It is Sunday again, so I’m taking some time to analyse the potential setups on forex pairs for the upcoming week. Last week was relatively quiet for me, with only 2 trades taken: the USDCAD long and a EURUSD short setup I discovered afterwards. The USDCAD trade ended up being just above break-even for me. Even though the pair closed the week higher, at some point it went against the rules of my trading plan so I exited my position. No harm done, there will always be other trades. The EURUSD short on the other hand went my way, and I ended up with a a nice profit for a R:R of 1:1.5. Overall another profitable week.
I exited all my positions on Thursday since I didn’t want to get whipped out due to the Jackson Hole summit, where the federal bankers of the world come together to discuss monetary policy. Of particular importance was the Fed chairwomen Yellen’s speech on Friday, so I wanted to be safe and not have any positions open. Markets did move a lot during her speech, so unless you’re a news trader (which is too risky for my liking), I suggest you always close or at least cover your positions before an important news event like this.
But now on to the upcoming week! August, the month that is dreaded by a lot of traders because of the reduced volume is finally on its last legs. I will be hesitant to enter any positions on Monday morning since I want to first see what the overall market sentiment is after the Jackson Hole events (which continued on Saturday as well). But nevertheless, here are the currency pair’s I’m keeping an eye on:
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The first (and arguably the best) pair that caught my attention is NZDUSD. I’ve been keeping my eye on this one for a while, as it as hovering in a resistance zone (green area) that is quite significant. If we look at the daily chart, we can see that not only this was a strong support level on the left of the chart before price broke through it, but it has recently also been tested multiple times (indicated by the red arrows), and it still holds.
If we zoom in a bit on the daily, we can see multiple things. Firstly, the green resistance zone is incredibly powerful! Every time the bulls tried to push the price into this area, there was a strong sell-off. This is displayed multiple times by the bearish engulfing bars and pin bars that are visible. Secondly, there is a bearish divergence on the RSI. Price pushed slightly higher (only just) while the RSI moved noticeably lower. This is again a bearish sign. Finally there was a strong bearish move down on Friday. This was of course caused by the Jackson Hole event, so I’ll be waiting on Monday for confirmation and continuation of that bearish push before entering.
There is a good R:R possible for this trade, with an initial TP delivering a R:R of 1:1.76, while a further push down to the bottom support zone could result in an R-multiple of over 3.5.
The next pair I’m keeping an eye on is the loonie/kiwi. This pair has tested a support zone that is again significant. After an initial strong reaction to the upside, the pair reversed but never broke the support again. It moved slowly higher and I’m waiting for a confirmation in the form of a clean break of the downwards trendline to consider an entry.
When we look at the 4H chart, there is a clear push to the upside visible every time the bottom is tested. It is not something I’ll be trading right away but I’ll definitely keep it in my watchlist and see how this develops.
It’s the week of NZD pairs! The last one for this week is the ozzie new zealand dollar. I talked about this setup last week, where I indicated that I was still waiting for a valid setup to develop. It has since moved lower and this is an update about the pair. Since last week, the price developed a nice reversal pattern. Last Friday, price reacted quite strongly to the black resistance level I drew on the chart though, so I’m only going to buy once price closes above that level on the 4H chart.
Good luck trading!
What setups are you looking at? Share your thoughts in the comments!
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