Forex Trading Opportunities for the Week Ahead 29 October 18

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I plan my trading for the week ahead each weekend. Here are the Forex trading opportunities I will be stalking this week.

Note that this is my current view, but if market conditions change my view can change too. Generally I will trade in alignment with what I have noted here, though I will wait for a set-up before I enter. I base my view on technical and fundamental information. This is my beliefs and you are welcome to have opposite ones. Having a plan is more important than the actual direction for me. 

  • Buy DXY. Trend  – MT is bull normal. The dollar index has just broken out into a bull MT on the weekly charts. Some caution does need to be had as (like last week) Friday was a key reversal day which is indicative of at least a temporary pull-back. Importantly, we have not yet breached the prior high at 97.00. Risk sentiment is a driver at the moment with the rout in stocks continuing and no clear bottom in place. Interestingly, except vs. JPY, the dollar has had no consistent correlation with the sell-off. Some days stocks sell off and the dollar falls and others it rises. This is probably a reflection that part of the sell-off at least is due to the Fed persistence in hiking rates, which is stock bearish, but dollar bullish. We also need to remember that while the USD is a safe haven traditionally, it now has higher yields than its major counterparts (higher yielding currencies usually benefit during a risk-on environment and suffer during risk-off). The Federal Reserve continues to talk about more hikes and data remains decent enough with GDP beating expectations on Friday. This week we have NFP and expect a ok number (around 190-200K). Wage growth will be closely watched for signs upward pressure. Look to buy, but wait for a pull-back and resumption of the upwards momentum first.
  • Sell GBP/USD. Trend – MT is sideways normal. Risk-off along with ongoing concerns around Brexit have pushed the pair back into a bear MT and we can expect the price to head towards 1.2680. There has been some speculation the prime minister May’s job is as risk as she is unable to convince her party members on her Brexit plan. But the base case is for her to stay in command. Look to sell.
  • Wait USD/JPY. – MT is sideways volatile. We have retested the prior low at 111.60 on the back of the continued fall in stocks. If the sell-off does continue we can expect the pair to move into a bear MT. Interestingly, USDJPY could well have been much lower than what it is given the size of the move in stocks and it does seem to be holding up relatively well. If we do see stocks bounce and there is a strong reversal pattern from these levels, I like to buy.
  • Wait AUD/USD. –  MT is bear normal. While we are just holding onto the bear MT, Friday has formed a bullish hammer candle pattern off the low, establishing a double bottom. This is suggestive that we at least turn into a sideways MT or it could be a signal that the market is oversold and due for a correction. The Aussie has been struggling in this environment with stocks falling, US yields rising and the ongoing trade battle between the US and China. The Chinese Yuan has been weakening too which does not help. The technical picture tells us that, at least temporarily, this stuff is all priced in and to watch out for a bounce.
  • Sell EUR/USD. Trend –  MT is bear normal. Lasts weeks suggestion that we would turn into a sideways MT did not materialize and we instead continued to head towards the low at 1.13. The key drivers remain falling stocks, the Italian conflict with the EU over the budget deficit, Brexit and the ECB’s intent to end asset purchases in December. Data has not been great, suggesting that growth will remain tepid. This will not stop the ECB whom are intent on their path to remove QE. You get the feeling that both the ECB and Fed a reading off the same playbook – they have their guns and they are sticking to them and it’s going to take something serious for them to change their view.
  • Wait NZD/USD. –  MT is sideways normal. On the back of a budget surplus and now a positive inflation surprise, NZD has been finding some traction. This may be surprising given the risk-off environment, but we need to remember that NZD is less correlated with equities as it is no longer a carry trade proposition. The wider than expected trade deficit last week has not helped the pair, nor has risk-off, but the Kiwi is holding up. Wait.
  • Buy USD/CHF.  Trend – MT bull normal. After taking out the key 1.00 level, and given that CHF is normally a safehaven, we can expect a period of consolidation and potentially a sell-off from these levels.
  • Wait USD/CAD. – MT is sideways normal. The BOC hiked rates last Wednesday and their comments where surprisingly hawkish. This has not really help CAD and the currency is weaker than before the event. Oil is struggling and fell $5 last week which may be part of the issue. Wait for now.
  • Wait EUR/GBP.  – MT is sideways volatile. I am still looking for a longer-term selling opportunity on the currency. For now, considering the sideways price action, its safest to wait.

Crosses

  • Wait EUR/CHF. – MT is sideways normal. Wait.
  • Wait AUD/JPY.  – MT is sideways volatile. Wait.
  • Wait NZD/JPY. – MT is sideways normal. Wait.
  • Sell GBP/JPY. Trend – MT is bear normal. Continue to sell.
  • Sell EUR/JPY. Trend – MT is bear normal. Continue to sell, but watch out for the hammer.
  • Wait CAD/JPY. – MT is sideways volatile. Wait.
  • Sell CHF/JPY. Trend – MT is bear normal. Continue to sell.
  • Wait GBP/NZD. – MT is sideways volatile. Wait.
  • Wait EUR/NZD.  – MT is sideways volatile. Wait.
  • Sell AUD/NZD.  Trend – MT is bear normal. Continue to sell.
  • Wait EUR/AUD. – MT is sideways normal. Wait.
  • Wait GBP/AUD. – MT is sideways normal. Wait.
  • Wait AUD/CAD.  MT is sideways normal. Wait.
  • Wait GBP/CAD. –  MT is sideways normal. Wait.
  • Wait EUR/CAD. – MT is sideways normal. Wait.
  • Wait NZD/CAD. – MT is sideways normal. Wait.
  • Wait GBP/CHF. – MT is sideways normal. Wait.
  • Wait CAD/CHF. – MT is sideways quiet. Wait.
  • Buy NZD/CHF. Trend  MT is bull normal. Continue to buy.
  • Wait AUD/CHF.  MT is sideways quiet. Wait.

Other Markets

  • Wait USDSGD.  – MT is sideways quiet. Wait.
  • Buy USDCNH. Trend – MT is bull normal. Continue to buy, but watch out for the hammer off resistance.
  • Buy Gold. Trend  – MT is bull normal. Continue to buy.
  • Sell Oil. Trend – MT is bear normal. Continue to sell.
  • Sell S&P 500. Trend – MT is bear normal. Continue to sell.
  • Sell DAX. Trend – MT is bear normal. Continue to sell.
  • Sell Nikkei. Trend – MT is bear normal. Continue to sell.
  • Buy T-Notes. Trend – MT is bull normal. Look to buy.

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(MT = Market Type: Click for more information on market types.)

Trend: Market is trending in the direction I have listed and I expect it to continue. 

Reversal: I am looking for a reversal against the current trend.

Breakout: The currency pair is breaking out of a range. 

About the Author

Sam Eder is a currency trader and author of the Definitive Guide to Developing a Winning Forex Trading System and the Advanced Forex Course for Smart Traders (get free access). He is the owner of  www.fxrenew.com a provider of Forex signals from ex-bank and hedge fund traders (get a free trial). If you like Sam’s writing you can subscribe to his newsletter.

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