2 Important Events You Need to Be Aware Of Next Week
Eric Furstenberg • 4 min read
This week wasn’t the most remarkable I’ve seen in terms of market volatility. There were trading opportunities, of course, but the big moves were mostly missing. I hope you traded gold this week. It was definitely one of the best instruments to trade and produced a decent bounce in the last couple of trading days. Before we look at gold, let’s first look at some FX pairs.
USD/CAD – Choppy Trading
USD/CAD Daily Chart
What shall I say about the USD/CAD? Mmmm… This is a tricky one. I was hoping we’d see a convincing break of the head and shoulders neckline in the chart above. If you've read my article, 2 Reasons Why The Canadian Dollar is Getting Hammered Right Now, you would have seen this chart:
USD/CAD Daily Chart (22 February)
This screenshot was taken on Wednesday before the FOMC meeting minutes were released. The Canadian Dollar performed really poor at that stage, and a further weakening against the US Dollar seemed likely.
As you saw in the first chart, the USD/CAD technicals have changed abruptly. The pair is now trading below both its 200-day moving average, and its 20-day exponential moving average. One of the few positive things we can say about this pair right now is that today’s candle is showing some bullish rejection off of the “strong support” zone which is indicated by the blue and yellow box in the very first chart in this article.
This is where we need to call in some help and more perspective from the weekly timeframe. You see, we’ve got a little problem here. The pair is still supported at the moment, but it’s trading below the two moving averages I just mentioned, which indicates weakness. Let’s look at the weekly chart:
USD/CAD Weekly Chart
Here we see a weekly candle that we cannot afford to ignore – a pinbar candle rejecting off the 20-week exponential moving average. An outright bearish signal. This is starting to look more and more bearish, wouldn’t you say?
Something else I noticed today (Friday), is that the Canadian Dollar is relatively strong at the moment when we compare its performance against the US Dollar to some other major currencies’ performance against the US Dollar. For example, the Pound and Australian Dollar got hammered by the US Dollar today, while the Canadian Dollar actually gained against the US Dollar, even though it wasn’t much. The Euro and the Swiss Franc also declined against the Dollar, although not as aggressively as the Pound and the Aussie.
The point I’m making is this: the Canadian Dollar is generally strong at the moment, and the technicals have undergone a significant change in the last two days. If you’re holding on to long exposure on the USD/CAD, you need to be careful here, and perhaps there will be a good opportunity to short this pair in the weeks ahead. Let’s look at a trade setup on the weekly chart:
USD/CAD Weekly Chart
The short entry is to be taken at a 50% retracement of the signal candle (the last candle on this chart). The stop loss is a few pips above the high of the candle, and the take profit is to be set at 1.28274 which gives us a target of a little bit more than three times the distance of the stop loss. This is an aggressive trade setup. If you like to trade with more confirmation, you can always trade a break of the signal candle’s low with a stop loss above the high of the candle. This will require a larger stop loss, though, and will limit your potential profit target.
The first important event you need to be aware of in the week ahead, is a speech by the new U.S. president, Donald Trump on Tuesday at 21:00 GMT. This is extremely important because the financial markets are really sensitive to what he says.
The second high-level event risk comes in the form of an interest rate decision by the Bank of Canada (BoC) on Wednesday at 15:00 GMT. This has the potential to forcefully move the Canadian Dollar. There should be a press conference or speech by the BoC Governor Mr. Stephen Poloz to accompany the rate decision, which could easily cause more volatility than the decision itself. The BoC is expected to keep their rate unchanged at 0.5%, but let’s see what happens on Wednesday.
Gold – Impressive Performance!
Gold Daily Chart
The gold price is still climbing. After another impressive trading day, this precious metal is worth $1255.97 per fine ounce. As I mentioned earlier, this has been an excellent instrument to trade in the last week because of its decent upward movement. This matters, because many FX pairs have traded pretty much sideways in the same period. I’m really glad we've recently started providing trading signals on gold, as I consider this commodity to be an important financial instrument which often yields good volatility, and can be a great supplement to any portfolio.
The black horizontal line in the chart above marks an important swing level where we can look for buy signals in the days and weeks to come. However, the price is not guaranteed to revisit this level, but hopefully, it will.
EUR/USD – Just Pulled the Trigger
EUR/USD Daily Chart
Today’s candle which rejected off of the 20-EMA is a really attractive sell signal in my opinion. The fact that this candle closed below its opening price also adds to the strength of this signal. I placed two market orders a few minutes ago, with different targets.The stop losses are a few pips above today’s high. I also placed a sell limit order at the 50% retracement level of today’s candle, also with a stop loss above today’s high. If you’d like to trade this pair next week, there might still be an opportunity for you to utilize this particular setup.
Good luck with your trading!