Another week has passed, so I’m back with my weekly trading outlook! Last week was quite interesting, with a couple of nice opportunities in the market. Most of the setups I mentioned last week didn’t yet materialise, though, so we needed to be patient. Since we always want to see some confirmation first, I just didn’t take any of those setups, which is fine. There were some interesting other opportunities in the market too.
Current market behaviour
The US dollar index saw some up and down this week. Initially, there was plenty of positive momentum to drive the dollar higher against the basket of other currencies. However, as the rate hike was priced in as an almost certainty (over 90%), there wasn’t a lot of news that could push the dollar higher. The NFP release on Friday was quite good – better than expected – but we saw a classic “buy the rumour, sell the fact” reaction. The dollar ended the week a bit lower than it opened.
Often, gold and the dollar will have an inversely correlated price pattern, but this week was different. Markets felt quite risk-on and equities have risen in the past week. This leaves money flowing out of the safe havens such as gold and the Japanese yen, which we could clearly see in the past week. Gold sold off almost the entire week to end sharply lower.
Finally, oil dropped below $50 a barrel in quite a strong move. In fact, we haven’t seen these prices since the OPEC production cuts were announced and it was the worst week for oil since November. This might be a move that’s not over yet, but we have to see what next week brings.
Past week trade review
In this week’s trade review, I want to highlight a 1H trade I took on AUDCHF.
I took this trade on Wednesday and it turned out to be a nice result. First, some of the reasons I thought this was an interesting setup. The price had a 3-wave uptrend once I got interested, with a sharp move down after the third wave. This coincided with a downwards trendline on the daily timeframe, which it slightly overshot but still seemed to respect.
Initially, price moved lower, but I only got interested once price made a small new rally but failed to make higher highs. The price had formed a head and shoulders pattern by now, so I placed an alert below the neckline (around 0.76840-ish). Once I saw the strong bearish momentum candle break this level, that was confirmation for me that the trend direction had changed and the price was ready to make a move lower.
I held the trade for quite some time (for a 1H trade) but eventually got out once price crossed the moving average again. Even though I left some pips on the table, this still netted me a decent 2.5R.
The upcoming week
Now for the upcoming week! Wednesday and Thursday are the main days with releases, with the US Fed interest rate decision as the main event of the week. Central banks for Japan, Switzerland and the UK will also be releasing interest rate decisions this week.
Noteworthy economic news for this week is:
- Tuesday: US PPI
- Wednesday: GBP average earnings index + claimant count change; US retail sales, CPI, crude oil inventories, FOMC statements and Fed interest rate decision, NZD GDP
- Thursday: AU employment change, BoJ interest rates + statement, SNB interest rates, EUR CPI, GBP interest rates, US building permits, Philly Fed manufacturing index, US JOLTs job openings
For this weekly forex outlook, I’m keeping an eye on the following pairs:
Follow my published ideas on TradingView.
I was already looking at a shorting opportunity on AUDNZD last week. I even took a small position, which I pretty much scratched at break-even since there wasn’t any follow through. Yet. The setup is still solid and on the daily (left), you can see that after a strong uptrend, we’re just at a level that acted as previous resistance.
The price clearly responded to that and sold off a bit, but since this was such a strong uptrend, we could see some back-and-forth between buyers and sellers. The price is currently in a range (better visible on the 1H chart) and I’m not taking action unless it moves below the blue horizontal line around 0.08600. If it does with a strong momentum candle, I’ll take a short position with a first profit target area close to the 0.07600 level.
CHFJPY has been in a downwards channel, which is very clear on the daily chart (left). Last week, it touched the upper channel boundary and promptly sold of quite strongly, which resulted in a nice pin bar on the daily. As you can see on the 4H chart (right), the price continued the move downwards and there’s little in the way of seeing this pair move lower towards the lower bounds of the channel.
The price has already reversed at this point and usually, we would have been in a trade already. However, such strong moves usually see a retracement and that’s what I’m waiting for. The blue horizontal line around the 113.710 level shows the retracement level I hope the price will reach. If it does and we see confirmation of a move further down, it will be an excellent way to enter this reversal. If it continues its move down, then I will just skip this trade and move on.
GBPCHF already featured on last week’s outlook and instead of setting in a reversal, price just moved down. My price alerts were never hit so I didn’t take any position in the pair. However, the pair has been in an overextended trend for a while now and shows slight signs of slowing down. Additionally, the price is currently at a (minor) support level so we might see something happening this week.
What I like about this pair is that it shows a very clean trend: not too many spikes and a classic drive-retracement wave structure. I’m just moving my price alerts lower as the price goes and right now, I’m waiting for the price to break the 1.23200 level (marked by the blue horizontal line).
If it does, I’ll be looking at a momentum candle to indicate a shift in direction and a strong push upwards. Plenty of upside potential to make for a nice R:R trade. If it continues its way lower, then I’ll just be waiting and doing nothing 🙂
And finally, NZDUSD. After a long downtrend, this pair is now nearing a strong support area. Last time that the price was at this area, it started a long uptrend. The pair has already been moving slightly up, but I think that this reversal will need a bit more time to develop.
I indicated the potential path of the moving average in the right window. I’ll be looking for momentum candles upwards around the second half of that curve only since with such a big support level, it’s not unusual that price will retest the level another time. If it does, this would make for a nice double bottom, which only would reinforce our reversal setup.
NZD has been selling off against the USD the past week, but this setup implies that the USD will weaken in the next week. It’s very well possible that it does, given that the potential rate hike is already completely priced in. Still, you should be careful to enter this when the Fed announces their interest rate decision since any USD related pair could see quite some volatility.
Good luck trading!
What setups are you looking at? Share your thoughts in the comments!
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