Forex Trading Opportunities for the Week Ahead 5 Sep 2016

Fx-trading-sep-5

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. 

Majors

  • Wait DXY  – MT is sideways normal. The main event for the dollar last week was NFP’s. The report came in a little on the weak side but it was not really enough to chance the mind of Fed officials (if they have their minds made up that is).  We will either probably see a hike in September and none in December or vice versa. Bond yields did rise after the report and there is divergence going on here which is bullish USD. The only real event risk coming up is services PMI this week, with markets perhaps more likely to trade in response to RBA, BOC and of course the ECB’s meeting outcomes this week. Technically we remain range bound in the middle of both a weekly and monthly sideways MT.
  • Wait GBP/USD. – MT is sideways normal. The GBP is sitting below the key 1.34 level when we can expect sellers in this MT. A break of 1.34 turns us into a bull MT. I for one remain bearish GBP despite the recent better than expected UK data and prefer to see 1.34 as a selling opportunity if we get a bearish price pattern.
  • Buy USD/JPY. Trend – MT is sideways normal. Last week we got the expected reversal and broke out into a bull MT. With limited US data, the next BOJ meeting not until the 21st, and sentiment bullish on the pair (bearish JPY) we can expect the move to continue towards 107.

  • Sell AUD/USD.  Trend–  MT is bear normal. We have switched into a bear MT. We have RBA and China trade numbers coming up. Copper is painting a bearish picture, while Iron ore is holding onto gains and the gold picture remains bullish. Friday’s NFP was good for stocks and the AUD was up, despite giving back a fair chunk of the gains. I still think traders will be interested in AUD for the yield. It’s a messy picture with technical and fundamentals conflicting hence I prefer tentative shorts with small position sizes or to stay out.
  • Wait EUR/USD.  –  MT is sideways normal. The main event for the week will be the ECB meeting on 8th which is seen as a “live meeting”. I don’t think that traders expect the ECB to do much so the risk is to the downside for the EUR if they do something aggressive and surprise the market. This is a possibility depending on how they feel about Brexit. Also inflation is not doing what the ECB wants so they may decide they need to act on this front.
  • Wait NZD/USD. – MT is sideways normal. Kiwi remains very buoyant and continues to pressure the key .73 figure which has been acting as resistance. The positives for the Kiwi include robust population growth, booming tourism, low interest rates (for the domestic market, helping housing and construction), a hot stock market, high yields (for foreign investors) and a central bank whom is not in a rush to ease. We still have to worry about low dairy prices as they are below the cost of production, though we are up 30% from the bottom. Overall you can see why the kiwi looks attractive. After selling did not eventuate last week, I look for a break of the key 0.73 level. Note I do prefer to buy kiwi vs. the crosses as I don’t think the USD will be the weakest option. Watch out for the dairy auction this week, good numbers should serve as a bullish catalyst.

  • Wait USD/CHF.  – MT is sideways volatile. We are range bound at the moment, though I do expect the pressures to be to the upside. I am in the process of changing my long-term view of the CHF. I have liked it weaker (USDCHF higher) on the back of the SNB obviously wanting the EURCHF to be at least at the 1.20 level. While we remain in a risk on environment (stocks up) I prefer to be buying or staying out as the CHF should roughly correlate with the EUR. When we get into a risk-off scenario I think CHF is going to strengthen dramatically (USDCHF goes down). Once stocks come off 10% or more and bear MT breaks out the SNB is in serious trouble. They have been expanding their balance sheet massively in order to weaken the Franc, and have been buying all sort of risky assets (they own more Apple shares than Mark Zukerberg for example). But the key thing is they have a mandate to remain profitable, so when we get major risk off, the CHF will strengthen on safe haven flows, while at the same time the SNB is going to get hammered every which way, and will need to repatriate funds adding to the pressure (They simply can’t keep losing money forever). There will be nothing they can do in this situation and will likely have made the problem much worse (you know the old saying “You create what you fear” – that will sum up the SNB). Note this is not something I expect to happen next week… but is one to watch during the next stock market bear, which is well overdue. The average length of a stock market bull is 7 years, we are now 8 years in.
  • Wait USD/CAD.  – MT is sideways normal. USDCAD remains range bound at the moment. There is some talk of Russia (Putin) wanting to come to a deal to halt the slide in oil. Of course he does, Russia needs higher prices. But this does not at all mean that the rest will. It’s probably a sign of how badly Russia is being squeezed, which is exactly what the Saudi’s etc want to see happen to their competition- it’s why they have not cut production already. Anyway, I think Oil heads lower still and this will eventually pressure the CAD, but for now just wait.
  • Sell EUR/GBP. Trend – MT is bear normal. We have shifted into bear MT territory. If you are bullish GBP and think the Brexit move is overdone, this could be one of the better options. Any bad news about Brexit could effect the EUR as well as the GBP if the data deteriorates offering a modicum of protection. We have been back up near the 2013 highs so there is plenty of downside potential. Look to sell, but of course watch out for the ECB this week.

Crosses

  • Buy EUR/CHF. Trend – MT is bull normal. Last week’s breakout may be failing here. Trade with caution or stay out.
  • Wait AUD/JPY. – MT is sideways normal. Wait for now.
  • Buy NZD/JPY. Trend – MT is bull normal. We got the break of .74 mentioned in last weeks report as a buying opportunity. Continue to buy.
  • Buy GBP/JPY.  Trend – MT is bull normal. Also got the break above the level mentioned in last weeks report. Continue to buy.
  • Buy EUR/JPY. Trend MT is bull normal. Look to buy.
  • Buy CAD/JPY. Trend – MT is bull normal. Look to buy.
  • Buy CHF/JPY.  Trend – MT is bull normal. Look to buy.
  • Wait GBP/NZD.  – MT is sideways quiet. Look to sell, prefer on a confirmed break of 1.77.
  • Sell EUR/NZD.  Breakout – MT is bear normal. On Friday we saw the break of the sideways quiet MT. I quiet like this one.
  • Sell AUD/NZD. Trend – MT is bear normal. At the risk of looking silly, I think we can break 1.000.
  • Wait EUR/AUD. – MT is sideways normal. Wait for now.
  • Wait GBP/AUD. – MT is sideways normal. Wait for now.
  • Wait AUD/CAD. –  MT is sideways volatile. Wait for now.
  • Wait GBP/CAD. –  MT is sideways volatile. Wait for now.
  • Wait EUR/CAD. –  MT is sideways normal. Wait for now.
  • Wait NZD/CAD. – MT is sideways normal. Technically we have a busted breakout, look for a move back toward .93.
  • Wait GBP/CHF. – MT is sideways normal. Wait for now.
  • Wait CAD/CHF.  – MT is sideways normal. Wait for now.
  • Buy NZD/CHF. Trend – MT is bull normal. Buy but son a dip as we have a hammer off resistance which suggest some downside.
  • Wait AUD/CHF. – MT is sideways normal. Wait for now.

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Economic calendar for the week ahead:

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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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