Forex Trading Opportunities for the Week Ahead 23 Jan 2017

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. 

• Wait DXY  – MT is bear normal. Yesterday, we saw the inauguration of Donald Trump as US president. Trump has yet to focus on the policies that got the markets so excited upon his election. This has keep bullish dollar sentiment in check. The first 100 days of his presidency will be quite interesting for USD traders and could see the currency move both ways depending on if the focus is on protectionism and China or on growth policies. Other than Trump there remain some bullish signs for the USD. Yellen was very hawkish (for her) when she spoke last week. Business confidence is high and hard data is OK. US Bond markets remain in a downtrend and continue to flash bearish technical signals (this is good for the USD). Despite the recent sell-off which has pushed the daily DXY chart into a bear MT, the weekly chart is holding onto a bull MT, and we are still above the key 100 level. If the index starts to consistently trade below 100 then it should give bulls pause. Watch out for Q4 GDP on Thursday.

• Wait GBP/USD. – MT is sideways normal. The GBP is of great interest here. Technically we have a bottoming formation in place after taking out the key 120 level. Note the gap down last Monday could be seen as akin to an “exhaustion gap” in stocks. The theory is that the bad news is all out at this point so there is nothing left to continue the move. The gap was closed on the back of PM Mays talk on Tuesday which said that there would be a “hard exit”. This bullish reaction to conceivably bearish news and the formation of a weekly bullish engulfing pattern and busted breakout suggests we may have a buying opportunity on the GBP. I prefer to play this against something other than the USD, but I would not begrudge GBPUSD longs. Note, any move higher is likely to be choppy as Brexit fears ebb and fade. Data has been decent out of the UK. Watch the reaction to both data and Brexit news, if we are bottoming, the pair should trade higher on positive data and ignore Brexit concerns. Look out for the Supreme Court ruling on Tuesday.

• Sell USD/JPY. Trend – MT is bear normal. The yen is not in focus at the moment with equity markets marking time. We remain in a daily bear MT against the long-term bull trend. The daily bear itself is messy, as the bullish engulfing candle last Wednesday makes it difficult to be short. Sell, but with caution.

• Buy AUD/USD. Trend –  MT is bull normal. We have shifted to a bull MT, though there are signs we could be turning sideways here. The AUD remains supported on the back of an improvement in metal prices, and uncertain USD, China capital outflows and bullish global risk sentiment. The issue for the AUD is that if Trump focuses on growth then that will be USD bullish. But if he focuses on protectionism and China this will be bad for global trade and the AUD. So while buying AUD this week is not a bad approach, I don’t think we are looking at a long-term bull trend.

• Buy EUR/USD. Trend  –  MT is bull normal. We have a messy bull MT here and I would prefer to wait for the price to break above 1.0750 before committing to longs. Eurozone data continues to be OK, but this has not influenced the ECB in any way, with Draghi maintaining his dovish stance. Trade with caution.

• Buy NZD/USD. Trend –  MT is bull normal. The Kiwi, like the Aussie, remains in a bull MT but could be turning sideways here. Also, like the Aussie, the Kiwi could struggle no matter which way Trumps policies go. Last weeks dairy auction was positive. A buy, but a cautious one.

• Sell USD/CHF. Trend – MT is bear normal. We had an attempted reversal off the key 100 level with a bullish piercing pattern, this has not played out so we can continue to look short. Prefer to wait for a break below .9980 to short.

• Wait USD/CAD.  – MT is sideways volatile. The BOC surprised with talk of a rate cut, which saw USDCAD trade sharply higher. Oil remains around the key 50 level but data was weak. All-in-all the picture looks less rosy for the CAD.

• Wait EUR/GBP. – MT is bull volatile. I am looking for the pair to head lower now we have taken out 1.20 on the GBPUSD and reversed. Wait for now, until the bear trend develops.

Crosses

• Wait EUR/CHF.  – MT is sideways normal. Wait.
• Buy AUD/JPY. Breakout – MT is bull normal. Look to buy.
• Buy NZD/JPY. Breakout – MT is bull normal. Look to buy.
• Wait GBP/JPY.  – MT is bear volatile. Wait.
• Wait EUR/JPY. – MT is sideways normal. Wait.
• Wait CAD/JPY. – MT is sideways normal. Wait.
• Wait CHF/JPY. – MT is sideways normal. Wait.
• Sell GBP/NZD. Trend – MT is bear normal. Look to sell.
• Sell EUR/NZD. Trend – MT is bear normal. Look to sell, but caution with two bullish engulfing candles.
• Wait AUD/NZD. – MT is sideways normal. Wait.
• Wait EUR/AUD. – MT is sideways volatile. Wait, stalk a buy.
• Sell GBP/AUD. – MT is bear normal. Sell.
• Buy AUD/CAD. Trend –  MT is bull fast. Continue to buy.
• Wait GBP/CAD. –  MT is bear volatile. Possible long-term buy, weekly double bottom in place.
• Buy EUR/CAD. Breakout –  MT is bull normal. Look to buy.
• Buy NZD/CAD. – MT is bull fast. Look to buy
• Wait GBP/CHF. Trend – MT is bear normal. Look to sell.
• Sell CAD/CHF.  Trend – MT is bear normal. Look to sell.
• Sell NZD/CHF. Reversal – MT is sideways volatile. Weekly hammer and daily bearish engulfing suggests sell in this MT.
• Sell  AUD/CHF.  Reversal – MT is sideways volatile. Weekly Doji and daily bearish piercing pattern suggests sell in this MT.

Other Markets

• Buy Gold. Trend – MT is bull normal. Look to buy.
• Wait Oil. – MT is sideways normal. Wait.
• Wait S&P500.  – MT is sideways quiet. Wait.
• Wait T-Notes – MT is sideways normal. Wait for sell after busted breakout off top of the range.

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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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