After a two week break, I’m looking for trading opportunities again! Two weeks ago, days were jam-packed with economic news. Pretty much every major country had interest rate decisions and the US topped it off with NFP results! Last week was the US election, you can read my last forex outlook and analysis here: Weekly forex outlook: November 6.
The US election
After months of build-up, the US election is finally behind us, the majority of the votes went to Trump.
As expected, we saw some big market moves before, during and shortly after election.
Last Monday started with a large weekend gap on news that the FBI had dropped charges on Clinton. In the run-up to election day, it seemed that a lot of markets initially thought of a Trump presidency as a negative and moved lower. After election day however, they often quickly rebounded, possibly due to a better than expected election victory speech from Trump. In that speech, he had a much more conciliatory tone as compared to his campaign and also discussed items such as infrastructure and spending. The market perceived this as good for the economy.
Anticipating this economic boost, lots of stocks in the energy, banking and transport sectors soared in the next days. Technology did considerably worse, on fears what the Trump presidency might mean for trade agreements and immigration policies. The NASDAQ turned sharply lower but has since regained some of its losses.
We can see the US dollar index move sharply lower on election night, followed by a quick rebound the days after:
But on to currencies! The obvious big loser was the Mexican Peso, related to Trump’s views on immigration and trade. Being safe havens, gold and the Japanese yen initially saw a surge before the results were known. These gains quickly evaporated as the market regained its confidence and saw the Trump presidency as not too bad for the economy after all. Plenty of currency pairs showed a major whipsaw as the market was looking for direction:
It is worth noting that while the initial market reaction to the elections has passed, we still don’t have a lot of information on appointments and policy announcements of the Trump presidency. The market might still have a strong response to these kind of unannounced messages, so it’s best to be on the safe side and keep an eye on the news!
The upcoming week
Noteworthy economic news for this week is:
- Monday: ECB’s Draghi speech
- Tuesday: RBA Meeting’s minutes, GBP CPI, EUR GDP and USD Retail sales
- Thursday: ECB Monetary policy meeting accounts and US CPI
- Friday: ECB’s Draghi speech (again)
In all, this is a slightly EU-heavy week with some US and and Aussie news as well. Not too bad! This week, I’m keeping an eye on the following pairs:
Follow my published ideas on TradingView.
AUDCAD is a nice reversal setup but at the same time, some caution is advised. The factors in favour of a reversal at this point are a long trend with multiple waves, the huge pin bar on the daily (which, on the 4H chart shows a nice Bollinger band spike) and clear RSI divergence.
At the same time, price action on the 4H is a bit messy, probably due to the elections. And if price moves lower, we not only have the upwards trend line to break but also the horizontal level of resistance-turned-support, which is a major zone to keep in mind. The classic break-and-retest of this level happened already in the beginning of November and ensured a further rally, but all signs are pointing to the exhaustion of the current trend and a change of direction.
However, I want to see a good push lower before I get in. Ideally, we’d see a break of both the horizontal level and the trend line, with a retest of the horizontal level afterwards. That level, around 1.01500, would be my ideal entry. I have my alerts set so that once the price moves lower, I get notified.
AUDNZD could serve as a textbook example of support and resistance levels! After an uptrend in September, we see price hesitating at the at the 1.05900 level before continuing to the resistance zone around the 1.07500 level.
Then we see a retracement to that same resistance-turned support level, only to bounce off it and make a run for the top resistance level. This creates a nice double top. The second part of the chart basically mirrors the first part in that it respects all the same levels. Price is now back at the 1.05900 level and last time price moved in that zone, we could see a very nice pin bar and sell-off. However, the sell-off wasn’t sustained, so instead of just jumping in this trade, I want some price action confirmation (big move down, engulfing bars, etc) that price will continue its downward trend.
Of course, it’s possible that price will continue upward, in which case I will look for short opportunities at any major resistance level.
GBPAUD, GBPCHF and GBPNZD
Next up are three very similar setups, all involving the loonie. Basically, this is a textbook example of break and retest and all three pairs are at around the same level. Every time we saw price at this level, there was a strong reaction.
I’m looking for price action that confirms my views, such as a large pin bar or engulfing bar. I will probably not enter all three, but find the pair that has the best setup and the least risk of being whipsawed by some economic news. Also keep in mind that due to Brexit uncertainties, GBP pairs are still a bit riskier.
Good luck trading!
What setups are you looking at? Share your thoughts in the comments!
Risk disclaimer: The information presented on Smart Forex Learning is for educational and entertainment purposes only. Nothing on this website serves as investment advice or recommendations. Trading is risky and you can lose more than your initial investment. Smart Forex Learning cannot be held responsible for any decisions visitors make. Please consult a financial advisor before making any investment decisions.