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 normal. The only real story in the markets in the last week has been the escalation of the trade war between the US and China. This has seen US equity markets fall. Importantly, they are falling from major resistance levels and we may see triple tops in place on the DOW and S&P500. But as of yet, this is by no means a stock market rout. The S&P500 formed a bullish hammer on Friday, so price action, whilst bearish, is already showing some signs of recovery. The challenge with this all is the drivers for the USD are a bit of a mixed bag. On the one hand, the USD has been responding poorly to the negative trade news. But on the other hand, if equities do fall, the USD should still be one of the safe havens of choice. Where will trade talks go from here? It is likely that it will take some time (at least a couple of months) before there is a resolution, but a resolution is still the most likely outcome. Technically, the DXY has shifted back into a sideways MT, but we are only just back inside the range and the long-term uptrend remains in-tact. I continue to like to buy USD, preferably on a dip towards 96.80.
- Wait GBP/USD. – MT is sideways normal. After a strong performance in the prior week, GBP was unable to hold onto the bull MT. There is not much progress with Brexit, which was perhaps what was weighing on the pair, along with negative global risk sentiment. Watch for jobs data on Tuesday to reaffirm that the fundamentals are not too bad.
- Wait USD/JPY. – MT is bear normal. Negative risk sentiment has pushed the currency pair down to support at 109.70. Trade tensions and risk-off flows have been the main drivers. US bond yields have fallen slightly. If stocks continue to fall next week then we should see support broken. If there is a full blown rout then 105.00 is not out of the realms of possibility. To be fair though, I would not be surprised to see support hold. We seem to be in a range trading environment with the USD.
- Wait AUD/USD. – MT is bear normal. The Aussie is just holding onto the key .70 level. There is likely to be a rate cut in coming months and of course the US/China situation is not the best for the Aussie. It’s possibly holding up a bit better than expected. I think there is opportunities both ways from here depending on stocks/ China etc. but the upside should be limited with the pending rate cut (or cuts) later this year.
- Wait EUR/USD. – MT is sideways normal. The EUR has shifted back into a sideways MT. Data has been slightly better then expected out of the Euro-zone. Watch out for German GDP next week for more confirmation. Over-all though, the divergence theme is still in play. We will need to see how the implementation of tariffs impacts the US economy. We can expect risk-off themes to continue to play an important part in the way the currency pair trades. In saying that, there was little movement last week. In this environment, selling on a pull-back to 1.13 seems like the safest play.
- Sell NZD/USD. – MT is bear normal. There was a rate cut last week. But the school of thought is that is will be a “one and done” scenario, and there is a lesser chance of further rate cuts. The currency remains in a bear MT and considering the risk-off environment, we can continue to sell the pair.
- Wait USD/CHF. – MT sideways normal. Risk-off has pushed the pair down to prior resistance turned support. This environment should support CHF strength. I would prefer to play it vs. the crosses.
- Wait USD/CAD. – MT is sideways normal. There was stellar job data from Canada on Friday. This is keeping the pair firmly within the range that developed in Feb. Bond yields are also supportive of USDCAD weakness. Oil, while lacking momentum, is still within the weekly bull MT. Wait for now.
- Wait EUR/GBP. – MT is sideways volatile. The pair failed to take out the low last week (I had anticipated it would) and bounced sharply to remain withing the range. The correct strategy in this MT is to sell from the top of the range near 0.0820.
Crosses
- Wait EUR/CHF. – MT is sideways normal.
- Sell AUD/JPY. – MT is bear normal.
- Sell NZD/JPY. – MT is bear normal.
- Sell GBP/JPY. – MT is bear 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.
- Buy EUR/NZD. – MT is bull 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.
- Wait GBP/CAD. – MT is bull volatile.
- Wait EUR/CAD. – MT is sideways quiet.
- Sell NZD/CAD. – MT is bear normal.
- Wait GBP/CHF. – MT is bull volatile
- Sell CAD/CHF. – MT is bear normal.
- Sell NZD/CHF. – MT is bear normal.
- Sell AUD/CHF. – MT is bear normal.
Other Markets
- Wait Gold. – MT is sideways quiet.
- Sell Oil. – MT is bear normal.
- Wait S&P 500. – MT is sideways quiet.
- Wait DAX. – MT is sideways normal.
- Sell Nikkei. – MT is bear normal.
- Wait T-Notes. – MT is sideways normal.
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(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.