Hi everyone,
No one can ever say Forex trading is boring…
If you were watching the charts on Friday and specifically the Yen pairs you would have seen a dramatic move or a sudden injection of volatility into the chart. There are strong rumours that the Bank of Japan intervened in the markets on Friday in order to protect the Japanese currency. (There wasn’t any fundamental news so this ‘unexpected’ move can only really be some form of intervention). Thursday, Masato Kanda, a top currency diplomat, assured the markets that the Japanese Government is ready to take action “as excessive volatility becomes increasingly unacceptable”. This kind of news is another important reminder to never let your guard down or take anything for granted in Forex. These kind of events can and do happen. REMEMBER you are fundamentally trading a country’s economy against another country’s economy…and there are a lot of moving parts to a countries economy.
-Always have a set amount of risk defined BEFORE putting on a trade.
-Keep scanning the news for clues as to what could potentially happen. Make it a habit, it really doesn’t take long.
-Manage your trade, don’t ever think something is ‘definitely’ going to do ‘anything’.
-Take profit
-Move your stop loss strategically.
Friday also saw the USD selloff quite strongly as ‘new’ rumours emerge that the US Federal Reserve will slow the pace of tightening after another 75 bps in November. If this were to be the case we can start looking for some big corrections in a lot of markets -I’m especially looking at gold and BTC. Thursday’s ECB interest rate decision could determine whether we see a prolonged recovery from the Euro. There are rumours that it will be a 75bp increase which would and should presumable be very positive for the Euro. Tuesday, the European Commission also unveiled plans to encourage joint gas buying amongst EU countries in an effort to curb the purchase of Russian gas. If this kind of strategy is successful, I believe the risk off sentiment could be dampened hugely.
We are starting to see a lot of clues now that we should start looking for dollar pullbacks, remember that this doesn’t mean that it will happen next week or even the next. Start building this fundamental picture (it could be completely wrong and you should be able to pivot) and look for clues to help or reinforce this bias. Once your fundamental ‘story’ is strong enough combine it with chart analysis to look for areas to enter with your newly formed bias.
DXY CHART
A strong sell off on the USD on Friday, but obviously still very Bullish. I do think that a break below 110 could see a decent size pullback.
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Energy & Commodity Prices;
Gold;
Could have potentially formed a double bottom at a previous monthly low. I’m looking for a break above 1800 to confirm a potential larger move up. A weaker dollar could see gold move up dramatically in my opinion.
Oil;
Looks to be making lower lows and highs. Also bounced off the 200. 76.20 is a big area of previous support/ resistance however.
Bitcoin;
Definitely looks to be ranging now.
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The Forex Week Ahead
Really really busy news week this week. The BIG one for the week is the interest rate decision from the European central bank on Thursday and EUR inflation news on Monday morning. Also, don’t forget about the Chinese news (CNY) on Wednesday (GMT+2 below). It could have consequences for, especially, the AUD & NZD
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MAJORS
EUR/USD: I’d look to short from parity (1:1) -if we get a pullback. On the smaller timeframes have a look at 0.9922
USD/CHF: Long from 0.980 on the smaller timeframes, A grade long from 0.9600
GBP/USD: On the shorter timeframes 1.1430 for a short. A grade short, 1.2200
AUD/USD: A grade short from 0.6900.
NZD/USD: Short from 0.6280
USD/CAD: Smaller timeframe long from 1.34000. A grade long way back at 1.3020
USD/JPY: Leaving this one as well as other JPY pairs alone this week.
CROSSES
EUR/GBP: Really choppy this week, but I’d look to long from 0.86200
EUR/NZD: Countertrend short from 1.7400. Long from 1.6800
AUD/NZD: Short from 1.1230 (Countertrend)
AUD/CAD: Short from 0.9000.
GBP/AUD: If it breaks above 1.8200, I’d look to long from this level on a pullback.
GBP/NZD: My setup for the week. Long from 1.9500, BUT I’m looking for clues that price is ready to turn up (see video)
GBP/CHF: Short from 1.17300
As always, remember correlation! -Especially when taking more than one JPY trade!
We are NOT a “tipping service” our aim is to teach you how to trade for yourself.
Watch the video below for more detailed explanations of this week’s analysis and trade plan (click the 4 arrows bottom right to view full-screen):
Regards
Thinus
