Weekly Watchlist | Snapshot | [17-21 July 2017]

This week we’re taking a 30-second look at GBPUSD, AUDUSD and USDCHF – my top three new trading opportunities.

GBPUSD

Sterling managed to close at a new high for 2017 on Friday, at 1.3112, clearing out two previous reversal points at the 1.3040 mark.

Is it time to go long? No.

Friday’s move far exceeded the normal range for the pair, and although price is bound for new highs, a retest of 1.3040 is an important first step.

Have a think about what happened on Friday to see why this retest is guaranteed: Many sellers would have shorted at 1.3040, and, instead of enjoying quick profits they are now in a hole, deep in the red. Some would have been stopped out, and some are still holding and praying for price to drift back to 1.3040, so they can get out at breakeven. And what happens when all those traders who are on the wrong side of the market close their sell positions at 1.3040? The market finds support as other traders pick up the long side, and it bounces. This probably took more than 30 seconds to read but if you’d like to improve your win-rate as a trader, start thinking about who you are trading against in the market – that’s what we just did here.

Summary: Wait for price to move to 1.3040, then wait for a bounce in price, targeting 1.3240, some 200+ pips away (or blindly go long at that level if you’re impatient and don’t intend having a very long trading career).

AUDUSD

We needed extra time to analyse the GBPUSD, but we’ll gain it all back here. The AUDUSD is offering a very similar setup to the GBPUSD. This time I’ve used the weekly chart because I think it better illustrates what’s happening.

Previous highs have been cleared out, and we’d like to see a retest of those highs, now acting as support before we go long. Got it?

Summary: Wait for a retest of 0.7730 – 0.7700, wait for price to bounce off that level and target 0.8000, some 300 pips away.

USDCHF

I think the ‘down-trending’ structure we’ve seen in the Swissy is still dominant, even though the down moves appear to have stalled for July. Here is where I think the opportunity lies:

Price is stuck in an upward sloping channel (albeit a bit ugly). When a pattern like this appears in a downtrend, the market is suggesting that it’s just pausing before resuming its move down. So a sell bias is in order- price is telling us that the trend is not over.

But how are we going to short this sucker?

Let’s consider targets. The first and most obvious is the low from June (0.9550) about 100 pips away. After that, I think we can expect buyers to step in at about 0.95 even. If we’re going to target the June low, and we demand that our reward to risk ratio is healthy, we’re going to have to drop down to a lower timeframe (4- or maybe even 1-hour for the thrill seekers out there) and wait for price to either

  1. Close below the lower channel trend line, or,
  2. Close below the lower channel trend line and retest it from below (better)

to load up our short positions.

Leave a Reply