Note that this is my current view, but if market conditions change my view can change too. Generally I will trade in alignment with what I have noted here, though I will wait for a set-up before I enter. I base my view on technical and fundamental information. This is my beliefs and you are welcome to have opposite ones. Having a plan is more important than the actual direction for me.
- Wait DXY – MT is sideways normal. I expect a couple of key drivers for the USD to start the year. Firstly, we have the Federal Reserve raising rates which is supportive of the dollar vs. other countries which are either on hold or looking to lower rates. We can expect this to remain a theme throughout 2017. Recent data, including this weeks Job Report and FOMC minutes have done nothing to contradict this theme. Secondly, politics is going to play a major role. The general consensus is that we will have policies from Trump that broadly support growth (and inflation) such as fiscal stimulus, tax cuts and a reduction in regulation. If this happens, then the USD will be seen as a desirable currency to own. The markets should focus on politics more than they have done in the past. Watch for Trump’s speech on the 11th of Jan to get an idea on how focused traders will be on what he says this year. We also need to keep a very close eye on Trump’s foreign policy, with some major changes afoot.
- Wait GBP/USD. – MT is sideways normal. Brexit concerns continue to weigh on the pair. I do think that they are overdone and that there is an opportunity to accumulate GBP vs currencies other than the USD around these levels. Technically, I would like to see the GBPUSD take out 1.20 and reverse before looking to buy. UK data has been solid to start the year and there is a trend since October 16 of speculators in the futures market trimming short positions.
- Wait USD/JPY. – MT is sideways normal. We have a period of consolidation forming in a weekly bull MT. No change in the fundamentals, with the BOJ and Japan actively devaluing their currency. Patience is required while we consolidate before looking to buy again
- Sell AUD/USD. Trend – MT is bear normal. The Chinese Yuan strengthened last week on the back of aggressive govt intervention which is bullish for AUD. Gold remains depressed, but Copper and Iron Ore remain well off lows. Trade data also came in better than expected. Speculators in the futures market have now flipped to net short AUD. Overall, I think the moves in the pair will come on the back of USD strength or weakness and that we will see the pair head lower, but we need to have some caution in the short-term.
- Wait EUR/USD. – MT is sideways normal. While I think we need to maintain a healthily dose of caution on the EUR at the moment, given the strong support level we are sitting at, I still prefer to sell the pair. The Italian banking crisis is far from resolved and we have plenty of political risks on the horizon. On the plus side, we have had some good Eurozone data to start the year, but I don’t expect the Eurozone to outperform the US in 2017. Interestingly, speculators in the futures market continue to trim shorts at these levels.
- Sell NZD/USD. Trend – MT is bear normal. A bearish engulfing candle after NFP should lead to further downside in the pair. Dairy prices have been falling again and with the divergence in monetary policy between the US and NZ sentiment remains negative. COT shows traders getting heavily short. Look to sell this week.
- Buy USD/CHF. Trend – MT is bull normal. We need some caution, as we are sitting at resistance. Overall, I like to buy the pair, but I think if we get risk-off in stocks we could see USDCHF sell-off heavily so stay diligent.
- Wait USD/CAD. – MT is sideways volatile. Oil formed a weekly Doji at key resistance around the $50 mark, and at these levels it is supporting CAD. I still favor Oil to sell-off in the medium term but patience is required. There were good trade and job numbers out of Canada on Friday and we have flipped back into a sideways MT on the weekly charts. Wait for now.
- Wait EUR/GBP. – MT is sideways normal. Gains in the pair have been capped at 0.86 with the formation of a hammer 6 trading days ago. One more push higher in the pair would not surprise me, but otherwise I certainly prefer to sell.
- Wait EUR/CHF. – MT is sideways normal. Wait.
- Wait AUD/JPY. – MT is sideways normal. Wait.
- Wait NZD/JPY. – MT is sideways normal. Wait.
- WAit GBP/JPY. – MT is sideways normal. Wait.
- Wait EUR/JPY. – MT is sideways quiet. A break above 124.00 looks very interesting from a technical perspective.
- Wait CAD/JPY. – MT is sideways normal. Wait.
- Wait CHF/JPY. – MT is sideways quiet. Similar to EURJPY, a break above 115.60 looks very interesting from a technical perspective.
- Wait GBP/NZD. – MT is sideways quiet. Wait.
- Wait EUR/NZD. – MT is sideways normal. Wait.
- Wait AUD/NZD. – MT is sideways normal. Wait.
- Wait EUR/AUD. – MT is sideways normal. Wait.
- Wait GBP/AUD. – MT is sideways quiet. Wait.
- Sell AUD/CAD. Trend – MT is bear normal. Continue to sell.
- Sell GBP/CAD. Trend – MT is bear normal. Look to sell.
- Wait EUR/CAD. – MT is sideways normal. Wait.
- Sell NZD/CAD. Trend – MT is bear normal. Continue to sell.
- Wait GBP/CHF. – MT is sideways normal. Wait.
- Wait CAD/CHF. – MT is sideways normal. Wait.
- Wait NZD/CHF. – MT is sideways volatile. Wait.
- Wait AUD/CHF. – MT is sideways volatile. Wait.
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Economic calendar for the week ahead:
(MT = Market Type: Click for more information on market types.)
Trend: Market is trending in the direction I have listed and I expect it to continue.
Reversal: I am looking for a reversal against the current trend.
Breakout: The currency pair is breaking out of a range.
About the Author
Sam Eder is a currency trader and author of the Definitive Guide to Developing a Winning Forex Trading System and the Advanced Forex Course for Smart Traders (get free access). He is the owner of www.fxrenew.com a provider of Forex signals from ex-bank and hedge fund traders (get a free trial). If you like Sam’s writing you can subscribe to his newsletter.