Morning traders, how’s the weekend going? Last week, I was on a short break due to travel (back to Japan) but I did follow the market. It was a slightly challenging week for reversal traders so I apparently chose this travel week well! 🙂
But now that I’m back in Tokyo, I’m back on the charts and preparing my weekly watch lists in the weekend. We have some interesting potential setups for the upcoming week, keep on reading to know which ones!
Back in Tokyo! 🇯🇵 Feels so good to be here again! 😊 I look like an outsider and can hardly speak any Japanese, but still this place feels like home ❤️✌️🙏 . . . . . . . . . . #trading #forextrading #forex #forextrader #fxtrading #fxtrader #tradingforex #forexlifestyle #igdaily #lifestyle #currencytrading #forexsignals #smartforex #trader #tradinglife #dailymotivation #money #winning #success #hustle #finance #grind #instadaily #japan #tokyo #wanderlust #travel #globetrotter #stocks #digitalnomad
However, you’ll notice that all of the setups for this week are daily setups. While I’m thinking there are some good opportunities in the market for next week, there still is a lot of ranging behaviour in many pairs due to things like the hurricanes and geopolitical uncertainty, which makes for less than optimal lower time frame reversal setups.
So instead of forcing setups, we just stay on the daily charts for this week.
Current market behaviour
Let’s get to the overview of last week. As many of you probably know, the dollar took a deep dive for pretty much the entire week. It just kept on sliding down until Friday, which saw a slight correction to the upside. Nevertheless, the DXY index ended the week sharply lower.
We could see the inverse behaviour from gold, which saw a strong move up during the past week. The markets are quite unsure about the whole geopolitical situation between the USA and North-Korea and that pushes traders in the risk-off mode. Risk-off assets such as gold are then being bought, which results in the rally we could see last week. It turned down on Friday, but still ended the week much higher than it started.
Finally, we can see oil doing its own thing. After a strong rally up, traders saw the risk that the Hurricane Irma could curtail the demand for oil as it approached landfall. This resulted in a massive drop on Friday, which pretty much erased all the gains of the week for crude oil.
The upcoming week
The upcoming week is ramping up slowly. Monday and Tuesday hardly have any events planned. The big ticket item on Wednesday are the GBP numbers and USD PPI, while Thursday has high-impact news for AUD, CHF, GBP and USD. On Friday, things are slowing down again with retail sales numbers from the US. Keep in mind that – just like the past weeks – both natural disasters like the hurricanes and geopolitical events can have a major impact on the markets. Here is the overview of next week:
- Monday: nothing special
- Tuesday: GBP CPI, USD JOLTs Job Openings
- Wednesday: GBP Average Earnings Index +Bonus, GBP Claimant Count Change, USD PPI, USD Crude Oil Inventories, USD Federal Budget Balance
- Thursday: AUD Employment Change, CHF SNB Interest Rate Decision, GBP Retail Sales, GBP BoE Interest Rate Decision, USD Core CPI
- Friday: USD Retail Sales and Core Retail Sales
For this weekly forex outlook, I’m keeping an eye on the following pairs:
Follow my published ideas on TradingView.
Let’s start with EURGBP! This is probably my favourite setup of the week. After a long (long!) rally, it seems that there is a chance that this pair is turning directions. We can see that the price has now crossed the 20-period moving average and while that’s not the first time it’s happened, I want you to take a closer look at the price action of the past two weeks.
First, start with the pin bar I marked with the red arrow on the left. We immediately see a strong bearish bar afterwards. There hadn’t been a bearish bar with that strength for easily a month! Afterwards, the market took a breather but the next day, it happened again: strong bearish bar! This pattern kept repeating itself up until the point where we are now.
Even though this is a very nice setup already as it is, I would like to see the 0.91000 level broken. Potentially, I would open half a position on the Monday open (depending on how it opens) and add to that position if and when the price breaks 0.91. Very clean setup, nice price action. Now, we just wait!
EURJPY could also benefit from a bearish euro outlook but has been ranging for the past few weeks instead. This is a setup we’ve talked about before on this website and I still think it’s potentially a really nice setup. We need to see the local support level broken, though.
Technically, this pair has also been in an uptrend for a long time but has now started ranging on JPY strength. If this keeps up and the euro finally stops climbing up, we could see a substantial drop down. While the price still makes higher highs, the RSI clearly shows divergence. The price action on Thursday shows a nice rejection candle, followed by a push down on Friday. This looks very similar to the pin and drive pattern, although I would like to see a bit more confirmation this time.
So here’s the plan: wait until the price breaks the 128.150 level convincingly and with some momentum. If the price can break and close that level, I will not hesitate to take a short position.
Another beauty of a setup on the daily charts: NZDJPY. And there are even two ways to play this, although the reversal setup has my preference. First up, we can see that this pair has been showing very nice trending behaviour. Large swings, clear price action, just a nice chart overall. However, right now the price is approaching an up sloping trend line that has been holding for a long time (more than the chart below shows, actually).
This gets my interest! On the one hand, we can clearly see that we have RSI divergence, an overextended trend and the trend line as extra confluence. These are all factors that favour a move to the upside. For this, I want to see the 79.200 level broken on the chart. This is a level that has previously acted as both support and then turned to resistance, so it’s something to keep in mind.
On the other hand, the price is currently showing slightly bearish behaviour with the bearish pin bar on Friday. If we see a Monday where the price convincingly breaks the lower trend line and in effect makes a new lower low, I would change my bias to bearish and look to sell the pair. One chart, two plays. We wait and see what happens.
And to close off our weekly outlook, I have an interesting setup that is developing on the USDSEK. First, I want you to take a look at the weekly charts on the left-hand side. You can see that on Friday, the price reached a previous swing low and support level that was the start of a long uptrend in April 2016. We don’t see an immediate reversal or reaction, but just the fact that the price is at this support level makes the chart interesting to me.
Zoom into the 4H chart on the right. This pair has been showing a very nice trending behaviour recently, respecting the moving average very well. While the price is still making lower lows, the RSI is creeping up again, showing us the divergence. Obviously, this downtrend is overextended, so it’s not unthinkable that this might be the moment where the price takes a turn and changes direction to the upside!
So this is my plan: I’ve put an alert at the 8.02500 level. If price manages to break that with some momentum, I might carefully decide to take a position on this setup. It’s too early to know what will happen for now, but it sure looks interesting!
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.