Hi traders, how’s the weekend going? I hope you had a good trading week! It certainly was an eventful week, with the UK elections as the main event on Thursday in addition to ECB meetings and a Senate hearing of ex-FBI director James Comey. These events made sure that it was a rather short week for me, without any trading on Thursday and Friday.
It was a relatively quiet week for setups as well. I only took two trades: the AUDNZD 4H long and the CHFJPY 1H short. The former had to be cut quickly since it didn’t really work out as planned (I suspect due to a very strong New Zealand dollar) but the latter worked out beautifully. I’m going to review the CHFJPY trade in a moment.
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
This wasn’t a bad week for the dollar. After some up and down, it ended the week rallying up. One interesting observation is that the market doesn’t really seem to care about the whole Comey story. Maybe it’s starting to get used to a continuous stream of Trump-related headlines and just chooses to ignore most of the day-to-day happenings around the White House? Who knows.
Gold is again the mirror image of the dollar, closing the week with a big sell-off.
Oil tanked on Wednesday after inventory numbers disappointed. From that moment on, it kind of drifted sideways for the rest of the week without too much directional action, but it ended the week sharply lower.
Past week trade review
In this week’s trade review, I want to highlight a 1H short trade I took on CHFJPY.
CHFJPY 1H short
This is a trade I took early last week and it was described in last week’s outlook as well. While this was a winner, I could get much more out of it, if it hadn’t been that I wasn’t around when the trade neared its take profit level. Let’s see a chart first:
As I talked about last week, the pair had put in a market top and was in the process of forming a head and shoulders pattern. The pair opened the week sharply lower but quickly closed the gap. This indicated to me that there was a willingness to go lower, but not just yet. Monday’s price action formed the right shoulder of the H&S pattern and took it into Tuesday to move lower.
The blue horizontal level the neckline, but I wasn’t really convinced about the price action once the price moved into that area, especially since the price moved lower than that on the Monday open. So I waited a bit more for confirmation, which came on Tuesday with a strong move lower.
I entered the trade and there was little to be worried about on the way down. There was a bit of back-and-forth at the 114.00 round number level, but eventually, the price managed to move lower and hit the profit level. It actually moved quite a bit lower than my TP level, but I wasn’t around to intervene. If I was, I would’ve probably trailed the move lower, but quite happy with the result as is.
The upcoming week
It’ll be a rather busy week! It starts off slow with an Australian holiday on Monday, but shifts into gears for the rest of the week with interest rate decisions from the US, Switzerland, the UK and Japan. All of this is intertwined with a bunch of other important data such as employment numbers, so be sure to keep the economic calendar close next week! Here are the main points:
- Monday: AUD holiday – Queen’s Birthday
- Tuesday: GBP CPI, EUR German ZEW Econ. Sentiment, USD PPI
- Wednesday: GBP Average Earnings Index +Bonus, GBP Claimant Count Change, GBP Unemployment Rate, USD Core CPI, USD Core Retail Sales, USD Retail Sales, USD Crude Oil Inventories, USD Fed Interest Rate Decision, USD FOMC Statement
- Thursday: NZD GDP, AUD Employment Change, CHF Interest Rate Decision, CHF SNB Press Conference, GBP Retail Sales, BoE Interest Rate Decision, USD Philadelphia Fed Manufacturing Index
- Friday: JPY Interest Rate Decision, JPY BoJ Press Conference, EUR CPI, USD Building Permits
For this weekly forex outlook, I’m keeping an eye on the following pairs:
Follow my published ideas on TradingView.
A common theme for this week will be that we’re looking for Euro bearishness and that most setups will play out on the daily charts. To start off with, I’m looking at EURAUD on the daily chart. This pair has been in a steady uptrend, but in the past two weeks, the trending behaviour has been flattening off.
This happens to coincide with a strong previous swing high, marked by the blue rectangle. Price spiked above it but was quickly sold off again. At the same time, we can see RSI divergence. The resistance level marked by the swing high also coincides with the 261.80% Fibonacci extension level. Price has been selling off last week but has found some support on Friday.
What I’m going to be looking at is a temporary retracement to the previous resistance level, followed by a sell-off again. This is the scenario I would prefer, but of course, the price can just as well continue down. Either way, I have price alerts set at both the potential retracement zone and below the current price, so I’ll be notified if the pair is ready to move down.
Similar to EURAUD, EURCAD is forming a market top on the daily charts. This market top is happening at the top end of a very strong spike (see the left of the chart below). The price is still making higher highs and higher lows, but at the same time shows very clear RSI divergence and the price is struggling overall to push higher.
Instead, we can see more and more bearish action, especially in the second part of last week. I’ll be looking for signals that the price is ready to move lower, based on two things: the upwards trend line needs to be broken first and then, I want to see the price break the horizontal local support level too. If that happens, we have a pretty classic reversal top and there’s plenty of downside potential so I like this setup a lot.
Continuing with the Euro bear theme, I want to take a look at EURJPY on the daily. You’ll notice that these pairs all share a common structure, which is signs of a market top on the verge of breaking to the downside.
EURJPY seems a bit further along than the other pairs and has actually already moved lower a bit. We could see a head and shoulders formation in here, but there’s still a longer-term resistance-turned-support level that needs to be broken.
Other than that, we have everything present: RSI divergence, reversal pattern, nice price action with a bias to the downside. I have my alert at around 122.75 because I want to first see if the price can move below the support zone. If that happens, there’s again plenty of downside potential and very little structure that could get in the way of a move all the way down to the 117.00 level.
And finally, something else than a Euro pair 🙂 This 1H setup on gold caught my eye because of a confluence of factors. First off, gold has been selling off on the 1H charts, showing a nice downtrend with multiple price swings. At the same time, look at where the price currently is on this 4H chart:
After a big 4H swing, the price has reached the upwards trendline again, and it feels that it will react with a move up again. It’s a bit early days, but on the 1H chart below, I’ve indicated the price level I want to see broken before I get in on this setup. On the pair manages to break and close above this 1271.40 area, I’ll be a buyer.
Good luck trading!
What setups are you looking at? Share your thoughts in the comments!
Risk Disclaimer: The information presented on Smart Forex Learning is for educational and entertainment purposes only. Nothing on this website serves as investment advice or recommendations. Trading is risky and you can lose more than your initial investment. Smart Forex Learning cannot be held responsible for any decisions visitors make. Please consult a financial advisor before making any investment decisions.