Hello, traders! It’s time for my weekly forex outlook again! Last week was a relatively quiet week, but two of the setups of last week (the EURUSD 4H long and the USDWTI 4H short) still worked out exactly as planned. I will review the USDWTI trade for you in this week’s trade review. The two other setups (USDMXN long and NZDJPY long) still didn’t yet materialise but they’re quite close, so they are still on my radar. Feel free to include those in your watchlists for this week again!
The one real surprise from last week was UK Prime minister May, who indicated that there would be early elections after all. It’s safe to say that no one expected this news and the British pound shot up afterwards, as the markets saw this as a signal that May might gain more support. And with more support, it is thought that she will have an easier time making better deals regarding Brexit.
If you want to keep up to date on setups during the week, have a look at my TradingView page. During the week, I will often 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 Monday off due to the easter holiday. Troubled by continued uncertainty regarding the situation in North-Korea, the US dollar sold off for most of the last week. It did, however, create a double bottom before moving a bit higher in the second part of the week.
You’d think that gold would see a steady rise, but it ended the week only a little bit lower than the week before. A lot of money flows are going into the Japanese Yen as well (with the USDJPY steadily declining), but gold is giving us a bit mixed signals and not a clear trending behaviour.
It’s worth noting that these days, a lot of the currency moves are fuelled by fundamentals as well. Things like the North-Korea situation, the French elections, Brexit and continued uncertainty on the proposed US tax changes (which might be coming next week) are driving a lot of the markets in the past weeks. It sometimes makes for unpredictable moves, which is something we have to keep in mind.
Oil, on the contrary, gave us a clear signal last week, selling off for the entire week (as indicated in my last outlook). This was partly fuelled by disappointing oil inventories (there’s too much supply) but also by strong technicals.
Past week trade review
In this week’s trade review, I want to highlight a short trade I took on the USDWTI 4H chart.
USDWTI 4H short
This was one beauty of a setup. This setup (which we discussed last week) was finally ready to move lower during the week. This was a head and shoulders reversal that followed an incredible rally. After the head and shoulder, the price did move a bit sideways (or rather, grinding lower). A stronger move down made me enter while I still managed to get in at a relatively good price.
I was then almost stopped out when the price did a final retest of the moving average, but luckily it then moved lower strongly after the oil inventories news. I exited the position at a close to 4R profit after the price started to bounce at a previous support level.
However, I could have easily stayed in the trade for another strong move down that would’ve netted me an additional 3R, so I’m a little bummed out that I missed the second leg! But I followed my trading plan, which is what matters in the long run anyway.
The upcoming week
Although there are not many special news announcements, there still is the usual economic data releases. And quite a lot of them, too! Tuesday is ANZAC day for the Aussies and Kiwis, which is a holiday, so the first part of the week might be quiet for the AUD and NZD. Thursday is the busiest day of the week.
Here are the highlights:
- Monday: EUR German Ifo Business Climate Index
- Tuesday: AUD and NZD ANZAC day, USD CB Consumer Confidence, USD New Home Sales
- Wednesday: AUD CPI, CAD Core Retail Sales, USD Crude Oil Inventories
- Thursday: JPY BoJ Monetary Policy, Interest Rate Decision and Press Conference, EUR Deposit Facility Rate, EUR ECB Interest Rate Decision, USD Core Durable Goods Orders, EUR EBC Press Conference, USD Pending Home Sales
- Friday: GBP GDP, EUR CPI, USD GDP, CAD GDP
For this weekly forex outlook, I’m keeping an eye on the following pairs:
Follow my published ideas on TradingView.
Let’s start off with AUDUSD. We’re only going to be looking at the daily timeframe as the pair is at quite an interesting location right now. As you can see, the price currently hovers around a major support and resistance level. In a broader context, the price put in a longer-term double top pattern, before moving lower in decreasing price swings. This creates a descending triangle, which is now close to either breaking out to the bottom or to the top.
Both scenarios are possible, but the “breakout to the bottom” one is more appealing to me, as there is much more room to the downside, without being bothered by intermediate potential support levels. As the price is making lower lows, this scenario is also more likely. My game plan is just to wait until the price breaks lower, with a price alert set around the 0.74700 level.
Now let’s move to a lower timeframe. USDCAD has been in a strong uptrend on the 4H charts and is also starting to level off. the pair looks interesting on both the 4H and the 1H timeframe, but I prefer the 1H as the trending structure is more pronounced and I find that it paints a clearer picture of what is happening.
On Friday, the price jumped to a previous resistance level but the move into the highs has been quickly pushed down again. The RSI divergence is clear, indicating that the price might be ready to move lower.
On the 1H, we can see that a strong local support has been formed. This coincides with a previous swing high and price has tried to pierce it multiple times now. The support level will obviously need to be broken first but once this happens, we have a lot of downside potential. Another scenario is that we see another support bounce which might potentially lead to the formation of a head and shoulders pattern. We will have to see on Monday what the price will do.
As opposed to most setups you’ll find on here, this is a continuation play. In the past weeks, USDCHF showed us some interesting reversal opportunities, quite similar to the USDSEK play that I discussed a couple of weeks ago. Price moved lower for some time now but for now, the pair is taking a breather. As you can see, the price has made multiple attempts at the intermediate support level indicated by the blue rectangle on the charts.
This hasn’t been broken yet, but price action on Friday and the days before indicates that the price might be ready to move lower. We could see the pin and drive pattern on the latest candles, which is why I got particularly interested in this setup.
Although it has been tested 3 times now, it doesn’t seem to be a particularly strong level though. There is a definite possibility that it will act as a reversal point and that price will make a run for the highs again, but in that case, I don’t find the upside potential interesting and upside trend structure good enough to be interested. If it breaks lower strongly, we will mostly have an open road to the 0.98600 level, indicated on the chart.
And finally, a 1H setup on silver. The price has been in an ok-ish downtrend (a few spikes here and there) but it’s now at a support level that last time featured an almost explosive reaction, so some of the supply should still be left here.
There was already a violent test of the level, which quickly got pushed back up, but the trend wasn’t ready to reverse just yet. There’s RSI divergence and the price reached the 261.80% Fibonacci extension level, which are all clues that a reversal might be imminent. Indeed, the price already showed some upside pushes on Friday, but not yet good enough to convince me to get in. Specifically, I indicated a zone that I would like to see broken first, before getting in. A convincing break and close of that area (around the 18.050 level) would be my entry trigger for this setup.
Good luck trading!
What setups are you looking at? Share your thoughts in the comments!
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