Good morning crew 👋 and a good weekend too! Another trading week has passed and one theme of this week was pretty much waiting for the big events. We had multiple central bank interest rate decisions and we could often see the market being relatively quiet in between these events. Nevertheless, there were some good opportunities, especially on the daily charts.
But first, let’s review our weekly outlook for last week! Let’s start with EURAUD on the daily. I mapped out two scenarios last week, one being a retracement before moving down and one being an immediate break of the support zone. Well, after some hesitation, the support level broke and the price moved down for the second part of the week. A nice trade could be had if you’d entered a short position here!
Next up is our second pair: EURCAD on the daily. Just as with EURAUD, I expected the pair to break lower and that’s exactly what it did! I banked a nice profit on this trade, which I eventually closed before the weekend since I had a good profit already and didn’t want to risk giving it back to the market:
Next up is a daily short on EURJPY. I indicated in last week’s outlook that I would wait for the pair to break and close below 122.75 and for the entire week, it stayed above this level! So it was very simple for me: no positions were taken. I’m still interested in the setup though, and if we see some strong selling early next week, I might still take a position.
Finally, we have our 1H long on gold. This didn’t really work out as planned since the price slowly moved lower, only to suddenly reverse on economic news. I didn’t like the price action (it was a very strong push up so I was waiting for a retracement) and soon after, the entire move was nullified by a bearish bar in the opposite direction. At this point, I decided to stay away from this trade setup and move on to other and better setups.
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
Well, the dollar chart basically says it all, it was an up and down week! This was basically caused by three separate events. On Wednesday, we had a slew of releases that were very disappointing for the US economy. Both CPI and retail sales numbers were well below expectations, which caused the dollar to sell off quite fast. However, not long after was the FOMC press conference, in which FED chair Janet Yellen took a very hawkish stance towards the economy.
This was a bit unexpected since the US data up until now were mixed at best and pretty disappointing at worst. Still, Yellen maintained a positive outlook for the year. This news made the dollar rally again until it made fresh highs for the week. The week ended with a fresh batch of disappointing housing data, however, and much of the gains had to be given back. Everything considered, the dollar pretty much ended the week where it started.
Gold mirrors the USD pretty accurately these days, in which the whole world seems to either be in risk-on or risk-off mode. We could see the up spike on the disappointing CPI and retail sales numbers and then the sell off as money flows went back to the dollar.
We can see crude continuing its path lower on too much supply. Just as last week, it ended the week sharply lower again.
The upcoming week
After a busy last week, it’s going to be a refreshingly quiet week. Highlights are going to be the RBA meeting minutes, RBNZD Interest rate decision and USD home sales figures, but nothing out of the ordinary. Here is the overview of next week:
- Monday: /
- Tuesday: AUD RBA Meeting Minutes
- Wednesday: USD Existing Home Sales, USD Crude Oil Inventories
- Thursday: NZD RBNZD Interest Rate Decision + Statement, CAD Retail Sales
- Friday: EUR German Manufacturing PMI, CAD CPI, USD New Home Sales
For this weekly forex outlook, I’m keeping an eye on the following pairs:
Follow my published ideas on TradingView.
Here we have a pair that I’m looking at on the 4H charts. To be honest, I was hoping to have traded this last week already, since we could see a strong bullish push up after a very nice and sustained downtrend. Unfortunately, this didn’t happen and the pair pretty much started ranging without too much direction. On Thursday, we could see a change in market behaviour, with again a strong push that was making higher highs. I got interested.
This was a strong move, already quite a bit away from the moving average, so I decided to wait on the sidelines and see what happened. We could again see some ranging behaviour, while the price slid down a little bit. Now, I still think this setup has potential. The last time the lows were tested, the price wasn’t able to reach the previous low, which is a sign of bullishness.
Here is how I’m going to play it: ideally, I’d like to see the pair move lower just a little bit, say around the 1.04900 area. After that retracement, I’m going to be waiting for a momentum push upwards, past the previous high of 1.05400. If the move happens with enough momentum, I can see the pair move higher again. I’m not sure this will happen, but as traders we can only wait and respond to what the market gives us!
Next up is CHFJPY, a setup that will play out on the daily chart. I already took a position last week as the price moved below the local support. Unfortunately, the price moved back up strongly and I had to cut my losses. That’s trading and I didn’t mind, but I got interested in this pair again once I saw the very nice pin bar on Friday!
This indicates that there might be some selling momentum left. The reasons for this setup are quite clear: flattening of the previous uptrend at a strong resistance level and a very nice rounding top structure. We can see from the price action that there is a clear RSI divergence as well. Now, I’ll just wait until the price makes a strong move lower (potentially creating a pin and drive reversal entry trigger).
Let’s have a look at EURAUD, also on the daily charts. If you remember, we discussed this setup last week and since then, it has moved down exactly as expected. And if you haven’t taken a position yet, no worries! This might be your second chance 😉
There are almost no bullish bars in the recent downtrend, it’s a very continuous bearish trend. That’s what we wanted, of course, but this also means that on the lower time frames, this move might be a bit overextended. A correction might happen soon, and that’s what I’m waiting for.
I’ll be looking for the price to retrace to around the 1.48200 level, which has so far acted as a resistance-turned-support level. If this happens, I reckon there might be a good re-entry opportunity if we get an engulfing bar, for example. Let’s see!
As our last setup, we’re going to look at a classic support and resistance play. A quick look at NZDCHF on the daily (left pane) shows us that the price is at a rather interesting level! This level was a swing low for a major swing, then the level got broken and now continues to act as a strong resistance. Also, note the long uptrend that the pair has been in so far.
But I can see signs of slowing down. The price has been recently selling off on the 4H charts (right), exactly at the previous resistance level! The pair has managed to climb up again to test the highs and that’s also the status for now.
If NZDCHF manages to move lower again, we could see a very nice double top and I’d be interested in selling the pair once it crosses and closes below the neckline. This neckline would coincide with the 0.70000 round number as well, so if it can break that convincingly, this will be one to watch!
Good luck trading!
What setups are you looking at? Share your thoughts in the comments!
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