It’s Friday! 🎉
But before we head into the weekend, here’s a quick rundown of the week’s featured forex strategies, how price action was affected, and lessons to take away.
Forex week setup: GBP/USD – April 16, 2023
GBP/USD 1-hour chart by TradingView
On Monday, we took a close look at the uptrend of the GBP/USD pair and how it was retesting the bottom of the ascending channel pattern.
Our assumption was that if the economic updates in the UK come out better than expected, this could attract GBP buyers.
The pair did in fact break below the channel, but the bulls are back in control after the UK’s hot average earnings data.
Aided by the hotter-than-expected update of UK CPI, the GBP/USD managed to avoid a turn towards negative global risk sentiment in the middle of the week.
After both events, the 1.2400 handle appears to have been a short-term jumping off point for bullish rallies, as it rose 70 pips before sellers entered on Tuesday and Wednesday.
XAG/USD: Tuesday – April 18, 2023
silver (XAG / USD) 1 hour chart by TradingView
On Tuesday, we saw mixed technical signs on silver but thought the upside might attract more buyers than sellers around the key psychological level of $25.00.
We also discussed a scenario where a break below $25.00 creates a complex head and shoulders pattern, which could trigger sell orders to be withdrawn if the USD sentiment turns positive.
There was a bearish break in XAG/USD on Wednesday, related to the UK CPI data release, but it didn’t seem to attract enough sellers to break the long-term bullish trend.
It is possible that some traders were chasing steadier global inflation, which seems to have benefited the metals this year along with concerns over the banking crisis, perhaps attracting more buyers into the key psychological $25.00 area.
Canadian dollar / Japanese yen: Tuesday – April 18, 2023
On Tuesday, we spotted a potential CAD/JPY setup as its massive rally in March/April took the pair back to 2023 highs last seen in February.
A bearish divergence signal was suggesting a potential top in the works, and that seems to be the case for the time being.
This level of 100.50 held as a champion, most likely with the help of lower-than-expected Canadian CPI data this week and lower oil prices (a scenario that would have a negative effect on the Canadian dollar).
Congratulations to those who played this minor psychological level as resistance as it probably went up about 150 pips at the moment.
Looking ahead, this is still a solid swing trade setup that favors the bears more than the bulls for now, and if Oil continues to weaken along with broad risk sentiment, CAD/JPY could see 97.00-98.00 area for the week Next before the sellers think about taking short-term profits.
British Pound / Canadian Dollar: Wednesday – April 19, 2023
On Wednesday, we discussed how momentum could take GBP/CAD all the way to a major resistance area around 1.6800, an area we’ve been watching for a longer-term swing setup.
With the Canadian dollar falling all week and the pound benefiting from strong CPI data, it appears that nothing was too much trouble for the GBP/CAD bulls to not only reach the 1.6800 region but also break it.
Congratulations if you were able to catch this rally during the week to the upside, but now is the time to reassess and ask whether or not this is a legitimate break of the lower tops pattern, or if this breakout will turn into a false breakout and return to the downside.
The answer most likely lies in upcoming fundamental data updates, so be sure to visit the calendar and do your homework before making your next move in GBP/CAD!
EUR/USD: Thursday – April 20, 2023
On Thursday, we were eyeing EUR/USD as volatility was expected to pick up significantly due to the latest PMI update on Friday. This has made consolidation on the hourly chart above something to watch for the breakout move and momentum.
Looking at the bullish trend in prices in the long term and the bullish signals from the technical indicators, we have a bullish bias in the short term if the services PMIs in the eurozone rise high enough to attract the composite PMIs to the growth zone.
Purchasing managers’ indices for the Eurozone came in mixed, as the manufacturing sector showed weakness, while the services sector came in more optimistic.
The Eurozone Composite Output PMI rose to 54.4, but with the US also releasing a hot PMI read, it’s not surprising to see volatile sideways movement in EUR/USD over the weekend.
So no consolidation break for now, but to the upside watch for bullish fundamental signs (most notably the inflation updates from the Eurozone and the US next week) and bullish technical patterns before considering a new position!
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