Forex Trading Opportunities for the Week Ahead 30 July 18: FXRenew

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 remains range bound stuck near to the recent high but with decent resistance to overcome before a new trend can break out. US GDP grew at 4.1% for the last quarter, well above the recent range of about 2%. This may or may not be a one off print at these levels, but it certainly continues to outline the divergence in economic performance and monetary policy between the US and its major trading partners. Trade has been in the headlines with positive news bites about President Trumps meeting with the EU. Still a lot of work to be done there though. Where there seems to be real progress is NAFTA with talk of a deal imminent. On the other hand China-U.S. trade relations are not making progress and we will likely see more tit-for-tat tariffs and other measures implemented. Trump has been tweeting about Iran and I think he will be hoping to bring Iran to the table like he did North Korea for nuclear talks – there is some geopolitical risk here but sentiment is not focused on it yet. This week we have FOMC and NFP, both of which will likely confirm the divergence theme. I like to look for opportunities to buy USD.

• Wait GBP/USD.  – MT is sideways normal. While we are in a sideways MT, technically and fundamentally the pressure remains on GBP. Brexit issues persist with the latest plan being rejected by the EU in it’s current format. It’s not an outright rejection and May may still be able to salvage it. We do need to be prepared for a hard Brexit which could see GBP much lower. Brexit will weigh on sentiment and on the minds of the BOE, limiting their hawkishness. This week’s BOE meeting will almost certainly see a rate hike of 0.25%. But with recent data not that great and considering ongoing Brexit concerns that will probably be it for a while.

• Buy USD/JPY. Trend – MT is bull normal. After taking out 113, the pair has sold off back to resistance turned support at 111.40 before putting in a bullish engulfing day on Thursday to resume the bull MT. With strong US stocks and rising US bond yields I still like the pair for a move back towards 115. There is a BOJ meeting this week and there is talk that there may be an adjustment to the current ultra-loose monetary policy. We do need to remember though that growth contracted in Q1 and inflation remains tepid. It may be more about how the BOJ thinks they can reduce some of the “negative side-effects” of QE. But as of now they don’t see any of the side-effects as serious. Continue to buy.

• Wait AUD/USD. –  MT is sideways quiet. We continue to consolidate around the key 0.7350 level. Base metal prices are struggling. Of note is the recent large fall in the price of copper, which provides a cautious outlook for the AUD. At the moment the Aussie looks somewhat caught between the diverging factors of risk on/ positive data and USD strength/trade war/ China concerns/ falling CNY. China has been engaging in stimulus to support the economy in the face of the trade war with the US. Wait for now.

• Wait EUR/USD. –  MT is sideways quiet. We have moved into a sideways quiet MT. Last week the ECB meeting gave market participants nothing new, reiterating that rates will not be hiked until September 2019. They are currently at -0.4%. The EUR slide on the day. Trade news was positive after the first meeting with Trump and the EU’s Junker, but lots of work needs to be done there. Italy’s Five Star Movement is calling for an EU membership referendum, which is a reminder of the political risk that still exists in the region. Longer-term I think the EUR could head much lower and I am looking for opportunities to sell.

• Wait NZD/USD.  –  MT is sideways quiet. The kiwi continues to consolidate. Fundamentally, we have falling dairy prices (somewhat off-set by the weaker NZD) and trade war concerns which have weighed on the pair. GDP growth is below trend and net migration is slowing but fiscal stimulus from the NZ government may provide support going forward. Inflation may also be firming which will keep the RBNZ from any further cuts. Wait for now.  

• Wait USD/CHF.  – MT sideways quiet. Despite rising stocks and relatively positive risk sentiment USDCHF failed to hold the break above the key 1.00 level. EURCHF has also been holding steady. Wait for now.

• Sell USD/CAD. Breakout – MT is bear normal. With strong data, the BOC hiking rates,bond yields on the rise and a robust oil price, the bull case for CAD is developing. There has been positive news about a outcome to NAFTA negotiations and it looks likely an agreement could be reached soon. Note that the US economy’s out-performance is bullish for CAD as the US is Canada’s largest trading partner. Look for opportunities to buy CAD on the crosses.

• Buy EUR/GBP. Trend – MT is bull normal. We have broken out into a bull MT and it should not be a surprise if the key .8970 level is taken out next. If we do take it out, watch for a strong reversal pattern as a shorting opportunity.

Crosses

• Wait EUR/CHF. – MT is sideways normal. Wait.
• Wait AUD/JPY.  – MT is sideways normal. Wait.
• Wait NZD/JPY. – MT is sideways normal. Wait.
• Wait GBP/JPY. – MT is sideways normal. Wait.
• Wait EUR/JPY. – MT is sideways normal. Wait.
• Wait CAD/JPY.  – MT is sideways quiet. Wait.
• Wait CHF/JPY. – MT is sideways quiet. Wait.
• Wait GBP/NZD.  – MT is sideways normal. Wait.
• Wait EUR/NZD. – MT is sideways quiet. Wait.
• Wait AUD/NZD. – MT is sideways quiet. Wait.
• Wait EUR/AUD. – MT is sideways quiet. Wait.
• Sell GBP/AUD. Trend – MT is bear normal. Continue to sell.
• Sell AUD/CAD. Trend – MT is bear normal. Look to sell.
• Sell GBP/CAD. Trend –  MT is bear normal. Look to sell.
• Sell EUR/CAD. Trend – MT is bear normal. Look to sell.
• Sell NZD/CAD. Breakout – MT is bear normal. Look to sell.
• Wait GBP/CHF. – MT is sideways normal. Wait.
• Wait CAD/CHF.  – MT is sideways normal. Wait.
• Wait NZD/CHF.  – MT is sideways normal. Look to buy above 0.68
• Wait AUD/CHF.  – MT is sideways normal. Wait.

Other Markets

• Wait USDSGD.  – MT is sideways normal. Wait.
• Buy USDCNH. Trend – MT is bull normal. Continue to buy.
• Sell Gold. Trend – MT is bear normal.  Look to sell.
• Wait Oil. – MT is sideways volatile. Wait.
• Buy S&P 500. Trend – MT is bull normal. Continue to buy.
• Buy DAX. Trend – MT is bull normal. Look to buy.
• Wait Nikkei. – MT is sideways normal. Wait
• Sell T-Notes. Trend – MT is bear normal. Look to sell.

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Economic calendar for the week ahead:

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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.