Analyst Picks

Walker England , Forex Trading Instructor

My Picks:  AUD/USD Pending Breakout
Expertise:  Technical Analysis
Average Time Frame of Trades :  1Day-1Week

Market Condition: AUD/USD Daily Breakout

Target 1: 2x ATR

Target 2: 4x ATR

Invalidation: A false breakout

AUD/USD Daily Chart

AUD/USD Prepares for Breakout

(Created using Marketscope 2.0 Charts)

The AUD/USD has been consolidating for the last 5 trading sessions, forming a symmetrical triangle. Also, if price action fails to break a new daily low or high, today’s candle will close the week with an inside bar. With the market consolidating, this means that traders may begin looking for a breakout during next weeks trading. Currently yesterdays high and low are acting as support (.7160) and resistance (.7246). Traders may look to trade a breakout at these values in the markets chosen direction.

Daily ATR for the AUD/USD sits at 68.5 pips. This means that a 2X ATR target for bullish breakouts may be found near .7383. Alternatively, bearish breakouts may initially find targets near .7023. ATR may also be used to manage risk. A 1X ATR stop may be placed in either scenerio to create an initial 1:2 risk reward ratio.

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Jeremy Wagner , Head Forex Trading Instructor

My Picks:  Long EUR/GBP
Expertise:  Elliott Wave, Technical Analysis
Average Time Frame of Trades :  2 Days – 2 Weeks

EUR/GBP is sporting some clean waves from an Elliott Wave perspective. Since finding a low on August 5, 2015, prices have been advancing in impulsive fashion followed by corrective setbacks. It appears the correction that began on February 11, 2016 is nearing a termination point. If this interpretation and wave count is correct, then prices would be supported on a move up towards .8150.

According to the wave count below, we are anticipating a wave 4 low at yesterday’s low or with one more possible retest near .7560.

Using Elliott Wave Theory EUR/GBP is Near Support

[Image 1]

Wave 4 typically retraces approximately 38.2% of wave 3. That level comes into play near .7550. Likewise, the equal wave measurement from the April 7 high to yesterday’s low is near .7560. Additionally, the 200 Day Simple Moving average sits around .7519 (not shown). As a result, there are a variety of support levels arriving near yesterday’s low.

If correct, then we can anticipate another 5 wave move higher. Wave 5 would equal wave 1 near .8100. Wave 5 would be 61.8% of the length of waves 1 through 3 near .8150. So initial target levels can be set near .8100, though higher levels exist.

If prices trade below the wave 1 high of .7493 then this wave count in invalid and we’ll reconsider other patterns.

The risk to reward ratio on this opportunity is skewed to the positive. We’ve researched millions of trades and found that almost half of the traders (43%) turned a profit when implementing this simple technique of a positive risk to reward ratio. This is something that every trader has control over. Learn more about that tweak in pages 13-14 of the Traits of Successful Traders Guide [free registration].

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Check out the latest standings for the FXCM trading contest HERE.

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Michael Boutros , Currency Strategist

My Picks:  Near-term Setups in GBPUSD, GBPJPY & USDOLLAR
Expertise:  Short-term Technicals
Average Time Frame of Trades :  1-2 Days

GBPUSD- A breach of the weekly opening range verified the topside bias noted yesterday with the advance once again eyeing key near-term resistance at 1.4664/83- a level defined by the 2015 low-day close, the February highs, the 100% extension of the advance off the yearly low, the 76.4% retrace of the May decline and slope resistance. A breach here targets the yearly open at 1.4731 backed by the highs at 1.4767. Immediate support rests at 1.4580/88 with our focus weighted to the topside while above the 1.45-handle. Review Latest GBPUSD Scalp Update

GBPJPY- I highlighted this setup in today’s scalp report- similar setup as sterling. Focus remains higher with the rally eyeing some pretty significant resistance targets just higher. 161.75-162, 162.68/80 & 163.50/86 are all levels of interest with a move surpassing these targets likely to mark a more meaningful advance for the pair. I’ll remain constructive while above today’s low.


Near-term Setups in GBPUSD, GBPJPY & USDOLLAR

As noted last week, the Dow Jones FXCM U.S. Dollar Index (Ticker:USDOLLAR) remains at risk for a pullback near-term while below 11989. Note that the index is already more than 2.5% off the monthly low & while the broader focus is higher in the greenback, the immediate topside bias is vulnerable. Look for a break of the weekly opening range for guidance with my initial inclination to sell rallies into this region. Review Latest USDOLLAR Scalp Update

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Looking for more trade ideas? Review DailyFX’s 2016 2Q Forecasts

---Written by Michael Boutros, Currency Strategist with DailyFX

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Jamie Saettele, CMT , Sr. Technical Strategist

My Picks:  Still Bullish British Pounds
Expertise:  Technical
Average Time Frame of Trades :  Swing

I started trading GBP/USD from the long side in April (see here) and action over the last few weeks (pullbacks into and strong rallies from support) fuels the bullish flame so that it may burn hotter.

I've been pointing out bullish clues to SB Trade Desk members for several weeks that Cable was in position to rally. For example, the following was published on 5/15.

This article suggests that the Pound is in a bad spot. So, a bullish USD headline and bearish Pound headline pop up right when GBPUSD is testing the neckline from its head and shoulders pattern AND seasonal tendencies turn up now across every look-back period except for 5 year (which turns up in 2 weeks). You know the logic…the best headlines to fade are the ones that predict. Why? Predictions indicate a comfort/consensus level that is typical before a market heads the other direction.

GBP/USD has traded higher since (from 1.42). Members will be alerted of evidence to the contrary but the combination of sentiment (including SSI) and price pattern (including other Cable crosses) places Cable in a bullish position (see the chart here).

For trades and more analysis, visit SB Trade Desk.

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Tyler Yell, CMT , Forex Trading Instructor

My Picks:  Bearish Cable GBP/USD Toward 2016 Lows
Expertise:  Elliott Wave, Technical Analysis, Intermarket Analysis
Average Time Frame of Trades :  1 Weeks - 2 Weeks

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Point to Establish Short Exposure: At Market With Stop At 1.4662

Spot: 1.4480

Target 1: 1.4189 61.8% of February-May Range

Target 2: 1.4004 April 6 Low

Target 3 (Extreme): 1.35006 January 2009 Low

Invalidation Level: Close above 1.4663 May 19 High / Channel Resistance

Fundamental & Technical Focus

Here’s why a Cable short is looking more attractive than usual to me. This Monday put us one month away from the June 23 European Union referendum for the United Kingdom also known as the ‘Brexit’ vote. You can read much of what you need to know about the ‘Brexit’ vote on June 23 here.

This event is significant because we are entering into a likely period of peak volatility in anticipation of even a ‘Vote Stay’ being priced into the options market via one-month implied volatility. Naturally, if we get a ‘Vote Leave’ outcome, there is very few people who know exactly how a ‘Brexit’ could play out given the potential implications.

In addition to the event risk surrounding the EU referendum on June 23, we recently had a Hawkish Surprise from the Federal Reserve, which continues to forecast rate hikes in 2016/7. Over the weekend, Federal Reserve Bank of San Francisco, John Williams said that 203 2016 rate hikes and 3-4 in 2017 felt about right.

From a mean-reversion point of view, this trade pick comes at the same time that evidence is surfacing that the US dollar plunged too far too fast. Additionally, GBP may have overshot strength given the risk that investors don’t want to take regarding being exposed to the negative effects of the UK potentially leaving the world’s largest trading block in the EU.

Cable Has Fallen From Solid Resistance At A Time The US Dollar Is Looking Resilient

Dollar Hike Bets & Pre-EU Referendum Volatility May Pave the Way For Cable Drop

Right now, our Trader Sentiment Indicator SSI continues to provide a bearish bias. The reading on SSI for cable sits provides the lone US Dollar bull case at 1.15 as 53% of traders are long. We use our SSI as a contrarian indicator to price action, and the fact that the majority of traders are long gives a signal that the GBPUSD may continue lower.

Dollar Hike Bets & Pre-EU Referendum Volatility May Pave the Way For Cable Drop

Key Technical Levels:

GBP/USD – Appears To Be Turning Lower From Lower Highs / Channel Resistance

2nd Resistance: 1.47680 Early May High / 61.8% Retracement of November-February Range

1st Resistance: 1.4662 May 19 Lower-High / Channel Resistance

Spot: 1.44652

1st support: 1.4335 May Low

2nd support: 1.4189 61.8% of February-May Range

Trade Setup:

I am looking to sell GBP/USD at the market with a stop above the May high at 1.4662. Price action should be volatile as many polls are coming out in anticipation of the June 23 ‘Brexit’ referendum at a virtual tie so smaller positions should be used because a swing for one outcome or the other in the polls could exponentially increase price variance.

Sentiment shows the move could have legs to the downside as retail leveraged traders are now chasing GBP/USD higher against a strong down trend. Should the trade begin to move in my favor by breaking below the May 16 low, the eventual target will be toward 1.4004, the April 6 Low. A trailing stop would be used above an opposing up-fractal on the daily chart so that the trade aligns with a favorable risk: reward ratio that our Traits of Successful Traders report found to be one of the best things a trader can do to ensure long-term sustainability in your trading. The eventual target, which is rather extreme, at 1.35006, is at the January 2009 low.

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