Analyst Picks

Tyler Yell, CMT , Forex Trading Instructor

My Picks:  Bearish USD/NOK
Expertise:  Elliott Wave, Technical Analysis, and Intermarket Analysis
Average Time Frame of Trades:  3 Weeks - 5 Weeks

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Point to Establish Short Exposure: At Market with Stop At 1.4515

Spot: 8.16654

Target 1: 7.9400 61.8% Retracement of May-January Range

Target 2: 7.2890 Base of Rising Wedge Pattern in May, Typical Target On Reversal

Invalidation Level: 8.3120 April 18 Weekend Gap High Post-Failed Doha Meeting

As of early April, traders are beginning to question whether or not we’ve seen ‘the bottom’ in WTI Crude Oil. If Oil has bottomed, there will be a lot of market narratives that will need to change, and some appear to be in the middle of such a change. One of the key changes has been around commodity currencies that were understandably sold aggressively in Q4 as Oil continually pushed lower and lower.

The flipside of the move higher in Oil is the move lower in the US Dollar. The Dollar move down took a distinct move after the G20 Summit held in Shanghai on February 26-27. There has been no confirmation of what was agreed to at this meeting, but many FX traders are suspecting that an agreement was made to put a lid on Dollar strength by global central banks.

Since the meeting, the US Dollar has fallen 8.65%, 7.08%, & 6.35% against the Australian Dollar, Canadian Dollar, and Norwegian Krone respectively. All countries are heavily dependent on commodities, which are inversely correlated to US Dollar strength, for their current account to be in the positive. As commodities have risen alongside a falling US Dollar, these currencies have risen, and may continue to do so through the year until the Federal Reserve changes their tone.

Specifically, the Norwegian Krone & Canadian Dollar are correlated to Oil, which has risen as much as 70% from the mid-February lows. On Tuesday, we heard from Bank of Canada Governor Stephen Poloz who noted that their economy has stabilized as Oil has in Q2.

Fundamentally, this has NOK looking rather positive as the market has priced in two cuts in 2016 while at the same time, the underlying components that support the Norwegian economy fundamentally are improving dramatically. Combining the improving fundamental NOK outlook with the commodity bounce, and the potential behind the scenes G20 Shanghai USD Accord, we could still have further room to run lower, which this analyst pick favors.

Multi-Year Chart Shows Long-Term Resistance Has Put A Lid on USD/NOK

Bearish USDNOK: Oil Breakout & Macro Trend of Weaker US Dollar

The chart above doesn’t help much with trading other than to show that we have moved aggressively higher since mid-2014. A retracement of much of the move could go a long way in hitting the target of the trade set-up shown on the chart below.

Chart-Pattern / Macro Trade

The chart below shows a broken rising bearish wedge pattern. The important thing to know about a rising wedge is that the target of the rising wedge is the start of the original pattern. Also, you’ll not there is an overlay of the positively correlated USD/CAD on top of the USD/NOK Chart. While rising in a similar fashion, USD/CAD has out-paced USD/NOK on the downside. If USD/NOK begins to close the gap, this trade could play out nicely.

Additionally, the price channel (red) and the Ichimoku Cloud continue to act as resistance. As long as those tools contain price the technical environment favors further downside.

Bearish USDNOK: Oil Breakout & Macro Trend of Weaker US Dollar

Key Technical Levels:

USD/NOK – Trading cleanly within a bearish channel on the breakdown of a bearish rising wedge pattern

2nd Resistance: 8.37904 April Opening Range High

1st Resistance: 8.3120 April 18 Weekend Gap High Post-Failed Doha Meeting

Spot: 8.16650

1st support: 7.9400 61.8% Retracement of May-January Range

2nd support: 7.2890 Base of Rising Wedge Pattern in May, Typical Target On Reversal

Trade Setup:

I am looking to sell USD/NOK at the market with a stop above the April 18 Weekend Gap High Post-Failed Doha Meeting AT 8.3120. Price action should be volatile as WTI Crude Oil (CFD: USOil) & Brent Crude (CFD: UKOil) Get comfortable in the new bullish territory.

Recent CFTC data via the Commitment of Traders report shows that Hedge Funds have become net-short the US Dollar for the first time since Summer 2014 when the major US Dollar uptrend began. If this trend continues, it could continue to move the market in my favor by breaking below 61.8% Retracement of May-January Range at 7.9400. 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.

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David Song , Currency Analyst

My Picks:  Bullish AUD/NZD
Expertise:  Fundamental and Technical
Average Time Frame of Trades:  2 - 10 Days

AUD/NZD Weekly Chart

AUD/NZD Weekly Chart

Chart - Created Using FXCM Marketscope 2.0

The Reserve Bank of New Zealand (RBNZ) interest-rate decision act as a near-term catalyst to spur a further advance in AUD/NZD should Governor Graeme Wheeler show a greater willingness to further embark on the easing cycle.

Even though the RBNZ is widely expected to keep the official cash rate on hold in April, dovish rhetoric accompanied by a toughened verbal-intervention on the New Zealand dollar may highlight a more bullish outlook for aussie-kiwi especially as the Reserve Bank of Australia (RBA) remains on the sidelines. In turn, the inverse head-and-shoulders formation may continue to pan out going in May, with a weekly close above 1.1310 (38.2% expansion) raising the risk for a move back towards 1.1440 (100% expansion) to 1.1450 (23.6% expansion).

Get our top trading opportunities of 2016 HERE

--- Written by David Song, Currency Analyst

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

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Jamie Saettele, CMT , Sr. Technical Strategist

My Picks:  Bullish GBP/USD
Expertise:  Technical
Average Time Frame of Trades:  Swing

The USD has turned up from good support (see here). Interestingly, GBP/USD was firm this week. Here is your scorecard for the ‘majors’ this week (as of 2 pm eastern).

USDJPY 2.76%

GBPUSD 1.38%

USDCHF 1.11%

AUDUSD -.18%

EURUSD -.53%

NZDUSD -.91%

USDCAD -1.00%

Yen was crushed, CHF and NZD were weak, GBP and CAD were firm, while AUD and EUR didn’t do much. I don’t know if this rally from USD support has legs or not (no one knows that) but I do know that GBP continues to not go lower in the face of this USD bounce. I like the reward/risk profile on the long side against 1.4290. Some of the non-USD GBP crosses look even better.

For trades and more analysis, visit SB Trade Desk.

Please add a description for the image.
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Jeremy Wagner , Head Forex Trading Instructor

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

Sterling has caught my eye today from a sentiment and technical perspective.

Trader positioning in GBP/USD has just flipped negative for the first time since November 2015 and currently sits at -1.07. This is a result of retail traders reducing their long positions and initiating more short positions. This is a headwind to the short bias below. However, if current market conditions are parallel to what happened in November, we saw GBPUSD continue a strong downtrend and sell off heavily after that negative flip.

(See GBPUSD real time trader positioning here.)

GBP/USD Sentiment Turns Negative First Time in 5 Months

[Image 1]

From a technical perspective, GBP/USD has been carving symmetric and measured moves since the February 29 low at 1.3836. This doesn’t mean that moving forward the waves will continue to be symmetric, but it does help us focus on some higher probability patterns at play.

As it stands, we’re looking for this push higher to terminate near current levels as we have a confluence of resistance showing up near 1.4400-1.4440. Ideally, any movement higher terminates below the March 18 high of 1.4515.

With the good technical set up and a strong risk to reward ratio, these types of set ups earn my attention.

Market Interpretation

Market Condition: Retracement

Bias: Short GBP/USD

Entry: Near 1.4387

Stop Loss: Near 1.4520 (-133 pips)

First Target: Near 1.4120 (+267 pips)

Second Target: Near 1.3860 (+527 pips)

GBP/USD Struggles Near Measured Resistance

GBP/USD Sentiment Turns Negative First Time in 5 Months

[Image 2]

Let’s unpack a couple of these symmetrical waves.

First, during the February 29 to March 18 uptrend, circle c and circle a are equal in length. We have this entire uptrend wave labeled as a red ‘A’.

Then, during the March 18 to April 6 downtrend, again, circle c and circle a are equal in length. We have this entire downtrend wave labeled as red ‘B’.

On the most recent uptrend starting on April 6, we have multiple wave measurements showing up in a tight zone suggesting prices may struggle and possibly repel lower.

Circle y = circle w near 1.4433

Red ‘C’ = .618 * red ‘A’ (this is a common wave relationship) = 1.4425

There is a smaller time frame relationship showing up at 1.4402 and could stretch as high as 1.4437.

As a result, we have 3 different measurements showing up in the 1.4402-1.4437 price zone.

This analysis becomes incorrect on a break above the March 18 high of 1.4515.

The first target is established near 1.4120 which represents approximately 61.8% the length of red ‘B’. The secondary target is the February 29 low near 1.3860.

You’ll notice above how the first target is about twice the distance to the stop loss. 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].

Still not sure about the direction of the GBP/USD? Consider downloading and reading our USD quarterly forecast which was just released and available here.

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Walker England , Forex Trading Instructor

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

Market Condition: USD/JPY Daily Breakout

Target 1:2x ATR105.53

Target 2:4x ATR103.45

Invalidation: New Higher High

USD/JPY Daily Chart

USD/JPY Trend Traders Wait for a Breakout

(Created using Marketscope 2.0 Charts)

What is next for the US Dollar? Click HERE for our analysts Free forecast!

The USD/JPY is currently rebounding from yearly lows at 107.62. As prices continue to retrace, traders may set pending entry orders to plan for the pairs next breakout. Entry orders may be set as close as 1 pip below the low at 107.61. This way, a sell order is triggered on the creation of a lower low. In the event that a pending order is triggered, traders may use ATR to manage risk and extrapolate potential profit targets. Currently daily ATR reads at 104 pips. When managing risk to 1X ATR this places stops near 108.61. Initial profit targets of 2x ATR may be found near 105.53, while secondary targets using 4X ATR may be found at 103.45.

In the event that prices fail to breakout lower, any entry orders to sell the market will remain pending. In the even that prices trade to a higher high above 109.73, traders may consider deleting any remaining entry orders.

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See Walker’s most recent articles at his Bio Page.

Contact and Follow Walker on Twitter @WEnglandFX.

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