War has put the market into a spin, but there are still some great trading opportunities out there. Hi, I'm trader Tom, currency analyst at Investing.com, and I've been doing this for over 17 years, and I'm about to share with you all my top trade setups for the week ahead.
In this video, firstly we are going to look at the impact of the US-Israel-Iran war and how it's affected markets and the resulting impact on forex pairs. We're also going to look at this Canadian dollar strength and the trading setups that it is giving us. We're also going to look at the US dollar because that's at some really interesting levels. And we're going to take a look at Bitcoin as well.
Plus, I'm going to give you all of my top trade setups, so stay tuned for that.
So let's start with the impact of this war. And unless you've been under a rock, we know that oil has been flying. And this is spot crude. Look at oil. This is the weekly chart. Look at that weekly candle. And all this is, guys, is simple supply and demand. The demand for oil is still there but supply has been affected. It has been decreased and obviously that increases the oil price.
Now the correlation you need to be aware of here is that if you're not trading oil and you trade the currency pairs, if oil’s doing this then the Canadian dollar becomes strong, and that’s exactly what we’re seeing.
Conversely, at the start of last week we were thinking the flight to safety over the weekend -- we saw the US bomb Iran -- and we were thinking flight-to-safety assets would be strong like JPY, gold, and CHF. But if I go to the indices now, we’re not seeing that strength in the flight to safety assets like JPY or gold because the indices have kind of been holding.
This is the NASDAQ. There isn’t any sell-off here. The S&P 500 is the same. We’re just about holding on to these lows. Maybe next week we do start seeing this sell-off and then we will see strength in the safe-haven assets.
The Dow Jones is different. We are seeing that sell-off. Look at this big bearish weekly candle and we’ve broken weekly structure. So the flight-to-safety reaction may be delayed because the indices haven’t reacted aggressively to that news. So we must keep an eye on that this week.
But let’s start by focusing on the Canadian dollar because we know that is super strong. And the first trade setup we’re going to look at is AUD/CAD sells.
Now this is clearly against the weekly trend. This is the weekly chart. But just look at that sell-off. Look at that weekly candle. It doesn’t get much more bearish than that. So we’ve got a massive weekly bearish candle.
And then if we go to the daily chart we have had a structure break. We were in this uptrend and then finally none of these candles here actually broke trend, but this one on Friday did. This gives me the confidence to start selling potentially all the way down to this 0.9400 psychological level.
Obviously we’re going to need a retrace. If we go to the H4, I’m going to be looking to put my stop loss above this level here. So any retrace up into this level, potentially these last highs, I’m going to start selling. Stop losses in here and then let that trade run back down to those higher-time-frame targets.
But I want to stay with this H4 trend as well. So this would be a pretty good level to start selling from.
AUD/CAD sells is my first Canadian-dollar-strength idea.
We also like NZD/CAD sells. And also guys, worth mentioning here is if we do see that sell-off on the indices and we see that strength in the flight-to-safety assets -- which we haven’t seen yet -- then you’re also going to see weakness in AUD and NZD. So these two trades play into that idea as well.
And again guys, if we go to the weekly chart, NZD/CAD is in an uptrend on the weekly chart. Higher highs, these are the last lows. But just look at the weekly candle. And the longer this conflict goes on, oil will just keep ticking up.
So NZD/CAD sells.
If we drop down to the daily chart with these Canadian dollar trades, it’s a case of whether we get that retrace. Price could quite easily just continue and then we don’t have a trade. But if we start retracing into value then we’ve definitely got a trade worth taking.
So if we drop down to the H4 your job as a trader is just to find these levels of interest. So these last lows here will be an interesting level to start selling from. But again I want to put my stop loss well above this level. So my stop loss would probably be up here somewhere.
But anywhere in here I want to start selling because it offers value. If I zoom out you can see we still have lots of room to come back down to our higher-time-frame target.
Now if we look at CAD/JPY, for example, you can clearly see on the weekly we’ve sort of stuttered here and then we’ve broken a key level. We’ve broken this resistance level through here. We’ve got a nice big bullish weekly candle and we’ve got all of this room back up to this level here.
But I do not want to trade this. Now we are seeing Canadian dollar strength but I don’t want to go against safe-haven currencies or assets and JPY is obviously a safe-haven currency. I just don’t want to trade against them at the moment.
So although CAD/JPY looks really good and oil is flying and CAD is strong, I’m still reluctant to take this trade.
And also we have some Canadian dollar pairs that are just untradable really. They don’t offer any value. So EUR/CAD, I mean we’re clearly in this downtrend but there’s no value down here.
The same is true with GBP/CAD. I want to sell GBP/CAD and we’ve broken a key support level here but I’m not going to start selling down here. And you need such a big pullback for this to start becoming a feasible trade again.
So that’s the Canadian dollar strength that we want to trade this week.
Let’s take a look at USD pairs now because we’ve got GBP/USD and NZD/USD at really interesting levels.
Because if I show you the weekly chart with GBP/USD this is where we’re at. We’re getting higher lows and these lows held. Look at this big wick. We’re getting higher highs. We’re clearly in an uptrend.
If we drop down to the daily now we are against trend -- it’s worth pointing that out -- we are in this downtrend. But if we get something like this and we get a bit of a ranging market and then we get a break I will be very interested in buying GBP/USD up to this 1.35 psychological level.
And the same is true with NZD/USD.
If we look at the weekly chart it’s a really nice entry point. We’re in this uptrend. Price has retraced to what was once resistance becomes good support.
Now the weekly looks really good but if we look at the daily chart we are in this downtrend.
So again similar to GBP/USD, maybe we get a bit of sideways action but as soon as we break this resistance level I will be looking to buy NZD/USD.
There’s also a couple of against-trend trades that I’m looking at.
The first one is EUR/NZD because if you go to the weekly you can see that we were in this uptrend, but we’ve broken down and reached this support level and price is holding it.
So GBP/AUD we’re looking to buy if we get a bullish reaction at support and a daily structure break.
Now let’s take a little look at Bitcoin.
Looking at the daily you might think it’s looking good for buys, but if we look at the weekly we’re in a weekly downtrend with resistance overhead.
So ultimately Bitcoin still looks like a sell trade on the higher timeframe.
So those are all of my top trade picks for this week.