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FX Setups for the Week of March 18, 2019

FX Setups for the Week of March 18, 2019

2019-03-15 16:10:00
James Stanley, Currency Strategist
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FX Setups for the Week of March 18, 2019

Forex Talking Points:

- DailyFX Quarterly Forecasts are available directly from the following link: DailyFX Trading Guides, Q1 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.

End of Q1 Nears, FOMC on Deck for Next Wednesday

The end of Q1 is near with but two weeks of trade remaining before the door opens to Q2. It’s been an interesting outlay for a number of reasons, key of which is the return of the risk trade as the Fed shifted into a more moderate stance following the troubling equity sell-offs in Q4. This carried impact through the FX market, as an early-year surge of Yen-strength soon took a backseat to prior themes of Yen-weakness. This has helped USDJPY to put in a respectable showing so far in Q1, and this keeps the door open for further topside as the Q2 open nears.

The big item for next week is the FOMC rate decision on the calendar for Wednesday. There are minimal expectations for any adjustments or signals of adjustments to rates. The big topic of interest will be the balance sheet and how the Fed will look to continue with run-off, focusing on what the FOMC anticipates as the composition of the portfolio once they’re finished with Quantitative Tightening.

Below I look into four US Dollar price action setups designed for next week’s trade.

Bullish USDJPY on Hold Above 110.70

While the US Dollar has found a few different setbacks over the past week, highlighted by last week’s NFP report that helped to push DXY off of a big resistance level, USDJPY has held up fairly well. This highlights how a weak US Dollar hasn’t been as weak as the Japanese Yen, and this is a theme that shouldn’t be foreign to FX traders as Yen-weakness has continued to carry a strong correlation to risk-on market themes. The opposite theme has held true as well, with Yen-strength becoming of interest as risk-aversion themes have taken-hold across global markets.

This can keep the pair in an attractive spot for strategies built-around USD strength. The pair has thus far struggled to maintain above the 112.00 level, so traders would likely want to incorporate either an initial target or a break-even stop move upon a re-test of that level. A bit-higher is another potential area of resistance at 112.34, and this could function as either an initial target (if 112.00 is being used for a break-even stop move) or a secondary target.

USDJPY Eight-Hour Price Chart

usdjpy usd/jpy eight hour price chart

Bearish USDCNH on Hold Below 6.7400

On the other side of the US Dollar, USDCNH remains of interest. I began looking for a reversal in the pair last November as USDCNH tip-toed up towards prior highs. Given the backdrop, with the US-China trade dispute going along with an intense focus on currency-devaluation from President Trump, it didn’t seem an opportune time for the PBoC to allow for a top-side breakout in USDCNH which would likely garner considerable attention.

Since then, the Yuan has been guided-lower and prices have been confined to a bearish channel. I began looking at additional short-side setups coming into this week, and the first target was hit fairly quickly before prices bounced-up to prior resistance. With prices still adhering to this bearish channel, the door can remain open for more. The same initial target as last week may remain of interest around 6.7000 and, a bit-lower, secondary targets remain of interest around the 6.6750 area.

USDCNH Daily Price Chart

usdcnh usd/cnh daily price chart

Bullish AUDUSD on Hold Above .7000

Also on the side topside of USD-weakness is the of AUDUSD, which I had looked at last week on the basis of support holding above the key psychological level of .7000. While there isn’t much around the Australian economy to get excited about at the moment, the currency has had a difficult time trading below .7000, historically speaking. There have been a few instances of as such, most recently around the open of this year’s trade; but each time buyers have pushed prices back-above, giving rise to the continued defense of that level outside of any exogenous shocks. Last week saw the .7000 level come into play but buyers responded before bears could test-below, and this was somewhat of the basis for including this market in last week’s FX Setups.

For next week, the potential for further gains remains as the pair holds near weekly highs. Above current prices, the prior zone of interest around .7125-.7150 remains, and the long-term zone of support/resistance remains from .7185-.7206, which could function as topside targets accompanied with a break-even stop move.

AUDUSD Four-Hour Price Chart

audusd aud/usd four hour price chart

Bearish USDCAD on Hold Below 1.3470

I had looked into this setup in yesterday’s webinar, highlighting this specific zone of resistance for the potential re-opening of bearish strategies. Earlier in the month of March I had looked at bullish reversals in the pair, largely using an Oil proxy as WTI had just run into a key level of resistance. That resistance held and didn’t come back into play until this week when buyers posed a brisk topside breakout. At this point, WTI has pulled back to find support in that prior zone of resistance, and this can keep the focus on the long side of Oil which can, in-turn, keep the long side of the Canadian Dollar of interest.

WTI Crude Oil: Support Bounce From Prior Breakout Resistance

WTI Crude Oil Four Hour Price Chart

Initial targets could be sought around the prior zone of 1.3236-1.3259, at which point break-even stop moves can be investigated. Secondary targets could be sought at the same level that was used for support earlier this month, around the 1.3132 Fibonacci level; and if traders did want to look for a larger down-side move, the 1.3066 level lurks just-below that.

USDCAD Four-Hour Price Chart

usdcad usd/cad 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 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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