Hello, traders! I hope you had an excellent week in the markets. There’s been a lot of irrational market behavior lately, and some currency pairs and other instruments have been difficult to trade. Nevertheless, we’ve seen some pretty good moves here and there. Before we continue, if you prefer reading this article in Italian visit our Italian website’s blog.
The week ahead doesn’t offer loads of important economic data, with the most important news coming out of Australia, New Zealand, and Canada.
Firstly, we have retail sales out of Australia early on Monday morning at 00:30 GMT. The RBA (Reserve Bank of Australia) then have their interest rate decision and rate statement early on Tuesday at 03:30 GMT. All of these events have the potential to move the Australian Dollar, with the interest rate decision and accompanying statement bearing the greatest importance, of course. Let’s look at the AUD/USD:
AUD/USD – Where to Next?
AUD/USD Daily Chart
This last bullish wave on the AUD/USD is quite aggressive. This wave also breached the 200-day moving average with ease, as you can see in the chart above. The price is currently far above the 20-day exponential moving average, which communicates to us just how strong the current bullish momentum is.
This pair is fast approaching an important resistance zone, which is marked by the red box in the chart above. We can expect this bullish advance to slow down as it approaches this zone. Of course, we don’t know what the RBA will reveal this week, and we know that central banks can rock the FX market. This pair and other Australian Dollar pairs could make really large moves in either direction, so with this in mind, the AUD/USD could possibly shatter this resistance zone in the days to come.
One thing to keep in mind, though, is that a dovish stance from the RBA could weigh on the Australian Dollar. I say this to warn you not to just stick to a bullish bias just because the current momentum is bullish. We need to be ready for anything at any time. You never know what lies ahead in the FX market.
Let’s look at some other instruments…
S&P 500 – Finally Bouncing!
I wrote about the S&P 500 last week and told you I expected the bulls to charge again soon. This is exactly what happened on Friday. Look at the following chart:
S&P 500 Daily Chart
As you can see, the price dipped below the green buy zone a few times last week, but never closed below it. Then on Friday, we saw some impulsive buying again, followed by a strong daily close. I entered a couple of trades in this buy zone a few days ago. I’m really confident that we’ll see some further bullish follow through in the days ahead. For those of you who are also in long positions here, I’ll keep you updated on how to manage this trade setup in the days to come. If you also entered in this green buy zone, you might consider trailing your stop loss to breakeven soon. My targets are in the region of 2328. I might consider extending my targets, depending on what happens in the next few days. My stop losses are currently at 2264.73.
USD/JPY – Watch out for a Move Lower
USD/JPY Daily Chart
The USD/JPY has been probing this blue support zone, as you can see in the chart above. It has been unable to close below it in the last couple of trading days. However, the pair is expected to break through this area of support soon. You see, when the price keeps hammering against a certain support zone, it usually gives way after a while. What you’re seeing in the chart above, is what we call a bearish price squeeze. This usually leads to a break lower and can offer great trading opportunities.
The conservative way to trade this would be to wait for a daily close below this support zone and then to look for selling opportunities. Perhaps trading a retracement of some kind, or either trading a breakout past the low of the daily candle which actually closed below the support zone (the breakout candle).
That’s all for today guys. Stay tuned for more in-depth market analysis this week by Skerdian, Ron, and myself.
Good luck with your trading!