Forex Trading Opportunities for the Week Ahead 5 November 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. 

Note there will be no report next week as I’m off on holiday.

• Buy DXY. Trend  – MT is bull normal. After taking out the key 0.97 figure the dollar sold off heavily before recovering somewhat on the back of a positive NFP result. The sell-off (to me) looks quite technical in nature with 0.97 being a key weekly level. On the weekly charts, a doji has formed which can be an early sign of a reversal, but it does require a confirmation candle. If the sell-off extends next week we will form a double top and can expect some further downside. Fundamentally I remain bullish USD so I would expect any sell-off to be temporary. But a move back to 0.94 would not be a surprise. Drivers of the USD at the moment are rate hike expectations and economic performance. NFP was strong with 250K jobs created v. 200 expected, as well as the strongest wage growth since 2009. This supports the case for more tightening and this should be re-iterated in this weeks upcoming FOMC meeting. There will be no hike this month, but most likely there will be in December. Stocks have been bouncing after the recent heavy sell-off (as they have been want to do for the last 10 years). But volatility is still high. There is talk of a trade deal with China at Trump and Xi’s December meeting, but there have been a lot of conflicting reports on this and I think it is unclear how this is going to impact the USD anyway. US mid-term elections are coming up on Tuesday. The analysis I read suggests that the outcome could be mildly dollar bearish if the Democrats win the lower house which is currently controlled by the Republicans. This is because it will impact the ability for fiscal stimulus (such as tax cuts) to be implemented. Traditionally, mid-term elections have not been great market movers but with the controversy surrounding President Trump, maybe they will have more impact this time round. Over-all we can remain bullish USD until we trade back below 0.96, although a period of consolidation after the rejection of 0.97 should not be a surprise either.

• Wait GBP/USD. – MT is bear volatile. There have been unconfirmed breakthroughs in Brexit negotiations which saw the pair rise dramatically on Thursday. These are around UK financial service access to the EU and, importantly, the Irish boarder. Additionally, Thursdays BOE meeting was seen as hawkish with the BOE suggesting that if a Brexit deal is done then further rate hikes at a faster pace will be warranted. Given the volatility of the price action and the MT it’s safest to wait for now.

• Buy USD/JPY. Trend – MT is bull normal. With stocks bouncing and strong US data, after rejecting 111.50, the pair has moved into a bull MT. Unless we get a significant bout of risk-off, or US mid-terms turn very dollar bearish, we should continue to head higher.

• Buy AUD/USD. Trend –  MT is bull normal. We got the expected bounce last week after a minor double bottom formed. The move was supported not only by USD weakness but by some positive Aussie data. We do need to be careful of Fridays hammer. I like to buy AUD vs the crosses for a temporary move higher. Watch out for RBA this week.

• Sell EUR/USD. Trend –  MT is bear normal. We remain in the bear MT for now, but similar technical considerations as DXY apply. After taking out the low a bounce is to be expected and we have formed a weekly doji. But the bear MT remains intact for now. Eurozone data continues to under perform and political risk is in the headlights with the Italian budget and Chancellor Merkel not seeking re-election as head of her party.  Continue to sell below 1.1450.

• Buy NZD/USD. Trend –  MT is bull normal. Kiwi was one of the strongest currency pairs in the past week. Positioning plays a part in this as the market was heavily short. Otherwise there was some decent data and some optimism around US/China trade. Of course, risk on in stocks helps too. Look to buy, but like AUD, I prefer to buy Kiwi against the crosses. This week we have a dairy auction and RBNZ.

• Buy USD/CHF.  Trend – MT bull normal. After taking out the key 1.00 level and the recent high at 1.0067, we can expect a period of consolidation here. But it is important to note the bull MT is intact and with stocks recovering and positive US data we may well continue to push higher.

• Wait USD/CAD. – MT is sideways normal. While the other commodity currencies bounced, CAD has not really gained much traction. Weighing on the pair in-particular is the slide in oil prices. Otherwise, employment data was decent and the central bank remains upbeat. Best just to wait for now.

• Wait EUR/GBP.  – MT is sideways volatile. I am still looking for a longer-term selling opportunity on the currency. For now, considering the sideways price action, its safest to wait.

Crosses

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

Other Markets

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

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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.