Analyst Picks

James Stanley , Currency Strategist

James Stanley
My Picks:  Bearish AUD/USD
Expertise:  price action - macro
Average Time Frame of Trades:  few days - few weeks

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We’ve been discussing this setup in webinars for a couple of weeks now as the U.S. Dollar continues to gyrate with the potential for bullish continuation. At this stage, a weakening Australian Dollar combined with a firm U.S. Dollar provide a backdrop that could make for an interesting reversal setup of AUD/USD’s prior bullish run.

While the U.S. Dollar spent most of the first nine months of the year in the doldrums, AUD/USD climbed from a yearly-open around .7150 all the way up to test above .8100. And this seemingly resolved more than two years of side-ways price action as AUD/USD had spent most of the time from June 2015-June 2017 gyrating between .7000 and .7800.

AUD/USD Monthly: Two Years of Gyration Resolved

AUD/USD Under Pressure as USD Strength Continues

Chart prepared by James Stanley

But life above .8000 wasn’t nearly as kind to the Aussie as life was below, and after sellers engulfed price action in latter-September, prices began a downward descent that hasn’t yet stopped as we’ve seen a recent lower-low combined with what could be a fresh lower-high around the .7900-handle.

AUD/USD Four-Hour: Lower-Lows, Lower-Highs Begin to Show

AUD/USD Under Pressure as USD Strength Continues

Chart prepared by James Stanley

This opens the door for a deeper correction of the prior bullish move in AUD/USD. Stops will be placed above the prior swing-low at .7905, so that if this current area of short-term resistance does not remain as a ‘lower-high’, the trade is exited with the aim of loss mitigation. Meanwhile, targets can be cast towards prior levels of resistance (potentially new support should the move lower continue to develop). The area of .7683 can be used as a first target combined with a break-even stop, with subordinated targets set towards .7609 and then .7517.

AUD/USD Four-Hour: Down-Side Targets for Deeper Development of Bearish Move

AUD/USD Under Pressure as USD Strength Continues

Chart prepared by James Stanley

--- Written by James Stanley, Strategist for DailyFX.com

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Contact and follow James on Twitter: @JStanleyFX

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Jeremy Wagner, CEWA-M , Head Forex Trading Instructor

Jeremy Wagner, CEWA-M
My Picks:  Long USDJPY
Expertise:  Elliott Wave, Technical Analysis
Average Time Frame of Trades:  Multiple Weeks

We went long USD/JPY on Sept 22 on the dip down to 111.70. Now that USD/JPY is testing recent highs, we want to move forward the stop loss to lock in some gains. We will use the October 19 low as the current risk level and move the stop loss to 112.25.

The rest of the trading plan remains the same. Our first target to the upside is 115.50. At that point, we will close 1/3 of the position.

USD/JPY Daily Chart Analysis

USD/JPY Grabs Highest Level in 3 Months

We continue to monitor the relationship between USD/JPY and Nikkei 225. However, if USD/JPY is unable to follow through on this week’s strength, then we will be happy to exit the full position at 112.25. We will allow the technical levels to guide us and the latest swing low on an intraday chart is the October 19 low at 112.29. Our stop loss will be just a couple pips below that level at 112.25.

IG Client Sentiment is favoring a higher USD/JPY exchange rate. The sentiment reading was near parity earlier this week. Now, with a reading of -1.2, this shift to a net short reading is providing us with a bullish signal. Follow the live sentiment reading here.

Another market I am watching in relation to USD/JPY is GBP/JPY. GBP/JPY is sitting near a potential reversal zone. If GBP/JPY ignores this price channel and shoots higher, that will likely support a higher USD/JPY exchange rate as well.

GBP/JPY Price Channel and Divergence

USD/JPY Grabs Highest Level in 3 Months

Do you know why many traders lose? Find out here.

If you are new to trading FX, we have created this guide just for you.

To learn more about Elliott Wave theory, grab the beginner and advanced trading guide.

---Written by Jeremy Wagner, CEWA-M

Jeremy is a Certified Elliott Wave analyst with a Master’s designation. This report is intended to illustrate how Elliott Wave Theory can be used to identify potential patterns of trading opportunities.

Jeremy’s favorite Elliott Wave Resources:

Elliott Wave Patterns: What is a Zigzag?

3 Elliott Wave Flat Patterns to Know and Understand

Learn more about the Elliott Wave patterns by receiving our beginner and advanced Elliott Wave guides.

Also, view these one-hour webinar recordings on the specific patterns:

Elliott Wave Impulse Patterns

Elliott Wave Zigzag Patterns

Elliott Wave Flat Patterns

Elliott Wave Triangle Patterns

Elliott Wave Diagonal Patterns

Starting Your Elliott Wave Counting

Follow on twitter @JWagnerFXTrader .

Join Jeremy’s distribution list.

Recent Elliott Wave articles by Jeremy:

AUD/USD Technical Forecast: Sideways to Higher Trading

EURUSD Attracted to 1.20

DJIA Momentum Diverges from Price

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David Song , Currency Analyst

David Song
My Picks:  Neutral EUR/USD
Expertise:  Fundamental and Technical
Average Time Frame of Trades:  2 - 10 Days

Sign Up & Join DailyFX Currency Analyst David Song to Discuss Key FX Themes & Potential Trade Setups.

EUR/USD gives back the advance from earlier this month following the string of failed attempts to close above the 1.1860 (161.8% expansion) hurdle, and the pair may continue to consolidate ahead of the next European Central Bank (ECB) meeting on October 26 as President Mario Draghi and Co. show a greater willingness to carry the quantitative easing (QE) program into 2018.

Recent comments from ECB officials suggest the central bank will move away from its easing-cycle as Governing Council member cargues ‘there should be an adequate reduction of our net asset purchases, toward their possible end. It seems as though the ECB will start to wind down its non-standard measure as ‘the economic expansion continued to be solid and broad-based across countries and sectors,’ but the recalibration may also keep the QE program rolling beyond the December deadline as the Governing Council struggles to achieve the 2% target for inflation. With that said, EUR/USD stands at risk of facing a more material correction if the ECB extends the timetable for the QE program.

EUR/USD Daily Chart

EUR/USD Daily Chart

DailyFX 4Q Forecasts Are Now Available

Keep in mind the broader outlook remains constructive for EUR/USD, but the pair stands at risk of facing range-bound conditions over the near-term as the former-support zone around 1.1860 (161.8% expansion) offers resistance. As a result, price & the Relative Strength Index (RSI) may continue to track the bearish formation carried over from August, with the first downside hurdle coming in around 1.1670 (50% retracement), which largely lines up with the monthly-low (1.1669). Break of the monthly opening range raises the risk for a move back towards the 1.1580 (100% expansion) region.

EUR/USD Retail Sentiment

EUR/USD Retail Sentiment

See how shifts in EUR/USD retail positioning are impacting trend- Click here to learn more about sentiment!

Retail trader data shows 41.4% of traders are net-long EUR/USD with the ratio of traders short to long at 1.42 to 1.

In fact, traders have remained net-short since April 18 when EUR/USD traded near 1.07367; price has moved 9.8% higher since then. The number of traders net-long is 6.7% lower than yesterday and 8.1% higher from last week, while the number of traders net-short is 4.8% lower than yesterday and 8.6% lower 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. Positioning is more net-short than yesterday but less net-short from last week. The combination of current sentiment and recent changes gives us a further mixed EURUSD trading bias.

--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

To be added to David's e-mail distribution list, please follow this link.

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Paul Robinson , Market Analyst

Paul Robinson
My Picks:  Pending Short EURUSD
Expertise:  Technical
Average Time Frame of Trades:  Several days to several weeks

Check out the fundamental view on EURUSD in our Q4 Forecast.

We aren’t quite there yet, but a topping pattern – ‘Head-and-shoulders’ – is coming more and more into focus with each passing day. The beginning of the pending pattern starts back in early August with the development of a ‘left shoulder’, the ‘head’ came early September upon a failure at the 2012 low, and now we are left waiting for a ‘right shoulder’ to fully form. It may have already done-so with the turn down from 11880. To make the pattern official, though, we not only need the ‘right shoulder’ to solidify but also see a daily closing bar below the ‘neckline’.

The 'measured move' target on a clean break of the 'neckline' is derived by taking the height of the pattern and subtracting it from the ‘neckline’. This method points to a target in the mid-11200s. This would take EURUSD a good distance back into the range from 2015-2017, so it’s possible if it's to eventually trade much higher, broadly speaking, that a move lower may be truncated and not reach the end-target. But this doesn’t mean there still isn’t a good risk/reward opportunity here brewing. Swing-traders can operate off the daily chart, and for those trading shorter-term time-frames (i.e 4-hr or less), a confirmed break can be used to help shape trades by following the path of least resisistance.

See the new psychology guide - Building Confidence in Trading

EURUSD: Daily

EURUSD Daily Chart

An update will be provided should we get the confirmation we’re looking for. To follow along as price action progresses, you can join me on Wednesdays and Fridays for the “London FX & CFD Trading” webinars. For details, check out the Webinar Calendar.

Trade Parameters:

Entry: Daily close below the neckline.

Stop: Above the neckline.

Target: Measured move target = ~11250

---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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Michael Boutros , Currency Strategist

Michael Boutros
My Picks:  Near-term Setups in Bitcoin, Ethereum and USD/JPY
Expertise:  Technical Analaysis
Average Time Frame of Trades:  1-3 Days

Here's an update on the setups we’ve been tracking this week. Find a detailed, in-depth review of these setups and more in this week’s Strategy Webinar.

BTC/USD Daily Chart

Bitcoin Price Chart - Daily Timeframe

Bitcoin ripped through resistance today with the advance taking out, “subsequent resistance targets at 5200 & 5375.” The rally marks the largest single-day advance since in nearly a month with prices registered a high at 5388 today before turning lower. Likely to see some pullback here but the focus remains higher while above 4979 with bullish invalidation now raised to 4600. A breach higher targets the upper median-line parallel, currently just above ~5500.

New to Forex? Get started with our Free Trading Guide!

ETHUSD: Ethereum prices have continued to hold within the initial monthly opening-range which has taken shape just below a key resistance range at 312/20. The broader focus remains weighted to the topside, but we’ll have to respect the possibility of a near-term correction if the range breaks. I highlighted this setup in today’s scalp report.

Join Michael this Friday for his bi-weekly Webinar on the Foundations of Technical Analysis- Register for Free Here!

USD/JPY 240min Chart

USD/JPY Price Chart - Daily Timeframe

I’m looking for a reaction in USD/JPY on a move into the 112-handle with the near-term risk still weighted to the downside while below the weekly open at 112.56. Note that the 50-line converges on the 23.6% retracement / weekly low heading into the close of the week. A break below this region targets 111.10 & 110.67/82 – both levels of interest for possible exhaustion / long-entries. Click here to review this week’s USD/JPY scalp report.

See how shifts in USD/JPY retail positioning are impacting trend- Click here to learn more about sentiment!

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

Follow Michaelon Twitter @MBForex or contact him at mboutros@dailyfx.com

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