Happy Sunday! How was your trading week? This week flew past and there were definitely some interesting opportunities in the markets! We’ll review one of these in a moment, a 1H short I took on NZDCHF. This was actually one of the setups in this week’s outlook, so hopefully, you could benefit from it as well! We also had an NFP release which largely surprised on the positive side. This was a welcome change for a dollar that has recently been selling off against all major currencies.
I’m temporarily getting settled in Ghent right now, where I’ll be spending some time working and trading for the month of August. After that, it’s back to Japan for me (I can’t do without the food!). The nice thing about being a trader is that I can work pretty much everywhere. Some music, a good coffee and my charts are all I need!
👋Morning champs! 😊Coffee, fresh juice and charts! ☕️🍊📈 What more do you need?✌️Good luck in the markets today! 🔥🙏🇧🇪 . . . . . . . . . . #trading #forextrading #forex #forextrader #fxtrading #fxtrader #tradingforex #forexlifestyle #igdaily #lifestyle #currencytrading #forexsignals #smartforex #trader #tradinglife #dailymotivation #money #winning #success #hustle #finance #grind #instadaily #belgium #ghent #wanderlust #travel #globetrotter #stocks #digitalnomad
Current market behaviour
The DXY dropped early last week, mainly due to the strength of the euro (CPI and unemployment rate surprised positively) and other currencies. We then continued the week without any clear direction, until we got an NFP that pretty much beat expectations across the board. This resulted in a move up that could be seen as the first time in about a month where there is potential for a dollar reversal to the upside. But it’s still early days and we are still very much in a downtrend, so we need to see what happens next week.
Gold didn’t show a lot of direction last week. This is typical behaviour for the bigger picture, which shows that the bullion is in a range. That range is part of what seems to be the top of a bearish reversal in the making. Towards the end of the week, we could see a bit more downside momentum and gold ended the week lower. It’s something I keep a close eye on since it shows all signs that more downside moves are possible if it breaks the level I indicated on my chart:
Oil is struggling with an upper trend line that it seemed to break for a moment last week but eventually was still respected. I’m expecting this level to hold and if we see more downside momentum, this might be an interesting one to look at. But last week was defined by ranging behaviour and crude pretty much ended the week where it started:
For the trade review of this week, I’m looking at a trade I discussed in the previous weekly outlook. It’s a short setup on NZDCHF. I’ve drawn a horizontal zone last week and indicated with the arrow that if we see strong momentum to the downside, this might be a setup I’m interested in. Halfway the week, we could see this momentum to the downside and I took a short position. Here is the chart for this setup:
This was a relatively easy play and I was just waiting until we could see enough downside momentum, before getting in. It helped that we could see that every high swing was lower than the one before, indicating that the buyers were exhausted. At some point, we could see a strong move down, breaking the horizontal local support and from there on, it was relatively straightforward.
Unfortunately, the price missed my profit level by just a few pips and then started to drift sideways. At this point, I didn’t want to risk losing my unrealised profits and took my trade and the profits off the table. I’m quicker with acting on open trades if it plays out on the 1H charts since it’s easier to get whipsawed on the shorter time frames. But eventually, this one turned out pretty nice and I was able to take home a bit over 2R on this single trade.
The upcoming week
Next week will be very quiet. There are a few holidays and very few data releases. The most interesting event is probably the NZD interest rate decision, but even that is usually a non-event. A few other data releases are scattered across the week, but it will be very calm. Here is the overview of next week:
- Monday: Canada holiday
- Tuesday: USD JOLTs Job Openings
- Wednesday: USD Crude Oil Inventories, NZD RBNZD Interest Rate Decision and Statement + speech by RBNZ Gov Wheeler
- Thursday: GBP Manufacturing Production, USD PPI
- Friday: Japan Mountain Day, USD Core CPI
For this weekly forex outlook, I’m keeping an eye on the following pairs:
Follow my published ideas on TradingView.
GBPCHF is one of the setups that could have already made for a nice trade once the first bearish momentum bar moved down, but I believe that there is still more potential there. We can see a textbook uptrend that halted at a previous resistance level. This in itself wasn’t enough to move the pair lower, but economic data releases pushed the pound sharply lower. It looks like this might be the start of a further move down to the previous swing lows.
Very simple setup, very clear price action, if the price manages to break the blue rectangle zone. A special mention needs to be given at the 1.26400 level a bit lower, which has acted as support and resistance before. A more conservative trader could first take a partial position and if it also manages to break that level, increase to a full position.
NZDJPY on the daily is also a very nice setup. We can see that the price touched a previous resistance level and then moved sharply lower. Again, you could have played this setup on the lower time frames already and made some nice profits! But right now, I’m interested in this pair on the daily.
We can see that Friday’s price action bounced off a local support zone and we might see a temporary retracement into a previous resistance or potentially the moving average early next week. Actually, I wouldn’t mind if that happened but once the price shows some good momentum to the downside, I’d be interested. I’d be looking for engulfing bars or pin bars that validate a retest and continued bearish control.
For now, my alert is set at 81.700, but I’ll be keeping an eye on this pair every day to see how it evolves.
USDJPY on the 4H charts isn’t the prettiest pair ever. Still, it’s got my attention because of the current location of the price within the context of the price action of the last months. We can see on the daily charts that this pair has been in a sort of an ascending triangle and the price has just touched that lower boundary and then shot up. It wasn’t an immediate reaction but we could see some strong bullish price action on Friday, which caught my attention.
My play on this pair would be to wait until it manages to break the 111.000 level, simple as that. This round number seems to be a logical resistance but if it manages to break this with some momentum, we could see more upside, with potentially the previous highs as a target.
The last one is gold. This pair has been showing pretty nice price action recently and it behaves exactly like you would expect from a pair that has been in a long uptrend but is now reversing. We can see multiple attempts at breaking the highs, but they get pushed down immediately and with high momentum every time.
Additionally, in the last 3 swings, we don’t see any higher highs anymore! While the pair is still in the ranging phase that is typical for a reversal, it’s very close to breaking a key resistance-turned-support level that I marked on the charts. If it manages to break that convincingly, let’s say the 1257.00 level, I’d be interested in selling this pair.
Good luck trading!
What setups are you looking at? Share your thoughts in the comments!
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