Hi traders! How’s your weekend going so far? Had any interesting trades on last week? I’ll tell you about my trades: there were none! It doesn’t happen a lot but the past week was incredibly boring. In the beginning of the week, nothing happened because all traders seemed to be in Jackson Hole anticipation mode.
Additionally, some of the reversal setups that showed promise kept on going in the direction of the trend and in fact, none of the setups worked out! This can absolutely happen but at the same time – because nothing was triggered – I didn’t lose any capital either. Capital preservation should be your number one priority.
Regardless, let’s hope that next week brings us more opportunities!
Current market behaviour
As I already indicated, last week’s market behaviour was a major dud. Not a lot happened that moved the markets, except the events on Friday where both Fed Chair Yellen and the ECB’s Draghi spoke at Jackson Hole. The first part of the week was largely silent and the price only showed some directional movement in the last part of the week.
Because of the announcements from Yellen and Draghi, the dollar index shot down strongly on Friday and ended the week sharply lower in what seems to be a long lasting sell-off of the dollar against other currencies. In an inverse reaction but with a much longer spike down first, gold shot up to end the week higher.
Oil was largely unaffected by these events of last week. Nevertheless, it didn’t show us a lot of interesting price action last week either, as it has been ranging for the entire week. Actually, we can see a symmetrical triangle pattern in oil. This might indicate a breakout, either to the upside or the downside, soon.
The upcoming week
A slow start of this week again! Monday and Tuesday will probably be quiet, with the real economic news releases starting from Wednesday. The only really big event of the week is on Friday, however, with the non-farm payrolls release. Other than that, we have some usual news releases but nothing too spectacular. Here is the overview of next week:
- Monday: GBP UK bank holiday
- Tuesday: USD CB Consumer Confidence
- Wednesday: USD ADP Nonfarm Employment Change, USD GDP, USD FOMC Powell speaks, USD Crude Oil Inventories, AUD RBA Governor Lowe speaks
- Thursday: EUR German Unemployment Change, EUR CPI, EUR Unemployment rate, CAD GDP, USD Pending Home Sales
- Friday: CHF Retail Sales, EUR German Manufacturing PMI, GBP Manufacturing PMI, EUR ECB Constancio speaks, USD Nonfarm Payrolls + Unemployment Rate, USD ISM Manufacturing PMI
For this weekly forex outlook, I’m keeping an eye on the following pairs:
Follow my published ideas on TradingView.
A shorter term setup to start the week! I’ve been looking at CADJPY on the 1H charts because it’s currently showing an excellent reversal setup. We can see a nice uptrend, followed by a flattening of the trend. At the same time, we could see an RSI divergence on the last swing high, followed by a strong push down in two bearish bars that were much stronger than all of the previous candles combined.
Then, the pair started ranging a bit, which isn’t unusual for reversal setups. A local support level got established and that’s where we are right now. If you’ve been following my outlooks for a while, you know what I’m looking for: a clean break of that support level with a candle close below that level. We want to see some momentum as well but if that’s the case, I think we have a potentially interesting trade. Alerts are set at 87.400, now wait and see!
Another setup involving the Canadian dollar, this time in combination with the British pound on the 4H charts. We can see a very nice downtrend that was also very clean (which doesn’t happen a lot these days!). At this point, there’s a shift in direction though. We can see that for the first time in a while, the pair moved above the moving average. This in itself isn’t enough of a reason to enter a trade, especially since that move happened on the Monday open. But it did get my attention!
The trend has been overextended, having already passed the 200% Fibonacci extension level. We can see RSI divergence on the last downswings. There is a local resistance level that has acted as support before, which I’ve marked with the blue rectangle. As always, we wait for this level to be broken to the upside. A strong momentum candle that closes above this zone would be the trigger for this setup to be valid. My alert is at 1.61500.
A little similar to the previous setup but this time on the 60-minute time frame, we are looking at NZDCAD. We can again see a nice downtrend that has respected the 20-period moving average for a long time, but now is shifting direction. Currently, the pair is definitely still ranging but if it breaks out on the upside, there is definitely good potential for a nice trade.
I’ve marked the support-turned resistance level on the chart (it’s the smallest blue rectangle) and that’s the zone I’m watching. The ideal scenario is that this gets broken convincingly on a bullish candle with some good momentum, but we’ll have to see. My alert is set at 0.90550.
Finally, a longer-term setup! NZDUSD has been developing a very nice head and shoulders setup that is very close to potentially breaking its neckline. This is a very easy setup to play, if the neckline breaks after the close of the day, we get in.
Another potential play is to wait for the retest of the neckline, which might give you a better R:R setup but at the same time, this will not always happen. It’s a trade-off you need to make for yourself, based on your risk appetite and if you are being comfortable missing setups. My alert is set at 0.72000, easy as that! Now we wait and hope it develops 🙂
Good luck trading!
What setups are you looking at? Share your thoughts in the comments!
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