Analyst Picks

David Song , Currency Analyst

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

EUR/USD attempts to retrace the decline from earlier this week as updates to the U.S. Consumer Price Index (CPI) instill a mixed outlook for the economy, but the data print may do little to derail the Federal Reserve from the hiking-cycle as the shift in trade policy is expected to fuel inflation.

In fact, Fed Fund Futures still reflect expectations for a December rate-hike as the Federal Open Market Committee (FOMC) largely achieves its dual mandate for monetary policy, and the central bank may continue to implement higher borrowing-costs in 2019 as ‘participants generally anticipated that further gradual increases in the target range for the federal funds rate would most likely be consistent with a sustained economic expansion, strong labor market conditions, and inflation near 2 percent over the medium term.

Image of fed fund futures

Moreover, the fresh updates from Chairman Jerome Powell & Co. may fuel bets for an extended hiking-cycle as ‘several participants reported that firms in their Districts that were facing higher input prices because of tariffs perceived that they had an increased ability to raise the prices of their products,’ and speculation for above-neutral interest rates is likely to keep EUR/USD under pressure especially as the European Central Bank (ECB) remains in no rush to normalize monetary policy.

However, the ECB may gradually alter the forward-guidance over the coming months as board member Jens Weidmann argues that the central bank ‘can’t lose time unnecessarily on the long road back to monetary policy normality,’ and the Governing Council may continue to scale back the dovish tone in 2019 as ‘the economic upturn in Germany and the euro area remains intact.’

Until then, the zero-interest rate policy (ZIRP) in Europe may continue to produce headwinds for EUR/USD, with the weakness in the exchange rate likely to carry into 2018 as the exchange rate finally clears the August-low (1.1301). Sign up and join DailyFX Currency Analyst David Song LIVE for an opportunity to discuss potential trade setups.

EUR/USD Daily Chart

Image of eurusd daily chart

EUR/USD slips to fresh yearly lows after the failed attempt to push back above the 1.1510 (38.2% expansion) region, with recent developments in the Relative Strength Index (RSI) casting a bearish outlook for the exchange rate as it extends the downward trend carried over from the previous month. In turn, the 1.1220 (78.6% retracement) area sits on the radar, with the next downside hurdle coming in around 1.1140 (78.6% expansion).

However, the 1.1220 (78.6% retracement) area appears to be offering short-term support as EUR/USD snaps the bearish sequence from the previous week and initiates a fresh series of higher highs & lows, with a move back above the Fibonacci overlap around 1.1390 (61.8% retracement) to 1.1400 (50% expansion) opening up the 1.1510 (38.2% expansion) area.

For more in-depth analysis, check out the Q4 Forecast for the Euro

Additional Trading Resources

Are you looking to improve your trading approach? Review the ‘Traits of a Successful Trader’ series on how to effectively use leverage along with other best practices that any trader can follow.

Want to know what other currency pairs the DailyFX team is watching? Download and review the Top Trading Opportunities for 2018.

--- Written by David Song, Currency Analyst

Follow me on Twitter at @DavidJSong.

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Martin Essex, MSTA , Analyst and Editor

Martin Essex, MSTA
My Picks:  EURGBP Set to Fall Further
Expertise:  Technical and Fundamental Analysis
Average Time Frame of Trades:  Next Few Days

EURGBP price, news and analysis:

  • EURGBP has dropped to its lowest level since April and further losses seem plausible.
  • The April 17 low at 0.8620 is a reasonable first target.

EURGBP price under pressure

EURGBP has fallen steeply over the past three sessions, closing a gap on the daily chart and dropping to its lowest level for seven months. With a downward trend now firmly established, losses could extend further – with the April 17 low at 0.8620 a possible first target.

EURGBP Price Chart, Daily Timeframe (January 30 – November 13, 2018)

Latest EURGBP price chart.

Chart by IG

If that level is broken, there is little support for the pair before a long-term trendline just under 0.85 and then the Spring 2017 lows of 0.8384 touched on May 10 and 0.8313 reached on April 18. Meanwhile, there is resistance at 0.8798 from the 20-day moving average, at 0.8828 from the 50-day dma and 0.8889 from the 100-day dma, as well as from a trendline that checks in at 0.8906.

This technical weakness is backed by fundamental factors, with the Euro under pressure from the row between Italy and the European Union over the Italian Budget while the Pound is benefiting from rising hopes of a Brexit deal between the EU and the UK.

Note too that retail traders remain net-long the pair and a contrarian view of crowd sentiment also suggests that further losses are possible.

Resources to help you trade the forex markets

Whether you are a new or an experienced trader, at DailyFX we have many resources to help you:

--- Written by Martin Essex, Analyst and Editor

Feel free to contact me via the comments section below, via email at martin.essex@ig.com or on Twitter @MartinSEssex

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Nick Cawley , Analyst

Nick Cawley
My Picks:  EURGBP: Pending Short - Downtrend Intact
Expertise:  Technical and Fundamental Analysis
Average Time Frame of Trades:  One week to one month

EURGBP – Pending Short at 0.8774.

Stop Loss at 0.8843.

Target 1 (50%) at 0.8690.

Target 2 (50%) at 0.8621.

The DailyFX Q4 EUR and GBP Forecasts are available to download.

EURGBP – Lower Highs and Lower Lows Dominate the Chart

When considering this trade set-up, it’s is important to keep in mind that Brexit headlines can, and will, shift the value of Sterling sharply and so the trade is risky and may be prone to volatile moves. While there has been a slight positive turn in Brexit sentiment, nothing is yet agreed with the EU, while PM May also faces increasing pressure from within her own party over the exact nature of any deal. The Euro is also under pressure as the economy continues to slow down – German Q3 GDP on Wednesday is forecast to turn negative – ahead of the end of the QE (bond buying program) in December.

From a technical stance, EURGBP remains pointed towards the downside. Since the August 28 high of 0.9098, the pair has fallen to a recent low of 0.8690 and in the process has made an unbroken series of lower highs and lower lows. EURGBP also trades below all three moving averages and will find initial upside resistance at the 50% Fibonacci retracement level at 0.8803. A stop will be placed at 0.8843, just above all three DMAs and at the bottom of the October 31 candle.

The initial target – 50% of the trade – is set at 0.8690, the November 8 low with the second target all the way back to the April 17 range low at 0.8621. The entry price at 0.8774 - currently above the market level of 0.8736 – gives us some flexibility and takes into account the current low level of the RSI indicator at 40.25.

EURGBP Daily Price Chart (March – November 12, 2018)

EURGBP: Pending Short - Downtrend Intact

IG Client Sentiment Datashow that retail investors are 57.5% net-long EURGBP and coupled with recent changes – traders are further net-long on a daily and weekly basis - this gives us a stronger bearish contrarian bias.

Traders may be interested in two of our trading guides – Traits of Successful Traders and Top Trading Lessons – while technical analysts are likely to be interested in our latest Elliott Wave Guide.

What is your view on EURGBP – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author at nicholas.cawley@ig.comor via Twitter @nickcawley1.

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James Stanley , Currency Strategist

James Stanley
My Picks:  EUR/USD, USD/CNH, USD/CHF
Expertise:  price action, macro
Average Time Frame of Trades:  few days - few weeks

Forex Setups for the Week of November 12, 2018

- DailyFX Quarterly Forecasts have been updated for Q4, and are available directly from the following link: DailyFX Trading Guides, Q4 Forecasts.

- For trading ideas, please check out our Trading Guides. And if you’re looking for something more interactive in nature, please check out our DailyFX Live webinars.

- If you’d like more color around any of the setups below, join in our live DailyFX webinars each week, set for Tuesday and Thursday at 1PM Eastern Time. You can sign up for each of those sessions from the below link:

Tuesday: Tuesday, 1PM ET

Thursday: Thursday 1PM ET

Do you want to see how retail traders are currently trading the US Dollar? Check out our IG Client Sentiment Indicator.

Dip, then Rip. Back to 97 for the US Dollar

It was another busy week across global markets, particularly the US as mid-term elections on Tuesday led into a Federal Reserve rate decision on Thursday. While global risk rallies continued in the aftermath of election results, those risk-on themes started to come into question on Thursday after the FOMC rate decision. While the bank did keep rates on hold while posing only mild changes to last month’s statement, global risk markets did not seem to take that meeting in stride as the bullish outlay from the early portion of the week was stopped dead in its tracks, followed by a pullback Friday.

Next week sees another large risk item come back to light, and that’s the brewing situation between Italy and the European Commission. Tuesday marks the due date for the revised Italian budget and, going on comments over the last couple of days, it does not appear that the two sides are yet nearing a compromise. This is the same theme that delivered a dose of risk aversion in April and May, and again in late-September running into October; and next week brings a similar backdrop of worry as attention will shift back towards a rather pensive situation still brewing in Europe.

The US Dollar is putting in another test of the 97.00 level and, much like last week, that Dollar strength appears to be unevenly distributed. For next week, I want to continue to look for USD strength through the Euro while directing strategies for USD-weakness elsewhere. Over the past two weeks, I’ve looked at both AUD/USD and NZD/USD for such plays, and the door remains open on each of those as I discussed in yesterday’s webinar. Those setups are largely in a similar spot as yesterday, so in the aim of avoiding redundancy, I will direct this week’s short-side USD setups elsewhere.

US Dollar Eight-Hour Price Chart: Back to 97.00 After Earlier-Week Trend-Line Test

us dollar usd eight hour price chart

Chart prepared by James Stanley

Bearish EUR/USD for USD-Strength Strategies

EUR/USD will likely be a focal point for the FX market next week as the situation between the European Commission and Italy comes into further view. This has been my preferred venue for USD-strength over the past few weeks, using a zone of prior support as fresh resistance that runs from 1.1448-1.1500. The level of 1.1448 came in last Friday to help mark the high and the 1.1500 handle came into play on Wednesday of this week, helping to quell the bullish move that had shown so far through November trade.

EUR/USD has been selling off over the past two days but, as of yet, sellers have been unable to take-out 1.1300, and this can make matters of entry difficult given proximity to support and resistance. For next week I want to look at short-side EUR/USD strategies in one of two different ways: Either a down-side break of the 1.1300 low, which can open the door for bearish breakout strategies. Or, a pullback to lower-high resistance around a level of prior support. Such an area exists from 1.1395-1.1430, which could allow for risk levels to be set outside of this week’s high at 1.1500.

EUR/USD Eight-Hour Price Chart

eurusd eur/usd eight hour price chart

Chart prepared by James Stanley

Bearish USD/CNH Below 6.9900

Dollar-Yuan has jumped by 12% from the March lows up to the October high, and this is a theme that has a bit of political importance as it speaks to the continued rift around tariff discussions. The pair has a multi-year high of 6.9875, and the Yuan was fixed-higher in early November as the pair inched closer to a re-test of that level. As these multi-year highs come closer to being in play, the matter becomes more attention-grabbing as it carries indications of trade tensions between China and the US; carrying with it more media attention into an already pensive situation, and this seems like a scenario that the PBoC might want to avoid, at least for now.

This can open the door to reversal setups in the pair, with stops located above the 6.9900-handle to get risk levels above the multi-year high, along with initial targets set to 6.9000 and secondary targets towards the early-November low around 6.8500.

USD/CNH Monthly Price Chart: Inching Closer to the Multi-Year High

usdcnh usd/cnh monthly price chart

Chart prepared by James Stanley

Bearish USD/CHF Below 1.0150

A bit of turbulence has begun to show in USD/CHF as the pair battles around a key area of resistance at 1.0071. This is the 23.6% Fibonacci retracement of the 2016-2018 major move in the pair, and this is the same level that helped to mark the high in July of this year before a bearish reversal came into play.

The bullish advance in USD/CHF has been going for a month-and-a-half now, and this level of resistance has helped to cap the highs for the past week-and-a-half. This can open the door to reversal setups with stops lodged above the 1.0150 level, and initial targets set towards .9950. Secondary targets can be directed towards the Fibonacci level at .9902. And if the setup does show strong reversal potential next week, additional exits could be plotted around .9850 and then the support zone from .9750-.9767.

USD/CHF Weekly Price Chart: In the 2018 Resistance Zone

usdchf usd/chf weekly price chart

Chart prepared by James Stanley

To read more:

Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts for Q4 have a section for each major currency, and we also offer a plethora of resources on USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.

Forex Trading Resources

DailyFX offers a plethora of tools, indicators and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions. Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities; and our real-time news feed has intra-day interactions from the DailyFX team. And if you’re looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we’re looking at what we’re looking at.

If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.

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

Contact and follow James on Twitter: @JStanleyFX

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Michael Boutros , Currency Strategist

Michael Boutros
My Picks:  Near-term Trade Setups in EUR/USD and NZD/USD
Expertise:  Technical
Average Time Frame of Trades:  1-3 Days

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

EURUSD 120min Price Chart

EUR/USD Price Chart - 120min

In this week’s EUR/USD Price Outlook, we noted that our focus was higher in price with a breach above near-term resistance at 1.1424/32, “targeting 1.1462 backed by trendline confluence at ~1.1480 and the 61.8% retracement at 1.15 – look for a bigger reaction there IF reached.” Euro registered a high at 1.15 this week before reversing sharply with the decline breaking below the weekly opening-range low / slope support on Thursday.

The risk remains for further losses near-term but IF euro has turned the tide, price should stabilize ahead of 1.1301/18 into the start of the week. Topside objectives unchanged at 1.1424/32 with a breach above 1.15 needed to keep the long-bias viable. Weakness below this threshold exposes the 100% extension of the September decline at 1.1239. Review this week’s Strategy Webinar for an in-depth breakdown of these setup and more.

EUR/USD Trader Sentiment

EUR/USD Trader Sentiment
  • A summary of IG Client Sentiment shows traders are net-long EUR/USD - the ratio stands at +1.58 (61.2% of traders are long) – bearishreading
  • Traders have remained net-long since October 1st; price has moved 1.9% lower since then
  • Long positions are11.3% higher than yesterday and 11.0% lower from last week
  • Short positions are 15.6% higher than yesterday and 24.7% higher from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests EUR/USD prices may continue to fall. Yet traders are less net-long than yesterday and compared with last week andrecent changes in sentiment warn that the current EUR/USD price trend may soon reverse higher despite the fact traders remain net-long.

For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy

NZD/USD 240min Price Chart

NZD/USD Price Chart - 240min

Last week we highlighted the breakout potential in NZD/USD as Kiwi was approaching multi-month slope resistance with our focus on a break of the 6453-6640 range. Price ripped higher with the advance extending through the October opening-range highs into the start of November trade. A reversal off confluence resistance at 6811 has me in a short – half off at 6740 with stops a breakeven into the close of the week.

Keep in mind, New Zealand Dollar has broken above yearly slope resistance and leaves the broader outlook weighted to the topside while within this ascending pitchfork formation. From a trading standpoint, on the lookout for downside exhaustion on a move back towards the median-line for re-entries in the direction of the breakout - ultimately a topside breach of the upper parallel targets subsequent resistance objectives at 6851 and 6920/31.

Learn the traits of a successful trader in our free eBook!

NZD/USD Trader Sentiment

NZD/USD Trader Sentiment
  • A summary of IG Client Sentiment shows traders are net-long NZD/USD - the ratio stands at +1.14 (53.2% of traders are long) – weak bearishreading
  • Traders have remained net-long since September 20th; price has moved 3.1% higher since then
  • The percentage of traders net-long is now its lowest since October 25th
  • Long positions are5.7% lower than yesterday and 21.9% lower from last week
  • Short positions are 35.5% higher than yesterday and 40.1% higher from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests NZD/USD prices may continue to fall. Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current NZDUSD price trend may soon reverse higher despite the fact traders remain net-long.

Find yourself getting trigger shy or missing opportunities? Learn how to build Confidence in Your Trading

-Written by Michael Boutros, Currency Strategist with DailyFX

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

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Daniel Dubrovsky , Junior Analyst

Daniel Dubrovsky
My Picks:  Bearish AUD/CAD
Expertise:  Event-driven macro and classic technical analysis
Average Time Frame of Trades:  A few days to a few weeks

AUD/CAD Trading Strategy - Bearish Setup on the Horizon?

  • Canadian Dollar may resume gains against AUD on fundamental and technical arguments
  • BoC is relatively more hawkish than the RBA, meanwhile crude oil price declines may slow
  • AUD/CAD may fall as resistance holds, perhaps offering an attractive selling opportunity

Build confidence in your own trading strategy with the help of our free guide!

Fundamental AUD/CAD Bearish Argument

The Canadian Dollar has been losing ground against the Australian Dollar for over a month, but there are a couple of fundamental and technical arguments as to why that may turnaround. In recent weeks, the drive higher in AUD/CAD seems to have been a combination of improving market mood as well as a significant drop in crude oil prices. More declines in latter could push the pair higher and poses as a risk to this argument.

Oil has been under pressure lately amidst increased output from the United States and OPEC nations. Furthermore, the US has also excluding key nations from its reinstatement of sanctions on Iran. For Canada, lower crude oil prices can adversely impact revenues given that it is a major export. Thus, CAD can at times closely follow the commodity given its possible implications for BoC monetary policy bets.

Speaking of, the Bank of Canada is much more hawkish than its Australian counterpart (the RBA). This has largely been the case this year as the BoC kept raising rates while the RBA left theirs unchanged. Now, CAD enjoys a yield advantage against AUD by 25 basis points and that spread may very well increase in the not too distant future.

In FX, the direction of where interest rates are going are arguably the most significant determent of what moves currencies will make next. Looking at the chart below, AUD/CAD tends to more closely follow the spread between Australian and Canadian government bond yields than it does with oil prices. It’s an inverse relationship with the commodity given that CAD is the counter currency.

AUD/CAD Price Bullish Breakout a False Flag? Reversal to Come?

Chart created in TradingView

With that in mind, overnight index swaps are pricing in an 80% chance of a BoC rate hike in January 2019. In Australia, we don’t approach the same odds until towards the end of next year. This may perhaps be why we haven’t seen such a dramatic widening of the spread between Australian and Canadian front-end government bond yields.

Thus, from a monetary policy perspective, recent gains in AUD/CAD could be corrective as the dominant fundamental themes reinstates themselves. Furthermore, reports crossed the wires November 7th that OPEC countries will be discussing output cuts for 2019. Thus, oil’s scope for more weakness may now be suppressed in the interim.

AUD/CAD Technical Analysis

From a technical perspective, this has AUD/CAD in a rather interesting position for a potential bearish reversal in the near-term. On the daily chart, multiple falling trend lines have now been broken which are bullish signals. The dominant downtrend in AUD/CAD seen since March may very well be over. But, it is now facing critical resistance barriers composing of December 2016/2017 lows and the May 2018 low (0.95548 – 0.96028).

AUD/CAD Daily Chart

AUD/CAD Price Bullish Breakout a False Flag? Reversal to Come?

Chart created in TradingView

Zooming in on the 4-hour AUD/CAD chart shows that amidst its aggressive push higher, negative RSI divergence is present. This reveals that upside momentum is fading which may precede a bearish reversal if the fundamentals noted earlier sink the pair. With that in mind, it may be possible that resistance holds and we get a turn lower. This would expose near-term rising support lines which if broken, may see the dominant downtrend resume.

If these technical bearish reversal signs bear any fruit, it could open the door to an attractive AUD/CAD short perhaps targeting 0.93266 and then 0.91827. But until that is achieved (or if), I will be standing aside to watch how price action unfolds ahead. You may follow me on twitter @ddubrovskyFX for updates to this setup.

AUD/CAD 4-Hour Chart

AUD/CAD Price Bullish Breakout a False Flag? Reversal to Come?

Chart created in TradingView

FX Trading Resources

--- Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

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David Song , Currency Analyst

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

EUR/USD remains bid ahead of the Federal Reserve meeting amid the failed attempt to test the August-low (1.1301), but the exchange rate may continue to track a broad range ahead of 2019 as monetary policy in Europe and the U.S. appears to be on a preset course.

Recent remarks from the European Central Bank (ECB) suggest the Governing Council is in no rush to alter the forward-guidance as ‘measures of underlying inflation remain generally muted,’ and it seems as though President Mario Draghi & Co. will retain the zero-interest rate policy (ZIRP) for the foreseeable future as officials expect borrowing-costs to ‘remain at their present levels at least through the summer of 2019.’

As a result, attention now turns to the Federal Open Market Committee (FOMC), with more of the same from Chairman Jerome Powell & Co. likely to keep EUR/USD afloat as the central bank is widely expected to keep the benchmark interest rate on hold.

Image of fed fund futures

However, the FOMC may use the November meeting to prepare households and businesses for higher borrowing-costs as policymakers show no indications of deviating from the hiking-cycle, and Fed Fund Futures may continue to reflect expectations for a move in December as officials ‘generally anticipated that further gradual increases in the target range for the federal funds rate would most likely be consistent with a sustained economic expansion, strong labor market conditions, and inflation near 2 percent over the medium term.’

With that said, the Federal Reserve may push a more hawkish forward-guidance ahead of its last meeting for 2018, and the policy statement may ultimately tame the recent rebound in EUR/USD should a growing number of Fed officials show a greater willingness to extend the hiking-cycle. Sign up and join DailyFX Currency Analyst David Song LIVE for an opportunity to discuss potential trade setups.

EUR/USD Daily Chart

Image of eurusd daily chart

The failed attempt to test the August-low (1.1301) may generate a near-term rebound in EUR/USD, with the Relative Strength Index (RSI) highlighting a similar dynamic as the oscillator breaks out of the bearish formation carried over from late-September. In turn, a break/close above the 1.1510 (38.2% expansion) region raises the risk for a move back towards the Fibonacci overlap around 1.1640 (23.6% expansion) to 1.1680 (50% retracement), with the top of the broader range capped by the 1.1810 (61.8% retracement) region.

For more in-depth analysis, check out the Q4 Forecast for the Euro

Additional Trading Resources

Are you looking to improve your trading approach? Review the ‘Traits of a Successful Trader’ series on how to effectively use leverage along with other best practices that any trader can follow.

Want to know what other currency pairs the DailyFX team is watching? Download and review the Top Trading Opportunities for 2018.

--- Written by David Song, Currency Analyst

Follow me on Twitter at @DavidJSong.

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James Stanley , Currency Strategist

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

FX Setups for the Week of November 5, 2018

- DailyFX Quarterly Forecasts have been updated for Q4, and are available directly from the following link: DailyFX Trading Guides, Q4 Forecasts.

- For trading ideas, please check out our Trading Guides. And if you’re looking for something more interactive in nature, please check out our DailyFX Live webinars.

- If you’d like more color around any of the setups below, join in our live DailyFX webinars each week, set for Tuesday and Thursday at 1PM Eastern Time. You can sign up for each of those sessions from the below link:

Tuesday: Tuesday, 1PM ET

Thursday: Thursday 1PM ET

Do you want to see how retail traders are currently trading the US Dollar? Check out our IG Client Sentiment Indicator.

FX Volatility Shows Up Ahead of US Mid-Term Elections

As we near the end of a climactic week across global markets, next week’s calendar offers more potential for volatility as a number of themes remain in the limelight. Politics will be the focus in the early portion of the week as US voters head to the polls on Tuesday for mid-term elections. This round of mid-terms has taken on even more interest than usual given the massive ramps seen in US equity markets after the 2016 US Presidential Election. The month of October has seen that strength in stocks come into question, and over the past few weeks, that risk aversion has started to show across FX as a strong topside breakout in the US Dollar as the currency jumped up to fresh yearly highs. This was followed by an aggressive retracement on Thursday with USD price action finding support around the 96.00 level, and bulls bid the currency higher going into the weekend after an all-around strong NFP report.

Below, I look at three US Dollar setups designed for next week’s price action. One is set for a continuation of the US Dollar strength that’s been going for over a month now, while the other is based around the prospect of a deeper reversal in the Greenback. I’ve included a third conditional setup with eyes towards US Dollar weakness in AUD/USD.

US Dollar Four-Hour Price Chart

us dollar usd four hour price chart

Chart prepared by James Stanley

Bearish EUR/USD for USD-Strength Strategies

On the long-USD side of the ledger, EUR/USD remains attractive. This was a focus chart in the Thursday webinar, as I focused-in on the bounces in major pairs as the US Dollar softened from those fresh one-year highs; and while all of AUD/USD, NZD/USD and GBP/USD were jumping up to fresh highs, EUR/USD remained below prior October support. That zone of support from October runs from 1.1448-1.1500, and in this week’s FX Setups, this was listed as an area of lower-high resistance for short-side strategies in the pair.

This level came into play on Friday morning, getting a bit of an assist from a bearish trend-line that can be found by connecting swing-highs from late-September and mid-October. This keeps the pair as one of the more attractive long-USD options, and over the next two weeks, the brewing situation between Italy and Brussels will likely come into further light, as the Italian government is due to send a revised budget to the European Commission on November 13th.

EUR/USD Four-Hour Price Chart

eurusd eur/usd four hour price chart

Chart prepared by James Stanley

Bullish NZD/USD for USD-Weakness Strategies

Next week also brings a rate decision out of the Reserve Bank of New Zealand. Recent data out of New Zealand has been a bit stronger than expected, and this may lead to a slightly more hawkish monetary policy statement out of the bank, although its unlikely to lead to any direct warnings of pending rate hikes.

My interest in the pair is more technical in nature, and I started looking into this two weeks ago as the US Dollar was threatening a breakout beyond the 96.00 level. While US Dollar strength was showing very visibly in pairs like EUR/USD and GBP/USD, NZD/USD had held up fairly well (along with AUD/USD), and this presented a window to work with some divergent themes. Given the past two days’ price action, that theme appears to remain as the Dollar’s pullback on Thursday led to very noticeable breakouts in NZD/USD and AUD/USD while EUR/USD remained restrained underneath prior points of support.

On the NZD/USD chart, I want to see support hold above the psychological level of .6500. This week’s swing low was at .6511, and there’s an area of prior resistance that can be re-used for higher-low support potential as the Wednesday RBNZ rate decision nears. On the target or resistance side of the coin, the late August swing-high around .6725 may slow the advance, and this could become an area of interest for initial targets and break-even stop moves.

NZD/USD Four-Hour Price Chart

nzdusd nzd/usd four hour price chart

Chart prepared by James Stanley

AUD/USD for USD-Weakness Plays – Approach with Caution

Coming into this week, AUD/USD was my choice for USD-weakness, and similar to NZD/USD, the pair caught a firm topside pop around the Thursday pullback in the US Dollar. The quandary is that this topside rip may have been a little too much, a little too fast, as prices have found resistance in a key area on the chart around the .7200 handle. And given the reaction on the Daily chart, where a doji now sits above October price action, prices might be a little too expensive to chase in the early portion of next week.

For AUD/USD, I want to see Monday price action remain above the .7150 area of prior resistance. This could allow for stops below the Thursday low of .7065 to go along with initial profit targets at the Friday high of .7250. Stops can go to break-even at that point, with secondary targets set to .7350.

AUD/USD Four-Hour Price Chart

audusd aud/usd four hour price chart

Chart prepared by James Stanley

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Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts for Q1 have a section for each major currency, and we also offer a plethora of resources on USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.

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DailyFX offers a plethora of tools, indicators and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions. Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities; and our real-time news feed has intra-day interactions from the DailyFX team. And if you’re looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we’re looking at what we’re looking at.

If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.

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

Contact and follow James on Twitter: @JStanleyFX

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Paul Robinson , Market Analyst

Paul Robinson
My Picks:  Bullish AUD/USD & NZD/USD Set-ups
Expertise:  Technical
Average Time Frame of Trades:  Several days to several weeks

Looking for forecasts, trade ideas, and educational content? Check out the DailyFX Trading Guides page.

AUD/USD trend-line from January under attack

While trends in FX this year haven’t been the easiest to come by for the most part, AUD/USD has been the exception. Since January the persistent downtrend has been marked by an orderly sequence of lower lows and lower highs, and a trend-line to connect several of those peaks.

Trend-lines and trends don’t last forever. While this might not turn out to be a total trend turnaround, a sizable correction looks to be in order. Today, AUD/USD is on the verge of crossing the trend-line from January, and should it do so in convincing fashion look for a broader move higher to develop. The first area of resistance doesn’t arrive up until over 7300.

One could take the entry on a solid daily breakout (on a closing basis) above the trend-line, or wait for the first pullback or consolidation before taking entry. If holding for several days or longer isn’t your forte, then the daily break can be used on short-term time-frames (i.e. 4-hr, 1-hr) to shape a trading bias based on the broader path of least resistance.

For another view, check out our Chief Strategist John Kicklighter’s perspective on AUD/USD.

AUD/USD Daily Chart (Trend-line on verge of breaking)

audusd daily chart, trend-line on verge of breaking

These 4 tenets can help bolster your Confidence as a Trader.

NZD/USD rounding its way higher out of bottom pattern

Kiwi is on the verge of breaking higher out of an inverse head-and-shoulders pattern, with the trend-line from June also aligning with the neckline of the formation. If today’s strong rally holds, then the daily close will constitute an official break. There is trend-line resistance from August to watch soon, but the depth of the pattern points to a move to around 6800. There may be some opposition around 6700, first, before running there.

NZD/USD Daily Chart (Breaking neck-line, t-line)

NZD/USD daily chart, breaking neck-line, t-line

***Updates will be provided on these ideas and others in the trading/technical outlook webinars held on Tuesday and Friday. If you are looking for ideas and feedback on how to improve your overall approach to trading, join me on Thursday’s for the Becoming a Better Trader webinar series.

Resources for Forex & CFD Traders

Whether you are a new or experienced trader, we have several resources available to help you; indicator for tracking trader sentiment, quarterly trading forecasts, analytical and educational webinars held daily, trading guides to help you improve trading performance, and one specifically for those who are new to forex.

---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at@PaulRobinsonFX

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David Cottle , Analyst

David Cottle
My Picks:  Bullish USD/JPY
Expertise:  Fundamental and Technical
Average Time Frame of Trades:  Two months

New DailyFX Quarterly Forecasts for Q4 and are available here

The Japanese Yen has looked a little stronger against the US Dollar as October has progressed, with USD/JPY significantly below the 2018 peak set early in the month.

However, the Japanese currency’s fightback has not been built-upon very much in the past two weeks, which have rather seen quite narrow range trading for the greenback between JPY111.20 and 112.87.

The two currencies have been engaged in a battle of the havens, for sure. Both are sought by investors when risk appetite is battered, by trade war worries perhaps or fears about rising US interest rates’ effect beyond its shores.

That appetite has certainly been battered this month, with many stock indexes nursing heavy losses as a result (Australia’s ASX is down nearly 10%). The Yen has perhaps gained a modest upper hand over the Dollar, but it probably has not done enough to prevent USD/JPY rising into year end.

It is surely notable that the strong and well-respected daily chart uptrend in place since mid-April remains very much unthreatened by recent trade. While it does a move back to and even above the year’s top makes sense and is worth planning for

After all the US Dollar still enjoys the sort of fundamental interest rate support which Yen bulls have lacked for many years. The Federal Reserve is well-embarked down the policy normalization path, and plans to continue raising rates for as long as the economic data will allow.

Meanwhile the Bank of Japan remains pledged to a policy of extraordinary monetary accommodation until annualized inflation sustainably reaches 2%. September’s print was 1.2%, edging down from August.

Japanese Yen Still Mired Against US Dollar On Daily Chart

Against this backdrop it is hard to see the Yen making firm gains, unless global risk appetite suffers a catastrophic collapse. Moroever it probably makes sense to be long of USD/JPY into year end, targeting this year’s peak of 114.63

Manageable risk appetite might also make it sensible to be short of other currencies whose central banks are stuck in easing mode, with the Australian and New Zealand Dollars standing out here in the Asia Pacific region.

Obviously a slide below the prevalent daily chart uptrend would make this trade a lot risker, but even that would probably need to be validated by weekly or monthly closes, given that hugely Dollar supportive interest rate prognosis.

Resources for Traders

--- Written by David Cottle, DailyFX Research

Follow David on Twitter@DavidCottleFX or use the Comments section below to get in touch!

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