Forex trading ideas for the week ahead
I thought I would share some of the positions I have established this week and some of the trades I will be looking to execute in forex markets over the next few days.
First, the Canadian dollar is looking obviously weak. As you can see in the weekly chart below the US dollar has been pushing higher against the Canadian dollar over the last two years. A very obvious CAD bear trend!
I’m looking for opportunities to sell into the Canadian dollar and spotted something that could work against the Swiss franc. Resistance in the 0.7575/0.7580 area could be a selling opportunity and, although we have been hovering around this area for over a week now, we have failed to see a daily close past this point. I have entered a small short position and I’m looking for a break below 0.7530/0.7525 to confirm a more negative outlook in the short term at least.
My first target would then be 0.7490/0.74804 for initial profit-taking on a short trade. I would look to exit any further shorts at around 0.7440/0.7460. It’s a pretty low-risk trade with a stop above 0.7620.
CAD/JPY is also worth considering a short position as we re-test Fibonacci resistance in the 92.65/92.75 area plus the 100-day moving average at 93.10. We also have the October high at 93.25 which was tested on Monday. Failure to break through these upper levels so far this week I think is quite negative. I have a short position looking for a move down to 92.30/20 and perhaps far as 91.70/91.60.
The British pound has been staging a short-term rally against the Japanese yen since the beginning of October, after we made a successful re-test of the September low. We are back above the 200-day moving average (the red line) and I think we could make it as far as the upper trendline of the rising wedge pattern you see in the chart below. This also coincides with the 50% Fibonacci and 100-day moving average resistance in the 187.85/187.95 area. This looks like a selling opportunity with a stop a few pips above the September high at 188.07.
Both the Australian dollar and the euro have been relatively weak currencies. You can see in the chart below how the euro spent the spring and summer of this year pushing higher against the Australian dollar and then peaked through August and September before turning lower. The sell-off through October has pushed us back below the 100-day moving average, but we have traded sideways for the last week or so, as the pair became oversold.
I don’t see any signs of a turnaround just yet, but if we do manage a small recovery I think there could be good selling opportunity in the 1.5350/1.5370 area. However just be aware that if we were to see a daily, and in particular a weekly close above this area that would turn the outlook more positive in the short term at least, into late November.
We have looked at both the euro and the Canadian dollar against other currencies. Let’s see what they look like against each other. The euro again topped out in the summer against the Canadian dollar and has been heading steadily lower over the past two-and-a-half months. This has created quite an oversold situation on both the daily and weekly charts.
As you can see in the daily chart below, we are approaching the 200-day moving average and this can often work quite well as a support level. However this looks more risky than some of the ideas above, so I would like to wait for some candlestick confirmation of a potential bottom around 1.1415/1.1410 before jumping into a long position.
We do at least have some extra back-up in the form of support at the 55-week moving average you see in the weekly chart below (the purple line).
These look like the best opportunities I can find, having scanned about 20 different forex pairs. If you’re trading for your own account don’t forget you always need a stop-loss on every trade.
Technical Analyst & Trader
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