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This week marks the final week of Q2 and the first half of 2018, and as we move into the second half of the year a number of key themes remain interesting across global markets. One of the more notable takeaways from Q2 has been a re-emergence of US Dollar strength to go along with bearish moves in both the Euro and British Pound.
To accent this backdrop, this week’s economic calendar has a number of key drivers set to be released. We have high-impact USD data every day of the week, Tuesday-Friday; and European data takes the stage as we wind the week down as a couple of European inflation prints are set to be released on Thursday and Friday. Below, we look at two price action setups for this week, and we’ll review these setups on our webinars set to take place on Tuesday and Thursday at 1PM ET, each of which are linked below and available for sign-up.
Tuesday: Tuesday, 1PM ET
Thursday: Thursday 1PM ET
Bearish USD/CHF on a Hold Below Parity
We’d looked at the short-side of USD/CHF last week, and the pair has come within a few pips of our initial target at .9850 before a bit of support began to show. But the fact that prices continue to print with both lower-lows and lower-highs continues to highlight the bearish potential in the pair; and this comes after the strong topside run that showed through April and May. With prices now sitting at short-term support, I need the pair to pullback a bit before I can look to add to the position. There’s an area of prior support/resistance that remains appealing for such a scenario, and that zone runs from around .9890 up to .9915; and a pull back to resistance here opens the door for stops above parity and initial targets set to .9825. The first target can be coupled with a break-even stop along with a secondary target down to the psychological level of .9750.
USD/CHF Four-Hour Chart: Bearish Continuation Potential
Chart prepared by James Stanley
Bearish GBP/USD on Hold Below 1.3350
Last week was fairly busy for the British Pound, and the currency came into the week continuing the sell-off that had driven price action for the better part of the prior two months. But around the Bank of England rate decision on Thursday, GBP/USD began to bounce from a key Fibonacci level; and as we open this week, the potential for a deeper move of strength remains as we discussed in our earlier technical piece on the pair entitled, GBP/USD: British Pound Price Bounces From Fibonacci Support post-BoE.
As we discussed in that piece, the longer-term down-trend remains attractive here. But the pair had become so oversold as we walked into that BoE rate decision, and the fact that we have a potential bullish driver given that hawkish outlay at the bank could bring a deeper retracement before that longer-term bearish trend is ready for resumption.
But – there’s also a short-term bearish setup showing, as prices have held the resistance area around 1.3304 that we looked at shortly after that rate decision. This can keep the door open for short-side continuation, but stops on the position will be kept rather tight in the event that a deeper retracement does show. Stops can be set at 1.3350 to get above last week’s high along with some additional room, and that can open the door for initial targets at the 1.3200 handle. Stops can go to break-even at that initial target, and secondary targets can be cast down to the same 1.3117 Fibonacci level that helped to cauterize support last week.
Want to see how retail traders are currently trading GBP/USD? Click here for GBP/USD Sentiment.
GBP/USD Four-Hour Chart: Bearish Continuation Potential
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