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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

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