Tough Trading in FX – Many Major Pairs are Ranging

This is where patience is needed – on days like these when very little happens in the markets. The bank holiday in the UK definitely played a role, and perhaps market players are keeping some powder dry for Friday’s nonfarm payrolls numbers. Nevertheless, there are a few setups which have potential at the moment. One such opportunity is in the USD/CAD. Let’s look at a daily chart:

USD/CAD

USD/CAD Daily Chart

I really like playing 61.8% Fib retracements like this. The 61.8 level is the horizontal blue line on the chart. As you can see the pair traded right up to this level and met some resistance there. After breaching this level by a mere 12 odd pips, the bears pushed it down about 30 pips. Now this doesn’t mean that price will not meet this level again, so we might get an opportunity to sell at this price again soon. I would place a sell order at the 61.8 level with a stop just above the last swing high, and a take profit at the recent swing low. Look at the chart below:

USD/CAD Daily Chart with Short Trade Setup

This is already an aggressive trade setup. The reason is that the recent bounce in the pair has been pretty aggressive. And we don’t know how much follow through will come from the recent impulsive US dollar strength. Aggressive traders can even enter the market at the current price and use a slightly tighter stop loss than in the example above. More conservative traders might want to wait for better levels to enter at, let’s say in the region of 1.31500 which would make a much tighter stop loss possible. A good stop loss would be at about 10 pips above the 200-day moving average in this case. Traders playing it this way might consider splitting the position up into two smaller positions with different targets in order to be able to scale out of the position at some stage. With some brokers, this can be done without splitting the position. The USD/CAD has a lot of short potential – especially if the oil price keeps rising.

USD/CHF

USD/CHF Daily Chart

As I mentioned previously, the 200-day moving average has lately been an important resistance level. As you can see in the chart above, the last time that price came near this moving average it topped out and traded lower again. It is important to note that this time around the bounce is much more aggressive than the previous one. However, at the moment price is at a level which is lower than the previous swing high, and if price fails to make any more progress this might turn into a lower swing high soon. I think that the pair might have some trouble clearing the 200-day moving average and that this might be just the right level to place a short entry at. Look at the following setup:

USD/CHF Daily Chart

Here we have a trade setup that offers a decent risk to reward ratio.

At the moment many of the major pairs are trading in ranges. This makes it difficult for momentum and swing traders to hit big moves. Another pair worth mentioning is the AUD/USD. I have really been writing a lot about this pair lately, and I am still holding on to my short positions on this pair. Let’s look at a daily chart:

AUD/USD Daily Chart

It looks like we could be lucky enough to get a run up to the 20 EMA soon. I would love to sell the pair at this level, or even a bit higher – look at the sell zone on the chart.

I am not very excited about the other major pairs right now. The technical picture is too obscure for me with no definite direction over the short term. I reckon that a lot depends on the US nonfarm payrolls numbers which are released on Friday. This could drive the market in any direction. For example, if we get a big miss the dollar would definitely take a hit. If we see the same type of impressive number like earlier this month, this could mean that the US economy might be indeed ready for the next interest rate hike. The US dollar would probably gain some more ground if this happened.

We have another quiet day ahead in terms of economic data and market sentiment might be the main driver in the FX market tomorrow.  

Have a great trading day!