Hi there, squad! How was your trading week? The past week has been… interesting, to say the least! The troubles that surround Trump (the firing of CIA boss Comey, leaks to Russia, etc) kind of held the markets hostage and much of the current market action is fuelled by politics and uncertainty, rather than pure technicals and economic data.
However, there were still opportunities to be had! The AUDCHF 4H short we discussed in last week’s outlook turned out to be my favourite trade of the week and we’ll review it in my weekly trade review. The GBPJPY short and Silver long trade also worked out nicely, with only our EURJPY short deciding to move a bit higher. No harm was done, our alerts were never hit so no action was taken on that one. The WhaM system also had a solid performance, although I’ve slightly changed the rules recently, but more on that soon!
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
The French elections are now well behind us and the new president Macron definitely didn’t wait to get started! He already had a meeting with chancellor Merkel, solidifying the relationship between Germany and France and strengthening the European partnership in the meanwhile. And the Euro liked what it saw! Without too much pause, the Euro dominated last week, with a strong performance on euro pairs across the board.
The US dollar, however, had a more difficult time. The “Trump trade” is now finally over, the uncertainty surrounding president Trump makes Wall Street look for alternatives and this means a dollar selling off in pretty much a straight line for the entire week.
This uncertainty and risk-off is beneficial for gold and silver, who could see a steady rally this week, with only a slight pause in the second part of the week.
Oil performed better than expected and with supply numbers steadily decreasing, oil went up. The low production and break-even costs of U.S. shale still form a risk but nevertheless, oil managed to end the week firmly higher.
Past week trade review
In this week’s trade review, I want to highlight a short trade I took on AUDCHF 4H.
AUDCHF 4H short
AUDCHF has been good to us lately! For two weeks straight, this pair has been giving us nice profits. Let’s see if it continues! But for now, let’s review the short I took, as I discussed last week. This is how it looked last week:
Well, this pretty much was a textbook play. The price indeed made a retest of the resistance level and then sold off, while showing us a beautiful pin and drive reversal entry trigger! The direction then was down for the next couple of days, in a trade that played out beautifully:
I entered after the pin and drive, with a stop loss a bit above the drive candle and the moving average. The target was the previous swing low, which is always a good place to take profits anyway with such a clean setup.
Initially, the price moved up a bit, making me reduce my position size as I don’t want trades to turn against me so fast. The price moved back in the right direction though, and I added back to my position. From then on, the price moved steadily to my target in a trade that was not very eventful. Target hit, case closed!
The upcoming week
News-wise, there’s nothing out of the ordinary this week. 2 holidays: Monday is Victoria Day in Canada and Thursday is Ascension Day in Switzerland. Keep in mind that trading might slow down for these currencies on those days. The most news-worthy are probably the CAD interest rate decision and USD FOMC meeting minutes.
Here are the highlights:
- Monday: CAD holiday
- Tuesday: EUR German GDP, EUR German IFO business climate, GBP Inflation report hearings, USD New home sales
- Wednesday: EUR German manufacturing PMI, USD Existing home sales, CAD BoC Interest rate decision, USD Crude oil inventories
- Thursday: CHF holiday, USD FOMC meeting minutes, GBP GDP, USD Initial jobless claims
- Friday: USD Core durable goods orders, USD GDP
For this weekly forex outlook, I’m keeping an eye on the following pairs:
Follow my published ideas on TradingView.
The first setup of this week’s outlook is AUDCAD on the daily chart. It might not be a traditional reversal setup, but it’s looking interesting to me nonetheless! Let’s first look at how the price swings behave. We can see the price being in an uptrend, but recently the price has put in a double top. Not only that, but the price seems to be struggling to make new highs in the past week, with multiple failed attempts to even get above the moving average. Thursday and Friday also printed two bearish pin bars, all adding confluence to a possible down move.
If I look at a chart like this, it signals buyer exhaustion to me. The price bounce of last week looks like a sort of cup-and-handle pattern and what I’m looking for in the upcoming week is for the price to break the local support level (indicated with a blue rectangle around the 1.00500 price level.
If it manages to break this support, it will also have broken the uptrend. If this happens with enough momentum, it would signal that a further move down is likely. For now, I’ve put price alerts a bit below the support, close to 1.00400. Now, we wait!
This is more of a classic reversal setup on the 4H charts. We had a nice downtrend with clean price swings, but the price has now reached a previous support level. The RSI indicator is already pointing up and the RSI divergence is also noticeable. When we map out the Fibonacci extension tool, we can see that the price has reached the 200.0% Fibonacci extension level as well.
While the price is still pointing down, this shows all the signs of a textbook reversal. But we don’t want to get in too soon (after all, we don’t have reversal FOMO), so we’re waiting for a momentum push up. There’s a local resistance level that I first want to see broken before getting into this setup. Depending on the momentum of that move, I might even choose to wait until the local swing high at 1.27654 is broken as well.
USDCAD is another daily play (there are less good setups on the 1H and 4H this week). Similar to AUDCAD, this pair is in an uptrend but is starting to show signs of a reversal. In the past two weeks, it seems to have put in a market top. This market top shows a strong bearish to bullish candle ratio (the red bars are much stronger than the green ones).
In the second part of last week, we could see one of our favourite patterns: the pin and drive entry trigger! A pin bar followed by a strong drive candle might indicate that there is more downside potential for this pair on the books. The drive candle also managed to just break a previous support level, although I want to see how the pair opens on Monday before I take action.
If there would be a large gap up, that would be a signal for me to back off and reassess the situation. However, if the price immediately moves lower on the Monday open, that indicates that the market still wants to go lower. This could then be an entry trigger for me.
Finally, something different! When we look at the weekly (!) chart on the left, we can see that the USDSEK pair is at an interesting position. The blue rectangle zone is a large-scale resistance-turned-support area that has been tested as support a couple of times now. As you might know, the more times a support or resistance area gets tested, the weaker it becomes.
We can combine this information with the fact that price is moving in a symmetrical triangle and is probably close to breaking out. If I had to choose a direction for this breakout, I’d say to the downside. However, you never know with triangle setups, so I’ve set alerts both at 8.85000 and 8.65000. This way, whichever the breakout direction, I’ll be alerted for a potential setup.
Good luck trading!
What setups are you looking at? Share your thoughts in the comments!
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