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. – MT is bull normal. The Dollar Index is only just holding onto the bull MT. Despite a less dovish than expected Fed and good non-farm payroll data, the breakout above key resistance at 97.70 has not yet been sustained. This is suggestive that we may see a pull-back or a period of consolidation. This does not mean the bull trend is over for good. The fundamental divergence theme is well and alive. There is an above average chance that there will be a resolution in trade talks between China and the US very soon. US stock markets continue to attract flows. These factors all suggest that buying is still the correct strategy, but probably on a dip rather than at market.
- Buy GBP/USD. – MT is bull normal. GBP ended up the strongest currency last week. Data was decent and there were semi-positive noises on Brexit progress. The real driver though, was the BOE. While acknowledging the Brexit risks, the BOE remained positive about the economy and continued to indicate that they would like to see rates higher than the market is currently pricing in.
- Wait USD/JPY. – MT is sideways normal. Despite US stock markets being at all time highs and bullish USD fundamentals, the pair is close to shifting into a bear MT. Bond markets don’t shed any light on JPY strength either. Best to wait until things line up a bit better,
- Wait AUD/USD. – MT is bear normal. The Aussie is finding some support around the key .70 figure. We have a minor double bottom in place here with the formation of the bullish engulfing candlestick pattern on Friday. Technically, it looks like a good buy. But the kicker is there is a 38% percent chance of a rate cut by the RBA priced in for this Tuesdays meeting. If no cut we are primed to bounce higher, if there is a cut then it should not be a surprise that the bear MT continues.
- Sell EUR/USD. – MT is bear normal. While we remain within the bear MT, price action is quite messy. There was no follow through on the breakout and the pair retested 1.1250, before forming a bearish hammer after the FOMC meeting. Often this would be a fair sign the downtrend was to resume. It did somewhat, but sightly better data from the EU and concerns around U.S. wage growth have pushed the pair back above 1.12. Bigger picture, the downtrend is intact and so is the divergence in monetary policy and economic performance, but for now it’s difficult to aggressively short the pair. A better strategy is perhaps to wait for a rally to resistance before selling.
- Wait NZD/USD. – MT is bear normal. The downtrend persists but the price action is a bit choppy on the back of mixed USD performance. There is a 60% chance of a rate cut priced in at this weeks RBNZ meeting. Fundamentals have deteriorated and the message from the RBNZ has been dovish. They would like a lower NZD too. A rate cut may push the pair towards 0.65.
- Wait USD/CHF. – MT sideways normal. The fundamentals are supportive of a continuation of the bull MT towards 1.03. Price action continues to be consolidative above resistance turned support at 1.0130.
- Wait USD/CAD. – MT is bull normal. The pair has failed to sustain the breakout. This is despite weaker GDP data and a sell-off in oil. Bond yields have shifted slightly in favor of CAD which is helping to keep the currency repressed. Wait for now.
- Sell EUR/GBP. – MT is bear normal. The pair is moving rapidly towards the bottom of the range. Fundamentally, this is a good selling option. We can expect the low at .8475 to be taken out this week. The challenge will be finding a good risk/reward trade now we are near the bottom of the range.
Crosses
- Buy EUR/CHF. – MT is bull normal.
- Sell AUD/JPY. – MT is bear normal.
- Sell NZD/JPY. – MT is bear normal.
- Wait GBP/JPY. – MT is sideways normal.
- Sell EUR/JPY. – MT is bear normal.
- Sell CAD/JPY. – MT is bear normal.
- Sell CHF/JPY. – MT is bear normal.
- Buy GBP/NZD. – MT is bull normal.
- Wait EUR/NZD. – MT is sideways normal.
- Wait AUD/NZD. – MT is sideways normal.
- Buy EUR/AUD. – MT is bull normal.
- Buy GBP/AUD. – MT is bull normal.
- Sell AUD/CAD. – MT is bear normal.
- Buy GBP/CAD. – MT is bull normal.
- Wait EUR/CAD. – MT is sideways quiet.
- Sell NZD/CAD. – MT is bear normal.
- Buy GBP/CHF. – MT is bull normal.
- Buy CAD/CHF. – MT is bull normal.
- Wait NZD/CHF. – MT is sideways normal.
- Wait AUD/CHF. – MT is sideways normal.
Other Markets
- Sell Gold. – MT is bear normal.
- Sell Oil. – MT is bear normal.
- Buy S&P 500. – MT is bull normal.
- Buy DAX. – MT is bull normal.
- Buy Nikkei. – MT is bull normal.
- Wait T-Notes. – MT is sideways normal.
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Economic calendar for the week ahead:
(MT = Market Type: Click for more information on market types.)
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.