. Trend – MT is bear normal. Look to sell.
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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.