It is Sunday again, so I’m taking time to analyse the potential setups on forex pairs for the upcoming week in this forex outlook for October 16. Last week, I actually had a couple of losses! I shorted AUDNZD but the market decided to move higher. It’s important to know that trading is not just about winning trades, as too many traders make it appear. Every trade can turn out to be a win or a loss. While I don’t know up front how the trade will end, I do know that over a larger number of trades, I always end up with a net profit so I’m not worried about losses. It’s part of the game 🙂
I’m still staying away from GBP pairs since the flash crash (or however you want to call it) 2 weeks ago. I believe the market is still looking for direction in GBP pairs and will stay out of them for as long as this is the case. There are plenty of other pairs we can turn to anyway! This week, I’m keeping an eye on the following pairs:
Follow my published ideas on TradingView.
We’ve seen some interesting price action from this pair in the past week. In a move that could have very well been the reversal to the downside, it went sharply lower. Eventually though, the pair couldn’t push through with the move and shot back up. It closed on Friday at a rather interesting level, right in a resistance zone that has been tested multiple times in the past months. Not only that, but I believe the pair is overextended, having seen an uptrend with numerous waves so far. To top it off, we can see a divergence on the RSI: price made a higher high while RSI made a lower high.
While I don’t consider this pair tradable on Monday morning (it still needs some time and I never trade just after the weekend open), it is one I keep my eye on. Once we see a push lower, I will probably get in. One thing that might be wise is to wait until the price can close below the rising trend line. It has been holding quite well for the past couple of weeks, so it is something to keep in mind.
The next pair I’m keeping an eye on is the kiwi dollar. When the pair approached the 0.70400 mark last week, a lot of traders thought a reversal was imminent and went long. I stayed out of this market, for one single reason: there’s a much bigger support area a bit lower around the 0.69800 level. The bullish move from last week was relatively short-lived, with NZDUSD already rejecting the 0.71300 level quite strongly before moving further down. My play for this week will therefore be to wait until it moves lower and enter at the lower support level.
This is a chart showing the price action when we zoom in a bit:
Next up is a nice opportunity to buy EURUSD. The pair has been in a downtrend for the last couple of weeks, but is now approaching a very interesting support level. It’s now around the 0.09700 level, which was a strong support area back in June when the price made multiple bounces from that zone.
The price action is still very much bearish, so I would be careful to get in this pair too soon and instead wait for a clear reversal sign (double or triple bottoms, head and shoulders, RSI divergence, etc). The bearish price action also means that the pair might be oversold quite a bit and the fact that this support area has not been tested for a couple of months makes this setup extra interesting.
This is a shorter term setup. Last week, we could see the pair continuing the downwards trend, while the area at around 1.01270 saw quite some resistance. Price broke finally through it, but I can see a retracement happening to that level, before going further down to the 1.012450 level.
This is a classic break and retest scenario which would only be triggered when the price retraces to the previous support-turned-resistance level at 1.01270. If that happens and we see the price action to support a further move down, I wouldn’t hesitate to get in and sell the pair with a take profit at the bottom around 1.012450.
This setup is pretty much the opposite of the NZDUSD pair I reviewed earlier. After bouncing off a previous, smaller resistance (blue line), price bounced back quickly which indicates the pair’s strength to the upside.
My preferred scenario is that it moves a bit higher, until a stronger resistance area (indicated by the green zone). That is the area for which I’ll be looking for short setups, again waiting for reversal setups to form such as pin bar, double or triple tops and head and shoulders. There is plenty of room to the downside for this move, as indicated by the orange zones on the chart. These areas could be used as profit taking targets.
Here’s a chart of the pair a bit more zoomed in on the recent price action:
USDJPY is an interesting one. I actually expected this pair to trade lower already, but it rebounded to the 104.400 level again on Friday. Nevertheless, it couldn’t make higher highs and it very much feels like this trend is largely over. I will need to see some confirmation in the form of price moving lower before entering again, but it looks like a promising setup I will keep my eyes on.
Good luck trading!
What setups are you looking at? Share your thoughts in the comments!
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