FX Trades of the Week – May 9th, 2016

This week the economic calendar is quite light in terms of high impact news. The Eurogoup called an emergency meeting for May 9th to discuss policy reforms to the macroeconomic adjustment program for Greece which may cause some indecision early in the week for the Euro.  The major announcements come out of England and the US at the end of this week, with the UK announcing its interest rates on Thursday, preceded by the month over month Manufacturing Production released on Wednesday. The US reports Unemployment Claims on Thursday morning, with Friday morning scheduled to be a a busy day out of the US with month over month Core Retail Sales, PPI & Retail Sales being reported , as well as the UoM Preliminary Consumer Sentiment reading. With these announcements in the back of our mind, lets get into this weeks analysis.


Building on last weeks analysis (found here), we got the intraday breakout we were looking for, however, the RBA announced a surprise rate cut on Tuesday morning and the Aussie dollar tumbled 2% within 20 minutes, knocking us out of the trade. As this was a counter trend position, we only risked 0.5% of our capital. Risk management keeps up is in the game! Prices closed the week under the key $80 support level and the daily demand level between $80.170 & $79.184.
On the intraday chart, price respected the 50 ma and formed a consolidation range (shown in purple), which price broke out of to the downside on Thursday also removing the daily demand zone just below. Coming into this trading week there are no high impact announcements out of Australia or Japan so price action should be technically driven, with that said, this week we hold a short bias below $80.
The play this week is to wait for a retracement to retest the intraday consolidation as support. There are a bunch of confluence factors on the intraday that point to the downside as the path of least resistance so we will be looking to short on a sign of an intraday reversal. A conservative entry would be around $79.623 with stop over the intraday consolidation resistance at $80.500 and targeting the 2016 low of $77.582 for a nice 2:1 short setup.


Building on the analysis from last week (found here), the close over $1.50000 really drove a nice continuation of buying throughout the trading week that was spurred on by the RBA surprising investors with a rate cut down to 1.75% on Tuesday morning. Price dipped right into our value area before the announcement and ripped right through our initial take profit at $1.51363, appreciating as much as 4% throughout the week. This week offers a potential opportunity to jump back into the bullish momentum or to compound your existing position. The weekly close shows great follow through of the bounce off the 200 ma and is suggesting a retest of the trendline resistance near $1.58000 with the daily confirming this view, showing a strong close over the 200 ma and a bullish engulfing candle pointing out a bullish imbalance at the $1.54000 area.

Taking a look at the intraday chart, the setup is very similar to last week’s, however this time price has established a nicely defined bullish trendline that lines up with the $1.54000 level offering additional confluence. The Eurogroup meeting may cause some early chop for the Euro, however there are no high impact news releases coming out of Australia this week so prices should be technically driven and with that we are looking for prices to dip back down to retest the value area near $1.54000-$1.53650 for long opportunities with stops below $1.53500 and initial targets at $1.55800 and the weekly/daily trendline resistance at $1.58000.


From last weeks analysis, we got our intraday pullback into our value area and rode the price back down to the key level we highlighted at $1.38420 for a nice profit. On the weekly chart, price broke over this level several weeks back and retested it last week, forming a nice doji rejection which points to potential bullish continuation. The daily chart formed a textbook higher low at the 50% retracement (of the move out of the daily trendline resistance) and confirmed this higher low with a strong engulfing candle the next day.
On the intraday chart we broke out over the descending trendline and intraday 50 ma and are now looking for a break and retest of the intraday value area (between $1.40690 & $1.40315) as support to pick up some longs. Stops under that $1.40000 round level and intraday swing lows at $1.39700 with initial targets at the $1.42000 level that has acted like a ceiling twice in the recent weeks. If price claims this level, then the next target is the daily 200 ma sitting at $1.43850.

 Mark Borszcz
Guest Contributor

Mark has been actively trading the financial markets since 2013. His interest in the markets was originally sparked during his time studying finance in university and he has spent hours since then perfecting his craft trading momentum stocks, options and currencies.
Since 2014, Mark has been actively swing trading FX markets and has a keen eye for spotting high probability setups and extracting maximum profit with limited downside.

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