Quiet Trading Before ECB, NFP. British Pound, Gold, and New Zealand Dollar Weakness Still on the Cards
Eric Furstenberg • 3 min read
I’m not fond of quiet trading days like today (Tuesday). It’s really frustrating to look at the screen and see that an exchange rate is exactly at the same level as a few hours ago (I have a short position on the CAD/JPY which I opened on 2 Feb. which is just going nowhere).
Nevertheless, a few instruments managed to provide some excitement today, with the Pound and Gold being worthy of our attention. Not to forget about the New Zealand Dollar which is a pretty hot mover at the moment. Let’s firstly look at the GBP/USD:
GBP/USD – Sellers are Still Calling the Shots
GBP/USD Daily Chart
The GBP/USD printed yet another bearish day today. While many FX pairs were directionless today, this pair didn’t hesitate to descend at all. Here is an hourly chart:
GBP/USD Hourly Chart
On this hourly chart, we can see that the bears are controlling the market and pushing it further down at a steady pace. The broad US Dollar strength had much to do with this decline today, but we can definitely ascribe some of this downward movement to a weakening Sterling.
My outlook for the GBP/USD remains bearish for now, and even for the next few weeks. We have Brexit dangers to further weaken the Pound, and of course, the technical outlook suggests a further decline in the exchange rate as well.
Let’s look at a different Pound pair as well:
GBP/JPY – Drifting Lower
GBP/JPY Daily Chart
The general Pound weakness is visible on the GBP/JPY as well. This pair has recently moved in between the 20-EMA and the 200-MA. The downward slope has offered some bearish opportunities in the last few weeks. I was lucky to get a beautiful entry close to the 20-EMA about four trading days ago. Look at this live trade:
GBP/JPY Daily Chart
I basically placed a pending sell order at the 50% retracement of this large bearish candle. The order was triggered three days later, and the trade is in profit by about 153 pips at the moment. I risked 1 percent of my account on this trade, and the target is three times the value of the stop loss. Of course, we don’t always get perfect entries like this one, but it is encouraging to see some of them now and then.
NZD/USD – The Bulls Have Fled in All Directions
NZD/USD Daily Chart
What an amazing decline in the NZD/USD! I like the aggressive angle of this selloff. We’re just seeing red candles everywhere! The last 5 trading days were forcefully dominated by the bears.
In the process, the price sliced through the 200-day moving average like a hot knife through fresh South African farm butter:) When will the New Zealand Dollar find support?
Of course, the New Zealand Dollar didn’t only weaken against the US Dollar in the last couple of days, but against most currencies that I can think of. I didn’t check all the pairs, but I’d go as far as to say it weakened in all the NZD pairs we can trade as retail traders. This weakening has already run a long way, but the NZD remains weak, and it will probably stay weak for quite a while to come.
It is important to be aware of extreme currency weakness and strength in the FX market because it can help us to select the best pairs to trade. Keep the NZD in mind when you look for trading opportunities in the next few weeks. Perhaps we can still catch some big moves in selling the Kiwi.
Gold – A Heavy Metal Once Again
Gold Weekly Chart
The gold price is falling once again. I mentioned in yesterday’s article (6 days out of 7 – the Bears are Serving Aces on the GBP/USD!), that I didn’t like the long side of gold anymore. Let’s look at a daily chart:
Gold Daily Chart
Here we see that the 20-EMA was unable to sustain the price, and the bulls had to give in to this strong selling pressure. These firm daily closes below the 20-EMA suggest continued weakness in the days and weeks to come. I’ll be on the lookout for selling opportunities in the near term.
Remember the ADP Nonfarm Employment Change number on Wednesday at 13:15 GMT. This can cause some market movement.
Also, keep an eye on the Chinese trade balance number. We don’t have a time for this yet. This release affects the Australian Dollar as well as certain other currencies, so it is definitely an important event on the docket.
If you’re trading oil or the Canadian Dollar, the US Crude Oil inventories release is at 15:30 GMT on Wednesday.
Best of luck guys, and be vigilant!