It’s weekend! Another trading week has passed and some decent opportunities have come along. The week wasn’t really that eventful, though. I largely skipped Thursday and Friday as I wasn’t feeling too well, but I had a good GBPNZD short (with pin & drive entry) running on the daily charts since the beginning of the week:
Additionally, I had a nice and quick AUDCAD price action play on Friday that got filled to the pip with deadly accuracy. I love when that happens!
Quick note: I’ve started a new article series called The Exit. Rather than focus on finding trade setups, The Exit will discuss how I manage and exit my trades in great detail. I’ve already posted a first article discussing an EURAUD 1H short I took last week, have a look!
But let’s first do a quick recap of the setups of last week.
Past Week Setups
Our AUDCAD short from last week progressed nicely, although not as fast as I expected. It is going the right way though, so we just need to be patient and know that setups on the daily just play out over longer timeframes. The GBPCHF long never broke the levels I indicated on my chart, so this trade idea never materialised.
As expected, our USDCAD short on the daily did move further down. The OPEC meeting did make it a bit more volatile than usual, but a nice trade could be had nonetheless. Finally, remember that I said how a move to the downside was more likely for the USDSEK setup? The price indeed moved down, but not as far as I’d liked. For now, this is still a setup on my radar.
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
Notable events from past week were the OPEC meeting on Thursday and a G7 summit that is currently still going on. That G7 summit is a good one to keep an eye on when we open on Monday, as the market often looks for clues on what the world leaders have to say.
The US dollar was mixed this week, largely due to very mixed economic data and FOMC members who are a little less hawkish about the US economy. It did manage to end the week a bit higher, but without clear trending behaviour. The same goes for gold, which also closed the week higher, but not without its up and downs.
In the beginning of the week, oil pushed higher on the expectation of extended production cuts. This was a clear “buy the rumour, sell the news” trade, however, and because the cuts were largely expected, the market reacted underwhelmed that nothing more was happening to support the oil price.
The result was a sell-off in oil once the OPEC press conference was underway, fuelled by profit taking and disappointment. As this was mainly an emotional reaction, the price managed to bounce back at the end of the week.
Past week trade review
In this week’s trade review, I want to highlight a short trade I took on GBPNZD D.
GBPNZD D short
I already mentioned this trade in the beginning of my weekly outlook, this was a setup that only caught my eye at the beginning of week. Basically, the GBPNZD broke a good support level very strongly on the daily charts. Let’s have another look at the charts:
Starting off, this pair was in a long uptrend. At the end of the uptrend, we can see some strong bullish exhaustion bars, which are a typical sign that the trend might soon be over. The uptrend was followed by a ranging and consolidation phase (learn about these phases in my reversal trading guide). There seemed to be a local support level that was slightly sloping up but at the same time, the resistance zone (the big blue rectangle at the top of the chart) held very well.
Monday closed off with a very bearish bar that not only broke the local support, but also formed a pin and drive pattern (marked in orange). This gave me plenty of conviction to enter a trade. The first couple of days were relatively slow and especially Thursday tested our patience in keeping this trade. Technically though, there was nothing wrong and our patience got rewarded on Friday, with a large continuation move down.
The target isn’t yet hit but with such a strong bearish bar on Friday, I wouldn’t be surprised to see this happening in the beginning of next week. Let’s wait and see!
The upcoming week
We start the week off slowly with a holiday for the US, UK and China on Monday. Other than that, we have NFP on Friday, together with the usual economic news releases. Nothing too special, but Thursday and Friday are definitely the busy days to watch.
Here are the highlights:
- Monday: US, UK, CNY holiday
- Tuesday: CNY holiday, JPY Retail sales, USD CB Consumer confidence
- Wednesday: CNY Manufacturing PMI, EUR German unemployment change, EUR CPI, CAD GDP, USD Pending home sales
- Thursday: AUD Retail sales, GBP Manufacturing PMI, USD ADP Non-farm Employment Change, USD Initial jobless claims, ISM Manufacturing PMI
- Friday: USD Crude oil inventories, GBP Construction PMI, USD Non-farm payrolls, USD Unemployment rate
For this weekly forex outlook, I’m keeping an eye on the following pairs:
Follow my published ideas on TradingView.
The first setup is a 4H play on EURAUD. The pair has been in a longer term uptrend with broad and well-defined swings, but recently has been flattening out. The resistance level it’s bouncing off is very strong and even an attempt on Friday was sold off strongly.
It’s to be expected that this uptrend is showing RSI divergence and is oversold. I’m looking for three things to happen, before I get in:
- A trend line break
- A support break below 1.49000
- Strong momentum down
The horizontal support level has been tested multiple times and is currently still holding. I won’t take any position before it breaks (hence the no-man’s land area, we won’t do anything there). But if it breaks, there’s plenty of downside potential. A bit of patience is still required, but the setup is good.
This is my favourite setup for the upcoming week. As far as classic reversals go, this is textbook! After a good uptrend, we can see that the moving average (and thus the trend) is flattening. We can see higher highs in the price, while the RSI makes lower highs: classic RSI divergence.
In a nice curved motion, we can then see that the price isn’t able to make higher highs anymore and recently, the price has been selling off strong; the bearish bars are larger than the bullish bars. This is a sign that a breakout to the downside might happen soon. When you put everything together, this also forms a sloped head and shoulders pattern.
I’m looking for a strong momentum break of the 1.11600 resistance-turned-support level to get in.
GBPUSD is the only play on the daily charts for this week. On Friday, there already was a great trade setup on the 4H charts (which I missed, unfortunately). You can see that after an uptrend and a consolidation phase, the price sold off strongly on Friday, breaking the local support.
The play for next week is this: I will wait for the price to retrace a bit to the resistance-turned-support level and if this holds and the price moves lower again, this will give me confirmation to get in. For the first target, we should be looking at the 1.25500 zone, while a second target could be at the previous swing low.
USDCHF on the 4H charts is something I was looking at for a good part of last week. We almost saw a break of the support-turned-resistance level, but instead the price still moved lower. It doesn’t look like the bears have much power left, however. The price made a double bottom on Friday and then moved higher again.
Technically, this is a very nice setup: long, clean downtrend with multiple (small) trend waves, a rounding bottom and double bottom reversal pattern and RSI divergence. Quite similar to EURUSD, we are waiting for the resistance level around 0.97800 to break with a good momentum candle, before we get in.
Good luck trading!
What setups are you looking at? Share your thoughts in the comments!
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