Hi traders! How was your trading week? I’m quite early with my weekly forex outlook this weekend. One of the things I’ve started to make a habit of (thanks to this book), is to get up early. It’s incredible what you can get done if you get up a couple hours earlier, it feels to me like I almost have an extra half day available to me!
The past week was relatively quiet. However, it still gave us excellent conditions for a couple of trade setups I was describing in last week’s outlook (see the past week trade review section below!).
The dollar initially moved lower but regained some of its losses in the second part of the week, ending pretty much where it started. As predicted in our previous outlook, gold saw a sell-off to below-1200 levels. Finally, oil crept up a bit higher but stayed mostly in the range it’s currently in.
Past week trade review
Here’s something new: a review of how the past week’s outlook went. A lot of setups I suggested in last week’s weekly outlook played out really nice. Of course, I’ll be the first to say that it doesn’t always turn out like this and I obviously have losing trades as well.
Nevertheless, I like doing a review since it keeps me accountable to the things I’m saying, but also because seeing the setups side by side might help you recognise valid patterns in the market, so I want to go over some of those trades. I will have trades in my future trading outlooks that won’t work out as well. It goes without saying that I’ll share those as well.
First, there was the AUDCAD trade. After I indicated that a reversal on AUDCAD might be imminent, this happened:
Aside from technicals, this was also fuelled by oil bullishness and disappointing AUD numbers halfway through the week. Nevertheless, the technicals were there, at the right place. After a lower low was printed on the charts, there were a couple of places you could get in to enjoy the ride down.
Next, the AUDUSD trade. Unfortunately, we didn’t see the follow through we hoped for and the price never closed below the 0.75000 level. This only means we don’t take action. A setup isn’t the same as an entry trigger, and in this case, the entry trigger would’ve been the close below the level. Instead, the price just ranged during the week. It’s quite possible you could’ve taken a trade on a lower timeframe, but here I’m reviewing 4H or daily charts only.
However, I must say that the overall market structure still very much points towards a reversal. Some price action and chart patterns just take longer to complete and patience is key here.
Price is currently already making lower lows and lower highs, it’s just not yet at the level where I’d like it at. With that said, I’m keeping AUDUSD on my watch list for this week. I believe there’s a fair chance that we will see a break of the 0.75000 level somewhere next week. If that happens, I will not hesitate to put a trade on.
NZDJPY and XAUUSD
I’m not going to review these two, but will just tell you that both have also turned out to be quite good trades. Instead, I would like you to have a look for yourself, see for both NZDJPY and XAUUSD where the price was last week and where it is now, and at which points you could’ve gotten in (if you didn’t do so already).
Have a look and tell me in the comments section what you would do and where you’d get in!
The upcoming week
Now for the upcoming week! The upcoming week is very news-heavy, with the main topics being the NFP, the Fed’s interest rate decision and the FOMC press conference. The rest of the week is also sprinkled with news events, so it will be key to look at our economic calendar before putting on a trade. Also noteworthy is that we have Lunar New Year on Monday and Tuesday. This means that some banks and exchanges in Asia (China, South-Korea and Singapore) will take a day off.
Noteworthy economic news for this week is:
- Monday: US pending home sales
- Tuesday: BoJ interest rate and press conference, DE unemployment, EU CPI + GDP, CAD GDP, US consumer confidence
- Wednesday: NZ unemployment, GBP and DE manufacturing PMI, US nonfarm employment change, ISM manufacturing PMI and crude oil inventories, Fed interest rate decision and FOMC statement
- Thursday: BoE interest rate decision and construction PMI
- Friday: UK services PMI, US NFP, unemployment numbers and ISM non-manufacturing PMI
For this weekly forex outlook, I’m keeping an eye on the following pairs:
Follow my published ideas on TradingView.
Let’s kick off with AUDCHF. This is a classic reversal that just needs that little nudge to the downside in order to be considered valid. The price was previously on an upswing but started to stall, which is visible by the RSI divergence (lower highs on RSI + higher highs on the charts).
Since then, the price has made somewhat of a head and shoulders pattern. The support zone (indicated in green) is still in place, but as you can see from the descending triangle, the price is already failing to make higher highs. If you look at pure price action, you might also notice that the bearish bars are generally much larger than the bullish bars once lower highs are made.
This all gives us clues about the potential direction of this forex pair. I’m waiting for a break and close below the green zone to enter a short.
The next pair I’m keeping my eyes on is EURUSD. The pair has been in a long-term uptrend and has recently reached a significant resistance zone (which you can see on the daily chart on the left). A common pattern of reversals is that the price enters a temporary range in order to figure out if either the bulls or bears have the upper hand.
Last week, a strong downwards break of that range already occurred. That could have already been a signal to enter, but I wanted to wait on two things: a break of the upwar ds trend line and a retest of the range. Both of then have happened in the second part of last week, so I’m anticipating that the price will try to make a move lower.
A risky entry could be to enter at market when markets open again after the weekend. A more conservative approach could be to wait until the price has broken the recent low to the downside. Since there will be a lot of US news this week, keep an eye this setup when US economic news is released.
The next one on my list is NZDUSD. As you can see on the daily, the price is currently hovering around the top end of a downwards channel. We can see that the pair has attempted to make a run for it, but was quickly brought back down again. The right shoulder of a head and shoulders chart pattern is also in the making.
I will be interested in shorting this pair after it has broken the neckline of the H&S pattern (which also acts as a resistance-turned-support level).
And finally, we’re back at gold. This pair already featured in last week’s market outlook and has since then exactly made the move I expected. After a nice double top, the price decided to move lower. Last week, I said that I would be interested in shorting gold after it has broken the 1200 significant level, and it has done so.
If you missed this setup, no worries! There might still be an entry opportunity. The neckline of the double top provides us with an interesting area to short again. Indeed, it seems that price has found temporary support at the 1180 area and moved back up slightly on Friday.
I’m planning to wait until the price reaches the 1198 level and will look at price action that confirms the continuation of the move further down.
Good luck trading!
What setups are you looking at? Share your thoughts in the comments!
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