Analyst Picks

Nick Cawley , Analyst

Nick Cawley
My Picks:  Long CADJPY *** Update ***
Expertise:  Technical and Fundamental analysis
Average Time Frame of Trades:  one week to several weeks

*** Trading Update ***

The long CADJPY trade was activated on September 18 at 85.70 and has now hit its first target at 87.10. I will keep the second target at 89.40 and move up the stop-loss from 84.60 to 86.00 to guarantee a small profit in the case of any sell-off.

Original Story – September 17, 2018

We look to set-up a short- to medium-term Long CADJPY trade.

  • Canadian rate hike expectations continue to boost the Loonie.
  • JPY boost from trade fears but USD still the haven proxy.
  • Technical set-up looks positive.

We will look to go long CADJPY at 85.70 with a stop-loss at 84.60 with targets at 87.10 and 89.40

The Bank of Canada is expected to raise interest rates at its October monetary policy meeting by another 0.25% to 1.75%, the third hike of 2018. Canadian rates stood at 0.50% in May 2017. Despite ongoing NAFTA talks, the Canadian economy remains hot with inflation running at 3%, at the upper band of the central bank’s 1%-3% mandate. Governor Stephen Poloz has reiterated recently that the central bank is in a cycle of policy normalization and that they must not fall behind the inflation curve, hinting that rates may continue to go higher in pre-emptive moves.

The CADJPY four-hour chart shows the pair trading above all three moving averages and edging back to the low of the September 13 bull candle at 85.700, where support short-term support should appear.

CADJPY Four-Hour Chart (July 27 – September 17, 2018)

Bullish CADJPY - Solid Technical Support ** Update ** 

The daily CADJPY chart also shows the pair above all three moving averages, while the 20- and 50-day moving average broke above the 200-day ma on August 27, a bullish market set-up. The uptrend off the March 19 low at 80.55 remains in place. A break back above 86.590 will open 87.100 up reasonably quickly and then leave the February 2 high at 89.443 as the next target.

Fibonacci retracement levels offer support at 84.763 (38.2%) – along with the three moving averages - and first-level resistance at 86.065 (50%).

CADJPY Daily Price Chart (November 2017 – September 17, 2018)

Bullish CADJPY - Solid Technical Support ** Update ** 

Entry Point: 85.700

Target 1: 87.100

Target 2: 89.400

Stop-Loss: 84.600

--- Written by Nick Cawley, Analyst

To contact Nick, email him at nicholas.cawley@ig.com

Follow Nick on Twitter @nickcawley1

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Paul Robinson , Market Analyst

Paul Robinson
My Picks:  EUR/USD Bullish on Breakout
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.

Pressure building towards a euro breakout

Choppy trading conditions in EUR/USD have made life difficult for those trying to play for a sustained move. As we’ve been discussing in recent webinars, taking only quick-hitter range-trades or staying away altogether has been a prudent approach. (for upcoming webinars, check out the calendar).

With pressure building in the form of an ascending wedge just beneath strong resistance the euro is on the cusp of a breakout. There is a good amount of resistance in the area around 11720/50 which needs to be cleared through first before momentum has a chance at picking up.

A clear on through, though, given the extent of the recent choppiness could lead to quick trade higher into the 11900/2000 area. Risk/reward on a swing-trade might not be the best, but for shorter-term tactical maneuvers a breakout could pave a clear path of least resistance to trade along.

EUR/USD Daily Chart (Break above resistance nearing)

Please add a description for the image.

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

EUR/USD 4-hr Chart (Pressuring building)

EUR/USD 4hr chart, pressure building

***Updates will be provided on these ideas and others in the trading/technical outlook webinars held on Wednesday 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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James Stanley , Currency Strategist

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

Talking Points:

- DailyFX Quarterly Forecasts have been updated for Q3, and are available directly from the following link: DailyFX Trading Guides, Q3 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, we discuss these in our live DailyFX webinars each week, set for Tuesday and Thursday at 1PM Eastern Time. You can sign up for each of those session 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.

A Quieter Calendar to Allow for Proof of Trend

This week opens with a quieter economic calendar than what we’ve seen over the past few weeks, and given some of the themes that have begun to show with a bit more prominence, this opens up the possibility for trends to avail themselves without the noise of constant near-term data on the calendar.

We now have two weeks until the end of Q3. The first quarter of this year was largely a stage for continuation, at least if looking at trends around the Euro, US Dollar and British Pound. The second quarter brought pullbacks in those themes that raised the prospect of full-fledged reversals; but so far throughout Q3 we’ve largely seen a state of hold as both Euro weakness and US Dollar strength have been unable to continue. The British Pound, meanwhile, has recently shown some chaotic price action as Brexit-headlines have pushed prices in either direction, and this is something that may continue as we move into Q4 of this year.

One of the more interesting takeaways from last week, however, came from the Japanese Yen. The Japanese currency put in a move of weakness around the Thursday release of US CPI, and this helped USD/JPY run up to a fresh monthly high above the 112.00 level. This leads into a Bank of Japan interest rate decision on the calendar for next week, and below we look at a couple of setups on either side of JPY.

Bearish AUD/JPY on Hold Below 81.00

AUD/JPY started the month of September in a troubling fashion, dropping down to fresh ten-month lows in the first week of the month, extending a down-trend that’s been in place since mid-July that’s seen the pair shed as much as much as 500 pips. But last week’s Yen weakness helped AUD/JPY to recover, and prices have moved back-above the key psychological level of 80.00.

There’s a bearish trend-line in-play on the pair, and price action is near an area of prior resistance around the 81.00 handle that can keep the door open for short-side setups. This can open the door for targets at the big figure of 80.00, at which point stops can go to break-even as deeper profit targets are set towards 79.37 and then 78.75.

AUD/JPY Four-Hour Price Chart

audjpy aud/jpy four hour price chart

Chart prepared by James Stanley

Bullish EUR/JPY on Hold Above 130.00

We looked into the pair last week ahead of the ECB rate decision, and at the time price action remained in a non-directional state, catching resistance off of a confluent batch of Fibonacci resistance levels. That resistance was soundly broken last week as EUR/JPY jumped up to a fresh monthly high, catching a bit of resistance off of the 131.00 handle in the process.

As we wrote last week, a test of these highs opens the door for higher-low support, which remains as a workable theme as we open up a fresh week.

EUR/JPY Four-Hour Price Chart: Holding Resistance at Monthly Highs

eurjpy eur/jpy four hour price chart

Chart prepared by James Stanley

At this point, prices are right back to testing those highs, so we now have two ways of moving-forward with bullish continuation approaches. Either a) a revisit to the higher-low support zone, coupled with a defense of 130.00 or b) fresh monthly highs which open the door for higher-low support at our current zone of resistance, as taken from last week’s high to the August swing-high around 130.90.

EUR/JPY Hourly Price Chart: Conditional Bullish Approach

eurjpy eur/jpy hourly price chart

Chart prepared by James Stanley

EUR/USD: Bearish Until Key Resistance Encroached Upon

On the side of USD strength, it can be difficult to muster much at the moment given that the currency is moving back down to test fresh monthly lows. But – as we’ve been following, much of the dynamics in the US Dollar of recent appear to draw back to EUR/USD, as it was the pairs risk aversion-led sell-off in May and again in early-August that really made the Dollar shine. But – as those themes of risk aversion have pulled back, so have US Dollar bulls, to the point that we may soon be nearing a re-ignition of the longer-term bearish trend in the currency.

In EUR/USD, we’ve been following the key zone of resistance that runs from 1.1709-1.1750, and this area has held up through multiple resistance tests, including in late-August and again last week. But bulls have yet been deterred, as last week’s resistance test led into a higher-low, and the pair is bouncing-higher so far on the fresh week.

But – as we’ve been following, the setup can be approached in a bearish fashion until that resistance is taken out, at which point traders would likely want to acknowledge the prospect of a longer-term return of strength in the pair. If we do see resistance show inside of last week’s swing high at 1.1722, the door can remain open for short-side setups. For that approach, this week’s swing-low of 1.1618 becomes an ideal first target, followed by secondary targets around the 1.1530 support that helped to mark last week’s low.

EUR/USD Four-Hour Price Chart: Approaching Key Area of Long-Term Resistance

eurusd eur/usd four hour price chart

Chart prepared by James Stanley

Bearish USD/CHF For Fresh Lows

On the bearish side of the US Dollar, we’ve been following USD/CHF, catching lower-high resistance at a key zone last week ahead of the pair pushing down to print fresh five-month lows. At this point, the primary fear for bearish continuation would be the potential for an oversold environment; but bearish structure remains and the door can stay open for down-side continuation strategies.

At this point, traders would likely want to look for a bounce up to another fresh lower-high. Last week’s resistance came-in at the psychological level of .9750, and we look at two different areas that can be used for lower-high resistance in the pair as we move deeper into this week.

USD/CHF Four-Hour Price Chart: Lower-High Resistance Potential for Bearish Continuation

usdchf usd/chf four hour 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 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.

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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Nick Cawley , Analyst

Nick Cawley
My Picks:  Long CADJPY
Expertise:  Fundamental and Technical analysis
Average Time Frame of Trades:  One week to several weeks

We look to set-up a short- to medium-term Long CADJPY trade.

  • Canadian rate hike expectations continue to boost the Loonie.
  • JPY boost from trade fears but USD still the haven proxy.
  • Technical set-up looks positive.

Check out the DailyFX Trading Guides for our latest forecasts and educational guides and content.

We will look to go long CADJPY at 85.70 with a stop-loss at 84.60 with targets at 87.10 and 89.40

The Bank of Canada is expected to raise interest rates at its October monetary policy meeting by another 0.25% to 1.75%, the third hike of 2018. Canadian rates stood at 0.50% in May 2017. Despite ongoing NAFTA talks, the Canadian economy remains hot with inflation running at 3%, at the upper band of the central bank’s 1%-3% mandate. Governor Stephen Poloz has reiterated recently that the central bank is in a cycle of policy normalization and that they must not fall behind the inflation curve, hinting that rates may continue to go higher in pre-emptive moves.

The CADJPY four-hour chart shows the pair trading above all three moving averages and edging back to the low of the September 13 bull candle at 85.700, where support short-term support should appear.

CADJPY Four-Hour Chart (July 27 – September 17, 2018)

Bullish CADJPY - Solid Technical Support

The daily CADJPY chart also shows the pair above all three moving averages, while the 20- and 50-day moving average broke above the 200-day ma on August 27, a bullish market set-up. The uptrend off the March 19 low at 80.55 remains in place. A break back above 86.590 will open 87.100 up reasonably quickly and then leave the February 2 high at 89.443 as the next target.

Fibonacci retracement levels offer support at 84.763 (38.2%) – along with the three moving averages - and first-level resistance at 86.065 (50%).

CADJPY Daily Price Chart (November 2017 – September 17, 2018)

Bullish CADJPY - Solid Technical Support

Entry Point: 85.700 (Pending)

Target 1: 87.100

Target 2: 89.400

Stop-Loss: 84.600

--- Written by Nick Cawley, Analyst

To contact Nick, email him at nicholas.cawley@ig.com

Follow Nick on Twitter @nickcawley1

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Justin McQueen , Analyst

Justin McQueen
My Picks:  Short USDCAD
Expertise:  Fundamental Analysis
Average Time Frame of Trades:  Few Weeks

USDCAD Trading Strategy: Short on rallies to 1.3060, target 1.28 stop 1.3150

  • Trade Risk: Failure to reach NAFTA deal and soft Canadian inflation

USDCAD Fundamental Overview

CAD: The largest risk to the outlook for the Canadian Dollar is the outcome regarding NAFTA. With a touted deadline of October 1st, the headline risk for USDCAD is high and will turn likely dictate near term price action for the pair. Recent rhetoric has been somewhat positive with source reports signalling that Canada were willing to provide key concessions in order to reach an agreement, consequently the Loonie has firmed in recent trading sessions.

Given the firm data out of Canada, the BoC has signalled that their willingness to raise rates in the short term. Alongside this, recent comments from Deputy Governor Wilkins were on the hawkish side with the rate setter discussing whether to remove its “gradual approach” from its current rate guidance. If indeed an agreement is reached, this could potentially see markets reprice a steeper rate path from the BoC.

On the data front, eyes will be on the upcoming CPI report, in which a a softer figure could cool bets of an aggressive tightening stance and pressure the Loonie.

USD

With Fed tightening price in the markets, the rise in the USD index may be somewhat modest at best from these levels. That said, CFTC data has shown a reduction in USD long positioning over the past two weeks with speculators shedding $2.5bln worth of longs, suggesting that the Dollar could top out. Alongside this, inflationary pressures have seemingly eased following this weeks PPI and CPI releases, which in turn has reigned in expectations of a steeper rate path from the Fed, thus weighing on the greenback.

USDCAD Technical Overview

Resistance 1: 1.3050 (Psychological)

Resistance 2: 1.3115 (23.6% Fibonacci Level)

Resistance 3: 1.3200 (Psychological)

Support 1: 1.2980

Support 2: 1.2950 (38.2% Fibonacci Level)

Support 3: 1.2910 (200DMA)

USDCAD PRICE CHART: Daily Time Frame (January-September 2018)

USDCAD Short: BoC Wait on NAFTA Deal to Steepen Rate Path

Chart by IG

--- Written by Justin McQueen, Market Analyst

To contact Justin, email him at Justin.mcqueen@ig.com

Follow Justin on Twitter @JMcQueenFX

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Justin McQueen , Analyst

Justin McQueen
My Picks:  Short USDCAD
Expertise:  Fundamental Analysis
Average Time Frame of Trades:  Few Weeks

USDCAD Trading Strategy: Short on rallies to 1.3060, target 1.28 stop 1.3150

  • Trade Risk: Failure to reach NAFTA deal and soft Canadian inflation

USDCAD Fundamental Overview

CAD: The largest risk to the outlook for the Canadian Dollar is the outcome regarding NAFTA. With a touted deadline of October 1st, the headline risk for USDCAD is high and will likely dictate near term price action for the pair. Recent rhetoric has been somewhat positive with source reports signalling that Canada were willing to provide key concessions in order to reach an agreement, consequently the Loonie has firmed in recent trading sessions.

Given the firm data out of Canada, the BoC has signalled their willingness to raise rates in the short term. Alongside this, recent comments from Deputy Governor Wilkins were on the hawkish side with the rate setter discussing whether to remove its “gradual approach” from its current rate guidance. If indeed an agreement is reached, this could potentially see markets reprice a steeper rate path from the BoC.

On the data front, eyes will be on the upcoming CPI report, in which a a softer figure could cool bets of an aggressive tightening stance and pressure the Loonie.

USD

With Fed tightening priced in the markets, the rise in the USD index may be somewhat modest at best from these levels. That said, CFTC data has shown a reduction in USD long positioning over the past two weeks with speculators shedding $2.5bln worth of longs, suggesting that the Dollar could top out. Alongside this, inflationary pressures have seemingly eased following this weeks PPI and CPI releases, which in turn has reigned in expectations of a steeper rate path from the Fed, thus weighing on the greenback.

USDCAD Technical Overview

Resistance 1: 1.3050 (Psychological)

Resistance 2: 1.3115 (23.6% Fibonacci Level)

Resistance 3: 1.3200 (Psychological)

Support 1: 1.2980

Support 2: 1.2950 (38.2% Fibonacci Level)

Support 3: 1.2910 (200DMA)

USDCAD PRICE CHART: Daily Time Frame (January-September 2018)

USDCAD Short: BoC Wait on NAFTA Deal to Steepen Rate Path

Chart by IG

--- Written by Justin McQueen, Market Analyst

To contact Justin, email him at Justin.mcqueen@ig.com

Follow Justin on Twitter @JMcQueenFX

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Paul Robinson , Market Analyst

Paul Robinson
My Picks:  Bearish USD/CNH
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.

We looked at a short USD/CNH trade a few weeks back, and things didn’t pan out quite as planned. Such is trading. If the current set-up doesn’t pan out, then adhering to the “max of 2 failed attempts on an idea” rule will apply.

To put the whole idea into context, a month ago there was a big key-reversal on the weekly chart near long-term resistance. This primed USD/CNH to trade neutral at best, likely lower. Since then we’ve seen a couple of attempts to trade higher following weakness, with yesterday’s down day having started just below the August 23rd swing high.

With momentum turning down, looking at the past few weeks, yesterday’s turn could post a lower high kicking off more selling in the days/weeks ahead. Looking at equal legs, the decline off the highs was about 1700 points, placing a target on a decline from yesterday’s high to down around 6.72.

Placing a stop above the highs created yesterday and on Aug 23rd (6.9050) with an entry at current prices (6.8468), leaves us with a risk/reward ratio of right around 1:2, sufficient enough. If momentum is strong as price rolls towards the target it's a good idea to see if it can't continue to roll on, a good strategy for potentially extending trades beyond the initial target. Especially since, in this particular case, there isn't any highly visible price support until 6.60.

USD/CNH Weekly Chart (Big Reversal followed by lower high potential)

USD/CNH weekly chart, big reveral followed by lower high potential

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

USD/CNH Daily chart (Looking for low 6.70s)

USD/CNH daily chart, lower high, looking for low 6.70s

***Updates will be provided on these ideas and others in the trading/technical outlook webinars held on Wednesday 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 Song , Currency Analyst

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

EUR/USD holds a narrow range ahead of the European Central Bank (ECB) interest rate decision, but fresh remarks from the Governing Council may sway the near-term outlook for the euro-dollar exchange rate as the quantitative easing (QE) program is set to expire in December.

Image of DailyFX economic calendar

The ECB is expected to unveil an updated exit strategy as the central bank pledges to wind down its asset purchases to EUR15B/month starting in October, and a more detailed exit strategy may boost the appeal of the Euro as the Governing Council shows a greater willingness to move away from its easing-cycle.

However, President Mario Draghi & Co. may continue to highlight a dovish forward-guidance as ‘significant monetary policy stimulus is still needed to support the further build-up of domestic price pressures and headline inflation developments over the medium term,’ and the ECB may merely stick to the current script as ‘measures of underlying inflation remain generally muted.’

In turn, the Governing Council is likely to reiterate that euro-area interest rates are expected to ‘remain at their present levels at least through the summer of 2019,’ and more of the same from President Draghi & Co. may produce headwinds for the Euro as the central bank remains in no rush to normalize monetary policy.

Keep in mind, there appears to be a broader shift in EUR/USD behavior as it appears to be breaking out of the downward trending channel from June, with the euro-dollar exchange rate at risk of making a run at the August-high (1.1734) as it carves a fresh series of higher highs & lows. 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 appears to be making a run at the August-high (1.1734) as the 1.1510 (38.2% expansion) appears to be offering near-term support, with a break/close above the 1.1640 (23.6% expansion) to 1.1680 (50% retracement) region raises the risk for a larger recovery. Need a break/close above the 1.1810 (61.8% retracement) hurdle, which largely lines up with the July-high (1.1791), to open up the topside targets, with the first region of interest coming in around 1.1960 (38.2% retracement) to 1.1970 (23.6% expansion).

For more in-depth analysis, check out the Q3 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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Jeremy Wagner, CEWA-M , Head Forex Trading Instructor

Jeremy Wagner, CEWA-M
My Picks:  USDNOK, EURNOK, EURNZD
Expertise:  Elliott Wave, Technical Analysis
Average Time Frame of Trades:  2 days - 2 weeks

The technical patterns on USDNOK and EURNOK depict some bearish patterns. The preferred position is short USDNOK and EURNOK while remaining long EURNZD (from Aug 29).

Longer term Elliott Wave pattern for USDNOK

The longer-term Elliott Wave pattern in USDNOK from the January 2016 high appears to be an Elliott Wave complex correction lower. This pattern has been mostly contained the within a downward price channel. USDNOK has effectively created a lower high and lower low since testing the upper bounds of this channel in August 2018.

Therefore, we have enough technical evidence to trade a bearish stance against the recent swing high. There is some technical support near the blue support line near 8.21-8.22. Conservative traders may want to wait for a break of this level to confirm the resumption of the downtrend.

Short USD/NOK Trade Idea

Short Entry: 8.24

Stop Loss: 8.47

First Target: 7.96 (Risk to reward ratio 1 to 1.2)

Second Target: 7.63 (Risk to reward ratio 1 to 2.6)

USDNOK price chart with elliott wave labels forecasting a continuation of the bearish trend.

EURNOK shorter term patterns clearer

The longer-term pattern for EURNOK is not as clear as USDNOK. I can see longer-term bearish patterns, like a thrust from a triangle from July 2017 to Dec 2017 high. A bullish possibility is that near term prices are correcting lower in wave 4 of an ending diagonal that should hold above 9.00. However, the near term technical picture for EURNOK is bearish as trend line support was just broken earlier today.

Short EUR/NOK Trade Idea

Short Entry: 9.58

Stop Loss: 9.67

Target: 9.41 (Risk to reward ratio 1 to 2.8)

EURNOK daily price chart with technical levels included.EURNOK selling trading idea forecasting a bearish trend due to trend line break.

Remain long EURNZD

The long position for EURNZD was triggered on August 29 as NZD was breaking down. We moved the stop loss higher to 1.75 on September 4 while EURNZD continues to punch 3 year highs. As described in Monday’s webinar recording(34 minute mark of the video), when you are in a strong trend that continues to break higher, manually move the stop loss up to the next swing low.

Our viewpoint on EURUSD is that it is rallying in a larger corrective wave that may last for several weeks or months. NZD has been especially weak lately. Therefore, pairing EUR against NZD may have medium term potential.

In the case of EURNZD, we are continuing to hold the long EURNZD position but will adjust the stop loss higher to 1.76 to lock in at better than break even. Though this trend is strong, we will head to the exits at 1.80 as there is a bit of congestion in this price zone from back in 2015.

EURNZD reaches 3 year highs in a strong up trend.

Original EURNZD Trade Idea

Long Entry: 1.7570

Stop Loss: 1.7354 (**we are moving this to 1.7600 today)

Target: 1.8000

Risk to Reward Ratio 1 to 2

We studied millions of live trades to find what makes some traders successful over others. Risk to reward ratios was a common trait so we used that in our Traits of Successful traders research.

Elliott Wave Theory FAQ

How does Elliott Wave theory work?

Elliott Wave Theory is a forex trading study that identifies the highs and lows of price movements on charts via wave patterns. Traders often analyze the 5-wave impulse sequence and 3-wave corrective sequence to help them trade forex strategically. We cover these wave sequences in our beginners and advanced Elliott Wave trading guides.

New to FX trading? We created this guide just for you.

---Written by Jeremy Wagner, CEWA-M

Jeremy Wagner is a Certified Elliott Wave Analyst with a Master’s designation. Jeremy provides Elliott Wave analysis on key markets as well as Elliott Wave educational resources. Read more of Jeremy’s Elliott Wave reports via his bio page.

Do you agree/disagree with Jeremy’s Elliott Wave count above? Include your comments and Elliott Wave chart in the comments section below.

Discuss this market with Jeremy in Monday’s US Opening Bell webinar.

Follow on twitter @JWagnerFXTrader .

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Tyler Yell, CMT , Forex Trading Instructor

Tyler Yell, CMT
My Picks:  Bullish EUR/USD on Weakening USD, Lower Italian Bond Yields
Expertise:  Intermarket Analysis, Derivatives, Technical Analysis
Average Time Frame of Trades:  1-4 Weeks
  • Spot: $1.1585 per EUR
  • Entry Zone: Break and close above $1.1800 per EUR
  • Invalidation Point: $1.1600 per EUR (corrective pivot point)
  • Target 1: $1.2075 per EUR (> 1:1 Risk: Reward), 275 pips of reward sought, 1.375X Risk multiple
  • Target 2: $1.2555 per Euro (2018 top), 755 pips of reward sought, 3.7X Risk multiple

Emerging Market crises tend to go hand in hand with a stronger US Dollar. We’ve had a handful of crises of late, but surprisingly, the US Dollar has been held back and may continue to soften.

When the US Dollar peaked in late May, it traded at 94.60. Today, the US Dollar Index is trading at 94.85. At the same time, it’s worth considering that the Fed will not manually push the yield curve to invert, which they would do if they keep hiking as they said they would while the 10-year UST yield remains below 3%.

If the Fed does pull back on anticipated hikes that are already priced in, we could be looking a broad pullback in the US Dollar, which some think has already started. That being said, EUR/USD could have strength on the horizon if this plays out.

Looking at a weekly US Dollar chart, we appear to be moving into long-term resistance through the lens of Ichimoku Cloud, one of my favorite trend following indicators.

Long-Term Chart Shows US Dollar Coming Into Resistance

Please add a description for the image.

Chart Source: Pro Real Time, an IG Charting Package, IG UK Price Feed. Created by Tyler Yell, CMT

If Italian Bond Yields Fall, Capital Flow May Boost EUR

Please add a description for the image.

Data Source: Bloomberg, Created by Jacob Schoenleb

Italian Bonds are important to watch as optimism abounds about the nation avoiding a budget crisis. If you look to the far right of the chart above you can see Italian Bond (BTP) yields drop, which as lifted EUR/USD from 1.13 to 1.17 (seen in orange.)

The absolute risk is that the ECB is set to make another cut in the bond purchase program, and given that they’ve already overpurchased Italian bonds. If the ECB spooks bond buyers and the yields jump back higher, then we’re likely to see a drop in EUR/USD, and the trade entry point of 1.1800 is unlikely to be reached.

However, if the yields continue to fall on favorable comments from Italy’s Finance Minister or the spread between the Italian 10 year yield and the German 10yr yield continue to narrow, traders should be on the look for further upside in EUR/USD price action.

EUR/USD Has Pulled Back, But A Channel Extreme May Show Value

Please add a description for the image.

Chart Source: Pro Real Time, an IG Charting Package, IG UK Price Feed. Created by Tyler Yell, CMT

The chart above has two channels, first a Fibonacci Channel, which is drawn off the 2015/2017 lows and the August 2015 high. The Fib channel helps traders to see support or resistance as a trend moves through time. What the channel helps traders to see is that Fib Channel resistance may now be turning into support based on the low in late 2017 and recently when price pierced the channel top only to perform a morning star bullish reversal pattern. A break above $1.18 could be a signal that we’re now entering or turning into a new more bullish scene with a weaker USD.

The second channel is an Andrew's Pitchfork channel that is drawn off the closing low in late 2015 and key pivots in 2016 and 2017. Andrew’s Pitchfork does a good job of framing price action. Another thing that Andrew’s Pitchfork does is show you where there’s value within a move (typically in the lower quarter of a rising channel or an opportunity to take money off the table or at least not enter (typically in the upper quarter of a channel.)

If the price breaks above $1.18, it could be a signal that price is strongly rebounded, and we could soon be on our way back toward $1.2075 (a Fibonacci bullish target,) or the 2018 high at $1.2555.

We’ll see.

New to FX trading? No worries, we created this guide just for you.

---Written by Tyler Yell, CMT

Tyler Yell is a Chartered Market Technician. Tyler provides Technical analysis that is powered by fundamental factors on key markets as well as t1rading educational resources. Read more of Tyler’s Technical reports via his bio page.

Communicate with Tyler and have your shout below by posting in the comments area. Feel free to include your market views as well.

Talk markets on twitter @ForexYell

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