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.
- Buy DXY. Reversal – MT is sideways volatile. Market type (MT) theory tells us that once the MT becomes bull volatile, signaling an end to a trend, it will then turn sideways for a period before the new trend is established. This price action is playing out now on the dollar index, with the initial bounce followed by a retest of the low and the formation of a bullish engulfing candle to confirm the bottom. We can now expect the price to move back towards 90.50, then a tighter period of consolidation or if there is a strong enough catalyst a flip back into a bull MT. Last week we saw a strong recovery in stocks (though they are by no means out of the woods yet) as well as sentiment focusing on USD news and rate hike expectations. Inflation data surprised to the upside and retail sales to the downside, with intra-day price action responding both ways (showing sentiment). There is now a 100% chance of a March rate hike priced in on the futures market. Look to buy the reversal, but remember the key to contrarian trades is 1. You may get stopped out so you need to be prepared to go again; and 2. You need to hold onto your winner, don’t get knocked out easy. Also note the continued strength of US bond yields.
- Wait GBP/USD. – MT is sideways volatile. Data was poor last week and there was no progress made on Brexit. We remain in a consolidative phase.
- Sell USD/JPY. Trend – MT is bear normal. Despite the broad-based recovery in stocks, USDJPY sold off through key support at 107 with barely a pause. Fundamentally, there is no great reason for this apart from some expectations of some very minor tightening in Japan, but overall easy monetary policy is set to continue. Japanese officials are becoming concerned about the strength of the Yen and importantly, the speed of the move (they don’t like fast moves either way, in particular if they don’t see them aligning with fundamentals). Note the bullish hammer formed on Friday as an opportunity to take profits if short. This is not a strong enough signal to buy though, and the correct strategy is to continue to sell, but with caution.
- Sell AUD/USD. Trend – MT is bear normal. The AUD recovered last week both in line with stocks and on the back of weaker USD retail sales. The RBA is not that concerned with the level of the AUD, even if they would prefer it lower. The bounce ended on Friday with the formation of a bearish engulfing candle which keeps us in the downtrend and in sell mode.
- Sell EUR/USD. Reversal – MT is sideways normal. We have the formation of a busted breakout off the the key 1.25 level (with similar price action to the DXY above). Data remains good out the the EU, but sentiment does seem to now be focusing on USD rate hikes which could see some of the recent strong move in the EUR unwind. Note that there is some divergence in bond yields, supportive of the USD. The price action and fundamental background presents a contrarian selling opportunity.
- Wait NZD/USD. – MT is sideways normal. The Kiwi has been relatively strong with OK data and dairy prices up. We are sitting at intermediate resistance here and have rejected the high showing there is supply at these levels. Note, there is a dairy action on the 20th.
- Sell USD/CHF. Trend – MT bear normal. Despite the rise in stocks, USDCHF continued to sell off last week. There is no firm bottom in place but there are signs that the trend is slowing so watch out for a move back into a sideways MT.
- Buy USD/CAD. Trend – MT is bull normal. Data was not great out of Canada, though oil prices have bounced. We have an intermediate-term bottom in place and Fridays bullish engulfing candle pushes us into a bull MT. Look to buy.
- Wait EUR/GBP. – MT is sideways normal. We remain firmly back within the range. Note we have developed a weekly sideways quiet MT, when these breakout, they tend to lead to a strong move. Wait for now and stalk the breakout.
Crosses
- Sell EUR/CHF. Trend – MT is bear normal. Continue to sell.
- Sell AUD/JPY. Trend – MT is bear normal. Continue to sell.
- Sell NZD/JPY. Trend – MT is bear normal. Continue to sell.
- 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.
- Wait CHF/JPY. – MT is sideways volatile. Wait.
- Wait GBP/NZD. – MT is sideways normal. Wait.
- Wait EUR/NZD. – MT is sideways normal. Wait.
- Sell AUD/NZD. Trend – MT is bear normal. Continue to sell.
- Wait EUR/AUD. – MT is bull normal. But careful of the topping action here at resistance.
- Buy GBP/AUD. Trend – MT is is bull normal. Continue to buy.
- Wait AUD/CAD. – MT is sideways normal. 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. Look to buy.
- Sell GBP/CHF. Trend – MT is bear normal. Continue to sell.
- Sell CAD/CHF. Trend – MT is bear normal. Continue to sell.
- Sell NZD/CHF. Trend – MT is bear normal. Continue to sell.
- Sell AUD/CHF. Trend – MT is bear normal. Continue to sell.
Other Markets
- Wait USDSGD – MT is sideways volatile. Wait.
- Sell USDCNH Trend – MT is bear normal. Continue to sell, but watch out as we look to be bottoming here.
- Wait Gold. – MT is sideways normal. Wait or contrarian sell.
- Sell Oil. Trend – MT is bear normal. Continue to sell, but with caution.
- Wait S&P 500. – MT is sideways volatile. Wait.
- Wait DAX. Trend – MT is bear normal. Continue to sell, but with caution.
- Sell Nikkei. Trend – MT is bear normal. Continue to sell, but with caution
- Sell T-Notes. Trend – MT is bear normal. Continue to sell.
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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.