It’s Friiiiyay! But before we head off to the weekend, here’s a quick recap of this week’s feature FX strategies, how the price action played out and lessons to take away.
Forex Setup of the Week: GBP/USD – April 16, 2023
GBP/USD 1-hour Forex Chart by TradingView
On Monday, we took a closer look at GBP/USD’s uptrend and how it was retesting the bottom of the rising channel pattern. Our assumption was that if U.K. economic updates came in better-than-expected, this could draw in Sterling buyers.
The pair actually broke below the channel, but the bulls came back to take control after the hot U.K. averages earnings data. And with the help of the hotter-than-expected U.K. CPI update, GBP/USD was able to fend off the shift towards negative global risk sentiment mid-week.
After both events, it seems that the 1.2400 handle has been the short-term jumping point for bullish spikes, rising as much as 70ish pips before sellers came in on Tuesday and Wednesday.
XAG/USD: Tuesday – April 18, 2023
Silver (XAG/USD) 1-hour Chart by TradingView
On Tuesday, we saw mixed technical signals on Silver but thought that the uptrend may draw in more buyers than sellers around the major psychological level of $25.00.
We also discussed a scenario where a break below the $25.00 level would create a complex head and shoulders pattern, potentially drawing in sell orders if USD sentiment shifted positive.
There was a downside break XAG/USD on Wednesday, correlating with the U.K. CPI data release, but it didn’t seem to draw enough sellers to break the longer-term uptrend.
It’s possible that some traders were pricing in stickier global inflation, which seems to have benefited metals this year along with banking crisis fears, and possibly draw more buyers to the $25.00 major psychological area.
CAD/JPY: Tuesday – April 18, 2023
CAD/JPY 4-hour Forex Chart by TradingView
On Tuesday, we spotted a potential setup on CAD/JPY as its roaring March/April rally brought the pair back to its 2023 highs last seen in February.
A bearish divergence signal was pointing to a potential top in the works, which seems to be the case at the moment.
That 100.50 level is held like a champ, likely with the help of this week’s lower-than-expected Canadian CPI data and falling oil prices (a scenario that’s usually a negative influence on the Loonie). Congrats to those who may have played that minor psychological level as resistance as you’re likely up nearly 150 pips at the moment.
Looking forward, this is still a solid swing trade setup that favors the bears more than the bulls at the moment, and if oil continues to weaken along with broad risk-on sentiment, CAD/JPY could see the 97.00 – 98.00 area next week before sellers consider taking short-term profits.
GBP/CAD: Wednesday – April 19, 2023
GBP/CAD 1-hour Forex Chart by TradingView
On Wednesday, we discussed how momentum may take GBP/CAD all the way up to the major resistance area around 1.6800, an area we were watching for a longer-term swing setup.
With the Loonie falling all week and Sterling benefiting from strong CPI data, it looks like there wasn’t much trouble for GBP/CAD bulls to not only rise up to that 1.6800 area but also break it.
Congrats if you were able to catch that intraweek rally higher, but it’s now time to reassess and ask whether or not this is a legitimate break of the falling highs pattern, or will this break turn into a fakeout and return to the downtrend.
The answer likely lies in the upcoming fundamental data updates, so be sure to visit the calendar and do your homework before making your next moves in GBP/CAD!
EUR/USD: Thursday – April 20, 2023
EUR/USD 1-hour Forex Chart by TradingView
On Thursday, we were looking at EUR/USD as volatility was expected to pick up bigly due to the latest round flash PMI updates on Friday. That made the consolidation on the one hour chart above something to watch for a breakout and momentum move.
And when considering the longer-term price uptrend and bullish signals from technical indicators, we leaned bullish short-term if Eurozone service PMIs rise high enough to pull the composite PMIs into growth territory.
Eurozone PMIs came in mixed with the manufacturing sector showing weakness, while the services sector slightly came in more optimistic. The composite Eurozone PMI Output Index did tick higher to 54.4, but with the U.S. also printing a hot PMI read, it’s no surprise that we saw volatile sideways action in EUR/USD heading into the weekend.
So no consolidation break for now, but the uptrend is still one to watch for bullish fundamental signals (most notably inflation updates from the Euro area and U.S. coming next week) and bullish technical patterns before considering a fresh position!
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