Forex Trading Opportunities for the Week Ahead 19 Sep 2016

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 this coming week is the September FOMC meeting. Markets are pricing in only a 20% (or less) chance of a hike so any hike, or hawkish speak will big a positive surprise. My view is that the chance of a hike it much higher (greater than 50%). The market prices the hike based on data, but the Fed is a political animal. It makes decisions just as much (if not more!!) to protect its reputation or achieve internal consensus as it does on data. With the news-flow turning very heavily against the Fed (even Fed confidante Jon Hilsenrath blasted the Fed to bits in a recent article) and low rates at the moment, there is a decent chance that the Fed will react and either raise rates, or keep them on hold and very strongly suggest that rates will be risen in December. This gives them an element of plausible deniability when things eventually do turn to custard (“we did our job and normalized, it was the politicians who did not do enough” etc.). This is of course a non-consensus view, but I have conviction that the odds are in my favor on this one, so will hold long USD positions this week heading into the event.

• Sell GBP/USD. – MT is bear normal. We got the sell off expected last week. What I think it key is that the market both ignored good data and then re-focused on Brexit headlines. We now shifted into Bear Normal MT, so continue to sell with the next target being the extremely important 1.28 key level. There is also divergence between UK bonds (Gilts) and US bonds which is bearish the pair.

• Wait USD/JPY. Trend – MT is sideways normal. The USDJPY has moved back into a sideways MT. We have the BOJ on the 21st (a few hours before the FOMC). The BOJ is not expected to lower rates further, but it is expected to engage in a twist program which would be bullish USDJPY. Let’s not forget that the BOJ likes to surprise markets though. I like to be long USDJPY in particular it you can trade in and out in what should be a range trading environment early in the week and build somewhat of a risk-free position heading into the event. If both Central banks surprise hold on to your horses. I will add some call options to my USDJPY spot position.

• Sell AUD/USD. Trend –  MT is bear normal. With limited data on the card the AUD should continue to be driven by the USD and risk off/on in stocks. Apple really helped to save stocks last week with strong sales, otherwise we remain in a heightened state of alert. Note Iron Ore is selling off as well, which adds to the bearish picture.

• Wait EUR/USD.  –  MT is sideways normal. After remaining range bound for most of the week, the EUR sold off on Friday’s us CPI beat. Long-term I think we are in a consolidation in a bear trend and expect to see the EUR eventually head much lower. This week movements in the pair should be dictated by USD. Note that simliar to UK bonds there is a divergence between Bunds and US Bonds which is bearish EUR.

• Wait NZD/USD. – MT is sideways normal. When the dust settles, I think Kiwi remains a buy (but perhaps not against the USD). For now we can expect a move back towards the .70 handle. I am watching with great interest the sell-off in NZ equities. We have RBNZ this week, which the market anticipates to be slightly dovish but with no cut. We also have a dairy auction where the trend has been one of recovery.

• Wait USD/CHF.  – MT is sideways volatile. The SNB did not do much yet again, we remain range bound for the moment so we need to wait. Personally I think the Swiss Franc is a screaming buy once the equity market starts to sell-off heavily, but not vs. USD.

• Wait USD/CAD.  – MT is sideways normal. Oil had a down week on the back of oversupply concerns and CAD is pushing though the top of it’s recent range. I like to buy on a break of 1.3270 if oil sells off at the same time, but of course you will need to watch out for the USD event risk this week.

• Wait EUR/GBP. – MT is sideways normal. I continue to favor buying this pair with a target at .87. Not a bad play if you want to avoid USD and think equity markets will remain pressured in the coming week.

Crosses

• Wait EUR/CHF. – MT is sideways normal. Wait for now.
• Wait AUD/JPY. – MT is sideways normal. Some bullish price action at the bottom of the range if you think it will be a risk-on week. Of course we have BOJ as well.
• Wait NZD/JPY. – MT is bull volatile. Wait for now.
• Wait GBP/JPY.  – MT is sideways normal. Wait.
• Wait EUR/JPY. – MT is sideways normal. Wait.
• Wait CAD/JPY. – MT is sideways normal. Possibly a good shorting opportunity on a break of .7650 if BOJ disappoints.
• Wait CHF/JPY.  – MT is sideways normal. Wait
• Sell GBP/NZD.  – MT is bear normal. Look to sell, could be good if both BOJ and Fed are accommodating and RBNZ is passive.
• Wait EUR/NZD.  – MT is sideways normal. Wait.
• Sell AUD/NZD. Trend – MT is bear normal. Continue to sell.
• 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 normal. Wait for now.
• Wait GBP/CAD. –  MT is sideways normal. Wait for now.
• Wait EUR/CAD. –  MT is bull normal. Wait or possible buy on dip.
• Buy NZD/CAD. Trend – MT is bull normal. Continue to buy, but watch out for the topping action.
• Wait GBP/CHF. – MT is sideways normal. Wait.
• Wait CAD/CHF.  – MT is sideways normal. Trade a break of 0.7350 if stocks and oil sell-off this week.
• Wait NZD/CHF. – MT is bull volatile. Wait.
• Wait AUD/CHF. – MT is sideways normal. Wait or stalk break lower.

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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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