Happy Monday everyone! I hope you’ve had a wonderful easter weekend or maybe it’s still going on. I’m back in front of the charts, looking for the best setups to potentially trade this week. It will be a shorter outlook this week since two of the setups of last week (NZDJPY and USDMXN) have developed a bit slower than expected. Because of this, they’re still valid and I will keep an eye on them during this week as well. Additionally, Easter Monday is a bank holiday in many countries so less will be happening in the markets.
The two other pairs on last week’s watchlist (the EURAUD short and the USDSEK short) did materialise and both could have been traded for a nice profit. The USDSEK one was a little bit challenging to trade however and I’ll go over the trade with you in my weekly trading review.
If you want to keep up to date on setups during the week, have a look at my TradingView page. I will sometimes publish a chart setup over there as well if I think it’s worth looking at.
Current market behaviour
Last week was a shorter week, with Friday off due to the holiday. We could see some good price movements before that, though. Trump said he found the USD too strong, which prompted a fast sell-off. Unfortunately, this move wasn’t sustained and the USD crawled back up rather quick. News-wise, the better than expected Aussie employment numbers were of interest, with our AUDCAD sell setup of a while back shooting back up.
The dollar moved lower for the week. Notice the bottom spike in the chart, which is where Trump initially said he thought the dollar was too strong. This was then followed by the bounce back up.
Gold did the inverse of the dollar and moved up for the entire week. This could be explained by the increasing uncertainty regarding the issues with Trump wanting to deal with North-Korea. People are looking to move their money to safety, which they find in gold and the Yen.
And finally, we have oil. Last week, we could see some kind of a top pattern forming, with a head and shoulders chart pattern now clearly visible. This might indicate a move lower, and as we had such a nice trending market for the past weeks in crude, it is one of the setups we’re looking at for this week.
Past week trade review
In this week’s trade review, I want to highlight a short trade I took on the USDSEK 4H charts.
USDSEK 4H short
This setup (which we discussed last week) was finally ready to move lower during the week. We could see a double top (or triple top, depending on your view) after a very nice and well-defined trend structure. This also coincided with a previous swing high (marked by the blue bar at the top).
The selling momentum started to appear after the second top, but I wanted some more confirmation to get in. The second leg pushing down was my trigger to actually take the setup. I entered at the close of that strong down candle with a stop loss a bit above the candle high and a target at an area that I thought might find some support.
Helped by some of the things Trump said, we could see the continued momentum to the downside as the pair moved lower quite quickly. At some point, however, traders started to fade the move quite strongly and price moved back to where it started. Depending on your profit targets, use of trailing stops and/or intermediate profit levels, this could be one of the more challenging setups to trade. It’s very easy to take this setup, see price move your way and then completely lose all unrealised profits!
It’s still an interesting setup and I’m looking to potentially get back in if we can see a push down again.
The upcoming week
A lot of countries celebrate Easter Monday so many markets are closed on Monday. The rest of the week is relatively low-news as well, here are the highlights:
- Monday: Easter Monday
- Tuesday: AUD RBA Meeting minutes, USD Building permits
- Wednesday: EUR CPI, US Crude oil inventories
- Thursday: NZD CPI, USD Philly Fed manufacturing index
- Friday: German Manufacturing PMI, UK Retail sales, CAD Core CPI, USD Existing home sales
For this weekly forex outlook, I’m keeping an eye on the following pairs:
Follow my published ideas on TradingView.
As you can see on the daily chart (on the left, the EURUSD is currently in an upwards sloping channel. At the same time, the price has reached the bottom trend line of the channel and might now be ready for a move up again. It already tried to do so on Wednesday (fuelled by the Trump comments), but the price was pushed down again.
On the 4H chart, we can see that the current downtrend has been going on for a while and was generally very nice. There was an intermediate moment where the price seemed to want to reverse already, but enough sellers stepped in to push the price lower. When you pull up the Fibonacci extension tool, you’ll find that the current down trend exactly reached the 200.0% extension level, which might indicate that the pair is ready to change course.
Combine this with a lower channel boundary, which acts as a strong support and there are reasons to think that the price might move up again. Currently, I’m in waiting mode. I want to see the price move higher first, before getting in too soon. The push down of the initial attempt to go higher might also indicate that there are still sellers in play that potentially want to see a breakout to the downside, so that’s an option I’m keeping in mind as well.
This is as textbook as you will get trend reversals. A straight uptrend with multiple clean trend waves, then a rounding off at the top, slight RSI divergence and a head and shoulders pattern with the neckline at a previous resistance-turned-support level. On paper, this looks very good.
But I want it to see break the neckline first, preferably with some momentum. The momentum has been lacking a bit lately and the smaller candles are not something I want to see just as I am about to enter a reversal play. After all, this could just as well be an intermediate retracement that happens to look like a head and shoulders. To get a bit more confirmation, we’re looking for an entry trigger, something like a strong engulfing bar or a pin and drive.
My alert is set a little bit below the neckline, around the 52.6 level. Now, we’re just waiting for this beauty to unfold.
Good luck trading!
What setups are you looking at? Share your thoughts in the comments!
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