Forex Signals Brief May 8 – 12

Posted Monday, May 8, 2017 by
Arslan Butt • 4 min read

Our forex trading signals from May 1st were successful and helped us start the month with a good number of pips. Though, the market remained highly volatile and unpredictable, the bullion and WTI Crude Oil traded into our hands. Anyways, let's move on to the trade opportunities and major fundamental events that are worth watching  this week to determine the market trends.

The previous week ended with the release of exceptional labor market figures. Unfortunately, many traders ended up burning their figures over the unexpected reversals in the market. Even I wasn't expecting this sort of behavior from the market. Regardless, this is a good example of where the stop loss can help save us from unexpected movements.

 

The Week Ahead – What To Look For

This week brings less high impact events than the first week of May. Nevertheless, investors are likely to feel the echoes from the French Elections and the optimistic Non-farm Payroll, which is yet to price in the market. In addition, the U.S. retail sales, inflation and the U.K.'s monetary policy decision will play a role this week.

USD    

  • Crude Oil Inventories (Wednesday – 15:30)    
  • PPI m/m (Thursday – 13:30)
  • Unemployment Claims (Thursday – 13:30)
  • G7 Meetings (Friday – Day 1)
  • CPI m/m (Friday- 13:30)
  • Core CPI m/m (Friday- 13:30)
  • Core Retail Sales m/m (Friday- 13:30)
  • Retail Sales m/m (Friday- 13:30)

EUR

  • ECB President Draghi Speaks (Wednesday – 13:00)
  • EU Economic Forecasts  (Thursday- 10:00)
  • German Prelim GDP q/q (Friday- 10:00)

GBP

  • Halifax HPI m/m (Monday – 8:30)                      
  • Manufacturing Production m/m (Thursday- 9:30)
  • Goods Trade Balance (Thursday- 9:30)
  • BOE Inflation Report (Thursday- 12:00)
  • MPC Official Bank Rate Votes (Thursday- 12:00)
  • Monetary Policy Summary (Thursday- 12:00)
  • Official Bank Rate (Thursday- 12:00)
  • Asset Purchase Facility (Thursday- 12:00)
  • MPC Asset Purchase Facility Votes (Thursday- 12:00)

AUD

  • Building Approvals m/m (Monday – 2:30)
  • NAB Business Confidence (Monday – 2:30)
  • Retail Sales m/m (Tuesday- 2:30)
  • Annual Budget Release (Tuesday – 10:30)

CAD

  • Building Permits m/m (Tuesday – 13:30)
  • NHPI m/m (Thursday – 13:30)

JPY

  • Consumer Confidence (Monday – 6:00)
  • Average Cash Earnings y/y (Tuesday – 1:00)
  • 10-y Bond Auction (Tuesday – 4:45)
  • BOJ Summary of Opinions (Wednesday – 0:50)
  • Leading Indicators (Wednesday – 6:00)
  • Bank Lending y/y (Thursday – 0:50)
  • Current Account (Thursday – 0:50)
  • 30-y Bond Auction (Thursday -4:45)
  • Economy Watchers Sentiment (Thursday – 6:00)
  • M2 Money Stock y/y (Friday – 0:50)

 

EUR/USD – Supported Currency Pair

The single currency remained supported over the previous week due to expectations that Emmanuel Macron would take the lead against Marine Le Pen in the final round of French Elections.

Therefore, it traded bullish despite the better than expected labor market figures from the United States. The unemployment rate declined to place a 10-year low at 4.4%. Likewise, the US non-farm payrolls rose to 211K for the month of April, beating the estimate of 194K for the month.

The end election results showed Macron winning a major 66% of the ballot whereas, Le Pen secured 34%. Thereby, the EUR/USD reversed its gains as it already priced in the outcome the previous week.

Forex Trading Signals

Investors are recommended to keep an eye on $1.0947 as the pair is likely to remain buying above this level with a target of $1.0990. Sell entry is recommended below $1.0930 with a take profit of $1.0850.

EURUSD - Hourly Chart

EURUSD – Hourly Chart

 

Technical Outlook – Weekly

On the daily chart, we can see a descending trendline which is extending a strong resistance to EUR/USD at $1.1015. In the morning session today, the EUR/USD tested and fell below this level.

Additionally, the pair has crossed above a strong double top resistance level of $1.0850 and is still consolidating above this level. The RSI is bullish above 50, along with the moving average, which is signaling trader's bullish bias.

 

Trading Levels – Weekly

Support     Resistance

1.0914         1.1039

1.0832         1.1082

1.0789         1.1164

 

USD/JPY – Weak Haven Appeal

The Japanese Yen remained heavily bearish compared to the U.S dollar. The haven assets have lost their attraction due to the lack of uncertainty in the market. The USD/JPY has posted their third weekly gain after the Bank of Japan remained dovish with its policy meeting and the United States showed an amazing improvement in their labor market.

Now, we have to wait and see the major economic events from the U.S including the retail sales, CPI data and PPI figures, which are scheduled to be released on Thursday. Additionally, the BOJ is likely to announce inflation and growth projections on Tuesday.

Forex Trading Signal

The USD/JPY is holding below a strong resistance level of $113. Traders are recommended to sell below $112.95 with a stop loss above $113 and a take profit of $111.650. In addition, buying is only recommended above $113.10 with a take profit of $114.450.

USDJPY - Bearish Channel In Daily Chart

USDJPY – Bearish Channel In Daily Chart

 

Technical Outlook- Weekly

The USD/JPY has formed a bearish channel on the daily chart and the pair is trading right below the top edge of the bearish channel, which is extending a strong support at $113.

However, it is important to notice the shooting star candlestick pattern in the daily chart, right below $113 trend line resistance. It demonstrates that buyers are getting exhausted and we may see sellers entering the market. The momentum indicator RSI, which is holding near overbought territory, is supporting the retracement in the pair.

 

Trading Levels – Weekly

Support     Resistance

111.56          113.41

110.46         114.16

109.71          115.26

 

Conclusion

In conclusion, I would ask you all to stay cautious and follow strict money management. There are likely to be aftershocks this week due to the outcome of French Presidential elections as well as the U.S.'s exceptional Non-farm payroll figures. It is also worth watching the monetary policy decision from the Bank of England, though I'm not expecting any change from their side. Stay tuned for trading signals and Good Luck!

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About the author

Arslan Butt is our Index & Commodity Analyst
Arslan Butt is our Lead Commodities and Indices Analyst. Arslan is a professional market analyst and day trader. He holds an MBA in Behavioral Finance and is working towards his Ph.D. Before joining FX Leaders Arslan served as a senior analyst in a major brokerage firm. Arslan is also an experienced instructor and public speaker.
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