Another week has passed, so we take the time to look at how the trading week went and at the same time, make our outlook for the next week. The past week had many reversals happening and many of the setups I indicated last week played out really well. We’ll have a look at some of these in a moment.
This week, it was a little harder to find good setups. We see less trending markets and if they are trending, they’re either in between S&R levels or just not trending cleanly. Nevertheless, I have selected some pairs I find worth looking at.
Current market behaviour
This week, we could see the USD continue its path downwards. Wall street might keep betting on the infrastructure and regulation changes that the Trump presidency has promised, but for now, we see a weakening dollar, indicating that the initial rally high after the inauguration has largely worn off. By now, Wall Street wants to see some concrete evidence – not some vague promises – in order to get the dollar higher.
For now, this is good news for technical traders. In the absence of political news, the dollar is respecting the technical elements more than anything. Price is also nearing a previous swing low, which should act as support and might give us new opportunities to buy the dollar next week, but let’s see.
Gold had a good week, ending quite a bit higher than last week and oil had another very skittish week, ending the week a bit lower after higher than expected crude oil inventories.
Past week trade review
In this week’s trade review, I want to highlight a trade I took on AUDCAD.
I talked about this trade last week, where I was looking on the daily chart. I saw an opportunity since the price was approaching a major resistance area marked by the previous swing high. It’s safe to say that this was a beautiful setup, exactly doing what I expected it to do.
On the left side, we can see the daily chart from last week. The price was close to reaching the resistance area, but not quite there. It only took the market one day to actually get there and then, things got interesting. I moved down to the 4H charts to see if any setup was available and lo and behold, a beautiful pin and drive appeared on Tuesday!
There’s not a lot to say about how this played out: I entered after the drive candle with the stop loss a bit above that same candle and a take profit at a previous resistance-turned-support level that more or less initiated the move up. As this setup is only just playing out on the daily, I wouldn’t be surprised to see it continue its move down and I will be looking for re-entry opportunities on this pair next week.
The upcoming week
It will be a slow week. Apart from a few FOMC member speeches and GDP numbers, not much is happening. Let’s have a look:
- Monday: FOMC Kaplan speech
- Tuesday: US CB Consumer Confidence, CAD BoC governor Poloz speech, FOMC Kaplan speech
- Wednesday: US Pending Home Sales, US Crude Oil Inventories
- Thursday: US GDP, FOMC Kaplan speech
- Friday: German Unemployment Change, UK GDP, EU CPI, CAD GDP
For this weekly forex outlook, I’m keeping an eye on the following pairs:
Follow my published ideas on TradingView.
On the 4H chart, we can see that this pair has been in an uptrend for some time. This was actually a pair on my watchlist for last week as well and it didn’t yet go down, but I think there’s still potential. Right now, the pair is at the resistance created by a previous downwards trend line and it seems to be losing steam. Last week already saw some selling, but a strong euro kept this pair going.
The setup on this is easy: wait for some downwards momentum. The horizontal line a bit above the 1.43500 level is the level I want to see the price move through. If it does with enough momentum, that would be an early sign that the trend direction might be shifting.
The EURUSD is at an interesting level. On the daily (left), we can see that the price is currently hovering around a strong resistance level marked by a previous swing high. There already was an initial sell-off, but price bounced back on a local support level and buyers buying the dips of the uptrend.
However, the buyers can’t seem to make new highs anymore and this trend seems to have lost most of its steam. On Friday evening, we could even see some selling pressure, although this isn’t enough to get me interested yet.
The trend on the 4H – although a bit messy – has many signs of an impending reversal. RSI divergence: check. Strong resistance level: check. Overextended trend: check. Nevertheless, I’m waiting for confirmation. Once price moves through the 1.07600 area (indicated by the horizontal local line), I’ll be interested in selling the pair.
The USDJPY isn’t in the best location to trigger a reversal. What I mean by that is that we basically just broke the previous support, which is something you’d rather not see. Nevertheless, the price seems to have found support a bit lower, with 3 or more attempts to push price lower, all unsuccessful. If we combine that with a clean but overextended trend and RSI divergence, we have something interesting to look at.
On Friday, we could see some strong momentum upwards, which might indicate that the price is indeed ready to move higher. But as always, I need more confirmation. The support that was broken (indicated by the lowest horizontal line) is something I want to see the price move through first. If it bounces off this level, this pair might just as well continue its move down. In which case this would have just been a temporary retracement. Better safe than sorry, so if the price moves through the 111.690 area with some momentum, I might get interested.
On the daily, gold is back at the previous swing high, which is quite a strong support-turned-resistance level as well. On the 4H chart, we can see signals that might reinforce our idea that gold could be ready to make a reversal: strong rejection of the resistance level and predominantly bearish candles.
Gold was having a good rally, though, so it might not be ready yet to reverse and instead continue up higher. That’s why we will wait for confirmation first, before getting into a position. I’ve drawn a horizontal line around the 1241.00 level and I want the price to break this level first. There was some momentum on Friday evening, but let’s see if it continues after the weekend first.
Good luck trading!
What setups are you looking at? Share your thoughts in the comments!
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