Analyst Picks

Jeremy Wagner, CEWA-M , Head Forex Trading Instructor

My Picks:  Long EUR/JPY
Expertise:  Elliott Wave, Technical Analysis
Average Time Frame of Trades:  Multiple Weeks

We bought EUR/JPY last week near 116.60 on a breakout above a small trend channel. The pair has worked higher in strong fashion signaling that we may be in a third wave higher. Third waves tend to be the longest and the strongest of the five wave Elliott Wave sequence so we will tighten the stop loss closer to the current price action in case the market turns against the position.

EUR/JPY Explodes Higher; May Consolidate

EUR/JPY is starting to bump up against a longer term price channel (blue line) near 122. This blue trend line may create a reaction lower towards 119. Since we may be in a third wave, a retracement may not reach all of the way to 119, but a retracement this deep is normal within the identified pattern.

We are anticipating an eventual break higher outside of the blue trend channel to retest 124 and possibly 133. The current stop loss is set near 117.82. If this level breaks to the downside, then another pattern is at play.

EUR/JPY was a top trading opportunity of 2017 by two of our analysts. Find out what they had to say on in this “Top Trading Opportunities 2017” guide.

Join Jeremy in his Monday US Opening Bell webinars to discuss this market and others.

Interested in learning more about Elliott Wave Theory? Watch these videos on trading with Elliott Wave.

---Written by Jeremy Wagner, Head Trading Instructor, DailyFX EDU

Follow me on Twitter at @JWagnerFXTrader .

See Jeremy’s recent articles at his Bio Page.

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Nick Cawley , Analyst

My Picks:  Short EUR/GBP
Expertise:  Fundamental/Technical Analysis
Average Time Frame of Trades:  One to several weeks

Nick Cawley, Analyst, April 26, 2017

Position: Short EUR/GBP

Entry:At market (0.85073 at the time of writing)

Stop: April 9 daily high of 0.85551

Target 1: 0.8436 (76.4% Fibonacci retracement)

Target 2:0.8313 (April 18 daily low)

New to the markets? See our Trading Guides.

EUR/GBP looks set to fall after its recent post-French election bounce with the spot price (0.8507) close to breaking below the 20-day ma (0.8485), confirming a bearish outlook. The 20-day ma broke below the 50- and 100-day ma on April 11-12 opening the move lower.

Chart 1: EUR/GBP Daily Timeframe (November 2016 to April 2017)

EUR/GBP Analyst Pick

Chart by IG

And a look at the daily chart also shows that EUR/GBP has failed to convincingly break above the 61.8% Fibonacci level of the recent December 5, 2016/January 15, 2017 low-high range.

Chart 2: EUR/GBP Daily Timeframe (November 2016 to April 2017)

EUR/GBP Analyst Pick

Chart by IG

---Written by Nick Cawley, Market Analyst

You can follow Nick on Twitter @nickcawley1

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Walker England , Forex Trading Instructor

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

Market Condition: NZD/USD Pending Breakout

Target 1:______2X ATR at .6792

Target 2:______4X ATR at .6699

NZD/USD, Daily Chart with Range

NZD/USD Pending Bearish Breakout

(Created Using IG Charts)

The NZD/USD is now trending towards new yearly lows, allowing traders to plan for a fresh bearish breakout. Traders may plan to enter into the market below the January 3rd low at .6884. It should be noted that daily ATR (average true range) for the NZD/USD reads at 46 pips. Upon a breakout, traders may elect to use a 2X ATR extension ATR to find initial profit targets near .6792. Further extensions open up a potential 4X ATR profit target near.6699.

Traders may also consider using ATR to manage risk. A 46 pip stop loss at .6930 would set up an initial 1:2 risk/reward ratio. In the event that the NZD/USD fails to breakout lower, traders may opt to delete any pending entry orders on the creation of a new monthly high above .7057.

--- Written by Walker, Analyst for DailyFX.com

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See Walker’s most recent articles at hisBio Page.

Contact and Follow Walker on Twitter @WEnglandFX.

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Tyler Yell, CMT , Forex Trading Instructor

My Picks:  Long EUR/USD On Close > 55-WMA - 1.0935
Expertise:  Technical Analysis, Intermarket Analysis, Sentiment
Average Time Frame of Trades:  2-5 Weeks

Point to Establish Long Exposure: Daily Close > 1.0935

Spot: 1.0848

Target 1:1.1050 (Opening Price Week Of Trump Election)

Target 2:1.1300 (November 9 High)

Invalidation Level:1.0725 (Weekly Close Before French Election)

If you are looking for other trading ideas, check out our Trading Guides

Fundamental, Sentiment, & Technical Focus:

In the closing bell webinar leading up to the French Election on April 23, we noted a common theme. The options market were putting it all on the potential for a scary outcome on April 23, and if a scary outcome did not surface, there were far fewer buyers of EUR downside insurance (puts) past the election. We noted that we could also see Bund prices fall (Bund YTM’s rise) as well as a risk-on move in European equities like the DAX that may align with EUR upside carrying through. This scenario seems to be playing out so far.

Many will tell you not to chase a gap and sometimes they’re right. Sometimes these traders are also wrong, which is why we’re using the historical resistance of the 55-WMA as a filter to add weight to the conviction that EUR/USD upside could continue with specific risk levels mentioned below.

However, it’s too early to call a victory lap despite the EUR surge. There remains a technical burden that needs to be overcome before we can get comfortable with seeing EUR/USD upside continue. That burden comes in the way of the 55-Week Moving Average that is currently positioned near 1.0930. On the charts below, you can see sentiment, which has shifted to favor EUR/USD upside, Bunds that could be in the process of tracing out a move lower, and EUR/USD that is sitting at a technical “line in the sand.” If EUR/USD can break above the 55-WMA, we could be on our way to taking out the significant levels in early November.

Namely, a close above the 55-WMA would open up the weekly open before the US Election at 1.1050 and the intra-week high on the announcement of the Trump Victory at 1.1300. Those two levels are the targets on this trade that will look for IG Client Sentiment to remain favorable in addition to correlated markets on the move higher. The invalidation of the trade is a close below the Friday close at 1.0725.

Euro Forecast to Continue Higher On Sentiment Shift

Bullish EUR/USD on Positive Bund Yield Correlation As European Political Risk Wanes

On EUR/USD as of April 24, retail trader data shows 33.0% of traders are net-long with the ratio of traders short to long at 2.03 to 1. The number of traders net-long is 21.6% lower than yesterday and 51.3% lower from last week, while the number of traders net-short is 18.8% higher than yesterday and 39.0% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EURUSD prices may continue to rise. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger EURUSD-bullish contrarian trading bias.

Favorable Correlation of Falling Bund Price (Rising Yields) To Higher EUR/USD Could Help Trade:

Bullish EUR/USD on Positive Bund Yield Correlation As European Political Risk Wanes

Created by Tyler Yell, CMT

EUR/USD Faces 55-MVA Test:

Bullish EUR/USD on Positive Bund Yield Correlation As European Political Risk Wanes

Created by Tyler Yell, CMT

---

Happy Trading!

Tyler Yell, CMT

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Paul Robinson , Market Analyst

My Picks:  Bullish GBPUSD
Expertise:  Technical
Average Time Frame of Trades:  Several days to weeks

See our Trading Guides for Q2 forecasts for FX, commodities, and equity indices.

GBPUSD recently broke the neckline of an inverse ‘head-and-shoulders’ pattern forming since October. The breakout took cable up to a pair of bottoms created in July and August, and has held up well above the December peak thus far despite the big area of resistance in the vicinity of ~12800/900. This suggests we should soon see a continuation trade higher.

On strong clearance of 12903, there isn’t any substantial resistance arriving until swing highs from June to September in the 13437/533 zone, leaving a sizable amount of room for cable to run. For an initial trade, stops could be placed below Friday’s low of 12755. The distance from entry to the target and stop make for a compelling risk/reward scenario. A drop below the neckline breakout day low near 12500 will be required to undermine the broader bullish view.

GBPUSD: Daily

Bullish GBPUSD Over 12900

Created with TradingView

The trade could take a few weeks or longer to fully mature, so traders with shorter-term time horizons can look to set-ups (i.e. bull-flags/consolidations/pullbacks to support) on the 1 and 4-hr time-frames for entries.

IG Client Sentiment data is supportive of higher GBPUSD prices, with retail traders selling into recent strength. See our Sentiment Guide on how to use the data.

Entry – Long above 12903

Stop – Initially below 12755 (under 12500 threatens broader bias)

Target – 13437/533

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---Written by Paul Robinson, Market Analyst

You can receive Paul’s analysis directly via email by signing up here.

You can follow Paul on Twitter at @PaulRobinonFX.

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