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.
- Wait DXY. – MT is sideways normal. The dollar index remains in the sideways MT. MT theory tells us that after rejecting resistance the most likely outcome is a period of consolidation after which a new trend breaks out. We are in that period of consolidation now. The catalyst to any move is likely to be the Fed. Rate hike expectations have been scaled back on recent dovish comments. With the market remaining quite long, if these comments are confirmed (possibly next week in Fed speak or the FOMC minutes), then we can expect further selling. Conversely, if the dovishness is walked back, we may see a renewed bout of USD buying. As mentioned last week, we are at a bit of an inflection point so will see what happens from here. Other drivers to be be aware of are upcoming trade talks between the US and China heads as well as risk-off in stocks. Note, my weekly MT model has major US stock indices breaking out into weekly bear MT’s… but normally over the last 10 years these have been brought…we will see if this time is different. There certainly is a strong reversal pattern this time round and monetary policy is nowhere near as loose as it was, which has been a key factor in stock market returns.
- Wait GBP/USD. – MT is sideways volatile. Brexit is dominating the headlines and sentiment. There is an agreement on deal at the moment but it needs to be approved by two groups. First EU leaders need to agree at this weekends summit. This will require 20 out of 27 members to approve the deal. Reports suggest that this is quite likely, though Spain will probably oppose it – which may lead to further amendments. The harder part will be for Prime Minister May to get the deal through Parliament. A vote will be held in mid December. If the deal is approved by both parties, it will be massive for GBP. But it looks to be very difficult to get the deal through Parliament. There is also an ongoing challenge to May’s leadership to watch out for, but it is proving difficult for the dissenters to find enough support at this point in time.
- Wait USD/JPY. – MT is sideways normal. I do suspect the key driver of USDJPY to be interest rate expectations. But, of course, JPY traditionally has benefited from risk-off flows when equities sell-off. The relationship seems to not be as strong right now, but if this bear MT does develop further then that correlation may come back into play and we see USDJPY much lower.
- Wait AUD/USD. – MT is sideways normal. The AUD had been benefiting from good data and some optimism around trade talks between US and China. But we sold off at 0.73 resistance and have now turned into a sideways MT. The RBA remains optimistic but not in a rush to hike rates. Risk-off does not help the pair. Wait for now.
- Wait EUR/USD. – MT is sideways normal. There is a major reversal pattern in place on EUR, but as yet there has been no follow through. This can be expected, with consolidation often occurring after a rejection of support. News has not been supportive of the EUR with the Italian budget getting more mentions and weaker PMI data. The key will be if this changes the outlook for the ECB. Otherwise I suspect the main driver of the pair will turn out to be Fed rate hike expectations in the near term.
- Buy NZD/USD. Trend – MT is bull normal. NZD remains in the bull MT but we are likely to turn sideways in the next week. After the recent strong run-up, momentum has run out. Similar to the AUD, optimism around trade between US and China has been supportive of the pair, but it is quite unclear if that optimism is justified. On the surface it seems very difficult for any meaningful trade resolution. But if there is a desire from both parties a way may well be found. Note that dairy prices are off 20% over recent months. But its not so bad as it sounds with part of the decline due to production being higher than expected. Note dairy prices are still above the cost of production for the majority of farmers.
- Wait USD/CHF. – MT sideways normal. CHF is one of the strongest currencies across the board in the last week due to risk aversion. But its failed to gain too much ground against the USD. Still looks to me to be one of the best plays if we continue to see stocks sell off.
- Buy USD/CAD. Trend – MT is bull normal. CAD is generally suffering from weaker oil prices. WTI is off 30% over the last few weeks, while Canadian select is at long-term lows. Fed expectations and Oil should be the key drivers at the moment.
- Wait EUR/GBP. – MT is sideways volatile. Volatility remains high and we can expect the pair to be driven by Brexit news. Tread carefully.
Crosses
- Sell EUR/CHF. Trend – MT is bear normal. Look to sell.
- Wait AUD/JPY. – MT is sideways normal. Wait.
- Buy NZD/JPY. Trend – MT is bull normal. Continue to buy.
- Wait GBP/JPY. – MT is sideways volatile. Wait.
- Wait EUR/JPY. – MT is sideways quiet. Wait.
- Wait CAD/JPY. – MT is sideways quiet. Wait.
- Wait CHF/JPY. – MT is sideways quiet. Wait.
- Wait GBP/NZD. – MT is bear normal. Careful of bottoming pattern here.
- Sell EUR/NZD. Trend – MT is bear normal. Continue to sell, but watch out for a reversal.
- Sell AUD/NZD. Trend – MT is bear normal. Continue to sell, but watch out for a reversal.
- Sell EUR/AUD. Trend – MT is bear normal. Continue to sell.
- Sell GBP/AUD. Trend – MT is bear normal. Continue to sell.
- Wait AUD/CAD. – MT is bull normal. Topping pattern in place.
- Wait GBP/CAD. – MT is sideways volatile. Wait.
- Wait EUR/CAD. – MT is sideways quiet. Wait
- Wait NZD/CAD. – MT is bull normal. Topping pattern in place
- Wait GBP/CHF. – MT is sideways volatile. Wait.
- Sell CAD/CHF. Trend – MT is bear normal. Look to sell.
- Wait NZD/CHF. – MT is sideways normal. Wait.
- Wait AUD/CHF. – MT is sideways normal. Wait.
Other Markets
- Wait USDSGD. – MT is sideways normal. Wait.
- Wait USDCNH. – MT is sideways normal. Wait.
- Wait Gold. – MT is sideways normal. Wait.
- Sell Oil. Trend – MT is bear normal. Continue to sell.
- Wait S&P 500. – MT is sideways volatile. Wait
- Wait DAX. – MT is sideways normal. Wait.
- Wait Nikkei. – MT is sideways volatile. Wait.
- Buy T-Notes. Trend – MT is bull normal. Look to buy.
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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.