Forex Trading Weekly Outlook – 9/25/2016

After last week’s trifecta of central bank rate statements from the BoJ, Fed, and RBNZ, I’m looking forward to a week with some decent data coming out but not much in terms of huge events. Hopefully we can start seeing some real trends taking hold. Looking at our trade tracker it doesn’t seem like there’s much going on right now:

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But that’s actually quite deceiving. There are a ton of trade opportunities in the market right now, and our Patreon group has been doing quite well. Going forward I will only be publishing a weekly outlook along with a mid-week update on Wednesdays as long as I have the bandwidth for it. I’m still trying to find the right balance between my family life, my business, my personal life, and sharing as much of my trading with you all.

That said, I am constantly updating our Patreon group throughout the week. We’re even launching a model account via MyFxBook starting in October with a $20,000 model account (more on that at the end of the post). The idea is to allow our Patreon members to see our trades in real-time even if I’m not around.

But enough of that, let’s focus on what’s going on in each of our six pairs:

EUR/USD

The Euro has been showing a little more life lately, and I’m taking a slight interest in it. Here’s the key chart I’ve been working off:

screenshot-2016-09-23-13-43-27

That’s the current 4-hour chart, and there’s a lot going on. But when we break it down, there’s a clear trend line that’s acted as resistance since August 18th. That same trend line capped the move higher post-FOMC which also happened to correspond with the 61.8% fib retracement level of the most recent move down.

You can also see that, starting from the July 24th lows, we can draw two trend lines. The steeper of the two was broken to the downside and has acted as resistance. Price seems to be stalling below this area yet again. The other trend line connects the most recent low around 1.1120 which is the magenta, dashed horizontal line (the shorter of the two).

I’m currently favoring shorts for a couple reasons. First, the technical picture leans a little bearish in my view. But perhaps more importantly is what the market is telling us. The pair was unable to really rally much on the back of a dovish Fed. That should be unsettling to bulls. That said, if we were to breach 1.1300 I’d be out and on the sidelines. But if we head lower and break the 1.1120 area, I think we’re in for a quick trip down to the next magenta line around 1.0950. So I like the risk/reward here with shorts.

I really don’t see the sense in analyzing the pair from another timeframe considering we are so rangebound on the daily chart. For now this is the only picture I’m interested in trading.

USD/CAD

USD/CAD is starting to look very interesting. I initially advocated for shorts on September 14th, and it took some patience but the trade finally paid off. But things reversed in a big way on Friday when Canadian CPI and core retail sales both came in on big misses. To add fuel to the fire, rig counts moved up to 511, a level not seen since February this year. The crude market was getting its hopes up for a production freeze, but Iran put the kibosh to that and it seems Iraq isn’t much interested either.

That’s a ton of links, I know but here’s one more: This all greatly supports my larger macro view on USD/CAD that is detailed in this post. I highly suggest you read it as it’s still quite relevant. I’m currently long USD/CAD with a stop lose that’s well in profit now but I think the time may finally be right for this pair to rip higher. Here’s the chart that we’re watch… the daily:

screenshot-2016-09-23-14-02-37

Now if you’re a trader that questions things constantly (and you should be), you might be wondering… “Yeah, but why now? USD/CAD has failed to break out of this range several times”. It’s a valid question. And there are some hints. First, notice how the daily chart has found support against the 50 and 100-day SMA’s. This is actually the first time these SMA’s have held as support during this consolidation period. You can see how price easily sliced through these levels the last two times it had an opportunity to catch a bid against them.

From a fundamental perspective, the Canadian economy is clearly weak. Unfortunately we don’t get a ton of economic data out of Canada like we do other countries, at least not as frequently. But we do have a speech from BOC’s Poloz on Monday. If he drops any dovish clues, it could be a catalyst for USD/CAD to move higher. And on Friday we’ll get Canadian m/m GDP, which could be another potential catalyst for a move in the pair. I don’t expect the data to be strong, because it hasn’t been. And with little improvement in the price of crude, you can bet that Canada is feeling it.

That said, there’s always the risk that we fail again and head back into the middle of the range. I’m happy with my small position for now and will wait to see how price reacts at current levels. When this range does break there will be plenty of time and plenty of pips to capture.

Stay patient.

AUD/USD

There’s not too much that can be said about the Aussie right now. The pair remains stuck in a large consolidation range:

screenshot-2016-09-24-07-40-19

We were able to squeeze nearly 100 pips out of longs last week, but it’s becoming increasingly risky to play the range as the pair is becoming more and more compressed.

That said, and understanding the risks of trading this pair at this time, if price is able to stay above the 200-bar SMA on the 4-hour chart, or even form a clear base above that level, it could be worth a long:

screenshot-2016-09-24-07-43-29

The idea here would be to keep a very tight stop loss below 0.7600 but I still think it’s too early to take such a trade. I’d need to see more of a base form first.

USD/JPY

After the BoJ last week, USD/JPY headed higher initially. But the move was quickly countered with the usual USD/JPY selling and the pair made new lows for the week, halting just ahead of the 100.00 level.

The weekly, daily, and hourly charts are all bearish, so that has me focused on the 4-hour chart:

screenshot-2016-09-24-07-48-50

At this point the 50-bar SMA is only about 9 pips away from crossing the 200. And the 100-bar isn’t far behind. I’m waiting for this cross over to occur before really committing to putting on a short position. That said, I’ve already start a small one and I’d likely be a seller on rallies up to 102.00.

If the pair can break down through 99.50, I think we’d likely see a relatively quick trip down to the weekly 61.8% fib retracement level around 94.76:

screenshot-2016-09-24-07-55-10

So I’m leaning bearish on USD/JPY because that’s the direction of the overall trend. The BoJ has not been able to reverse that, so I’m sticking with it.

GBP/USD

Sterling is offering some great trading opportunities right now. The pair is in a clear downtrend on the longer time frames, and the shorter ones are quickly catching up. Its now sitting precariously on a key level:

screenshot-2016-09-24-10-04-05

That’s the daily trend line support that connects the post-Brexit low with the low from August 15th. When drilling down to the 4-hour chart we see that we actually dipped below this trend line support on Friday:

screenshot-2016-09-24-10-06-18

I recommended shorting GBP/USD on Thursday before the last leg down. And I’m still holding my shorts. I’ll be looking for areas to add to my position because I think we’re heading lower.

I don’t think there’s a whole lot more to say here. The trend is clearly down, and the pair is in danger of really tipping over. The best strategy is to look for opportunities to get short, but you’ll need to be smart about picking your spots. Join us on Patreon if you’d like updates throughout the week.

GBP/JPY

Geppy is in a very similar position as GBP/USD, precariously sitting at a level that, if broken, would open the flood gates:

screenshot-2016-09-24-10-22-40

Again, we’re already short with nearly 100 pips of unrealized gains. So in short, I really like selling rallies in this pair also. But I’ll feel even more confident about the trade if the 4-hour SMA’s can become purely aligned to the downside:

screenshot-2016-09-24-10-25-08

As you can see, at this point, that’s likely to happen. That would put the weekly, daily, 4-hour, and hourly charts (and likely the 15-minute) all bearish. And that’s as strong of a trend as you’re going to see.

It’s hard to really determine targets on technical pictures like this one and GBP/USD. We’re at some pretty pivotal levels, and should these fail, there’s no telling how far it might run. So I’m staying flexible, keeping my eye on conditions, and locking in gains as we go.

Other Pairs

I’ve been branching out to other pairs to find trade opportunities for our Patreon group. One gorgeous trade we took was in EUR/GBP where we hit our TP on Friday almost to the pip! Even if you’re not interested in joining our Patreon group I highly suggest you look over that post and dissect how I analyzed the initial setup.

We entered the trade on the 15-minute timeframe on Tuesday, risking 37 pips to make 63. It worked out perfectly even while a lot of people have been talking about a potential head and shoulders pattern in the pair (on the daily chart), I felt it wiser to stick with the current trend. I’m glad we did. We’re now on the sidelines there, but I’ll be keeping an eye on this pair more going forward.

We also bought EUR/CAD on Wednesday at 1.4645, so that trade is doing quite nice for us, but I believe there’s more on the bone there. But we’ve already locked in some gains with our stop lose, so we’re free rolling at this point.

It wasn’t all roses, sunshine, and unicorns though. We did take a hit in NZD/USD with a long position, and I’m still keeping an eye on that pair to see if the uptrend is still valid.

I’ve been leveraging divergence trades on higher timeframes a lot more, especially when I can see an added level to lean against. And that’s been opening up opportunities in pairs that I wouldn’t normally look at. So our options are broadening, and I think that’s a great thing. There’s always a trade somewhere.

Model Account Coming Soon

Lastly, we’re launching a model account starting in October. It’s a $20,000 account hosted on MyFxBook and will be open to all of our Patreon members. That will be the easiest way for our members to see exactly what trades I’m in, current stop lose and target profit levels. We’re already off to a great start with that:

screenshot-2016-09-24-10-38-53

The other main goal of this account is to help traders realize that you don’t need to be risking a huge amount per trade to make money trading forex. Notice the drawdown here has been just 2.67%. I tend to only risk 1-2% per trade, and you can see that in my recent trade history:

screenshot-2016-09-24-10-40-14

My hope is that this will be a great tool and reference point for our Patreon group. I hope to also be able to write posts on win rates, profitability, etc. using examples from this model account.

I hope everyone had a great weekend and is ready to get another week of trading started!

Geppy

I've been involved in the forex markets for over a decade, initially starting as an FX trader at Allston Trading in Chicago. Eventually I went on and founded my own (non trading related) company. I spend my days working from home and trading forex, equity, and crypto markets.

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