WEEKLY FOREX TRADING TIPS – 2023.07.24

FOCUS ON: Markets Braced for Busy News Week

• US earnings season is set to trigger price moves as tech giants update investors.
• US and Eurozone central banks are to set new interest rate levels.
• Other key inflation and sentiment reports are also to be released.

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Trading Ideas

We created this Weekly Tips section to share possible trade entry and exit points based on our technical analysis. We also have other methods to validate our trades which we can’t publicly share, that help to increase their success. All our trades include entry and at least one target price. Stop losses are applied at the reader’s discretion. Our strategies typically trade with a wide stop loss, and risk is further mitigated by trading in small sizes.

UTC: 09:37

US Dollar Basket Index (DXY)

Last week’s rally in the US Dollar Basket Index was not matched by a breakout of the long-term downward trend of the index, which leaves room for those who are bearish on the prospects of the dollar to enter into new short positions. The chance of a short-term upward move was hard to discount, considering the RSI on the Daily Price Chart at one point on Thursday reached as low as 23.07. With the RSI back in the region of 45.00, the market has moved away from being oversold on that timeframe.

US Dollar Basket Chart – Daily Price Chart – Downward trendline holds

Source: IG

US Dollar Basket Chart – Hourly Price Chart

Source: IG

Short positions

• Entry Level 1: 100.97 – Region of the 20 SMA on the Daily Price Chart. Strong downward momentum has characterised the market since September 2022, and the 20-Day SMA offers a trade entry point for those looking to go short.
• Price Target 1: 100.00 – Psychologically important parity price level.
• Price Target 2: 99.12 – Intraday price low printed on 18th July.
• Price Target 3: 94.59 – In extension, price low recorded in January 2022 which forms a swing-low price pattern.
• Stop Loss:  > 101.93 – Convergence of the 50 and 100 SMAs on the Daily Price Chart.

Long positions

• Entry Level 1: 100.36 – Price low printed on 14th April which in conjunction with the price low of 31st January forms part of potential double-bottom pattern.
• Price Target 1: 100.97 – Region of the 20 SMA on the Daily Price Chart
• Price Target 2: 101.93 – Region of the 100 SMA on the Daily Price Chart, with 50 SMA at 102.10 also likely to offer resistance.
• Stop Loss: < 100.00 – Parity price level.

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GBPUSD

The 23.6% Fibonacci retracement level of the multi-year downward price move from November 2007 to September 2022 has once again guided price. The breakout above 1.28539, which started on 10th July, saw GBPUSD reach as high as 1.31431 on 14th July, retreating to the key Fib level by the close of last week’s trading. The RSI on the Daily Price Chart now sits at 49.9, which leaves room for price to make significant moves in either direction before being considered overbought or oversold.

Daily Price Chart – GBPUSD Chart – Daily Price Chart – Fib Level Resistance/Support

Source: IG

GBPUSD Chart – Hourly Price Chart

Source: IG

Short positions

• Entry Level 1: 1.28539 – The 23.6% Fib level has played a crucial role in guiding price over the preceding weeks, and a break below this key metric leaves room for further price falls in GBPUSD.
• Price Target 1: 1.27190 – Region of the 50 SMA on the Daily Price Chart and the supporting trendline of the upward price move, which started in September 2022.
• Stop Loss:  > 1.28907 – Those looking to use a tight stop loss could select the 20 SMA on the Daily Price Chart as a guide.

Long positions

• Entry Level 1: 1.28907 – Price needs to break through the 20 SMA on the Daily Price Chart if the upward trend is to find renewed momentum.
• Price Target 1: 1.300 – Psychologically important ‘round number’ price level.
• Price Target 2: 1.31431 – Year-to-date price high printed on 13th July.
• Stop Loss: < 1.28539 – The 23.6% Fib level offers acted as resistance throughout June and can now be expected to provide price support.

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EURUSD

The EURUSD price chart shows that the euro, like the pound, has retreated to a key support/resistance level. In the case of EURUSD, this is the 1.10956 price high of 26th April, which forms part of a potential double-top price pattern. As is the case with GBPUSD, this price level played a significant role in guiding price in February and May. With the Fed and ECB updating the markets on interest rate levels this week, a break by EURUSD in either direction could be likely.

EURUSD Chart – Daily Price Chart

Source: IG

EURUSD Chart – Hourly Price Chart

Source: IG

Short positions

• Entry Level 1: 1.10677 – Region of the 20 SMA on the Daily Price Chart.
• Price Target 1: 1.09228 – Region of the Daily Price Chart where the 50 and 100 SMAs are converging.
• Stop Loss:  > 1.10918 – Price high of 3rd May along with the price highs of February forms part of a double-top price pattern.

Long positions

• Entry Level 1: 1.10677 – Buying into short-term weakness, which takes price to the region of the 20 SMA on the Daily Price Chart. Price has traded above this key metric since 7th July.
• Price Target 1: 1.10918 – Price high of 3rd May.
• Price Target 2: 1.12758 – New year-to-date price high printed on 18th July.
• Stop Loss: < 1.09228 – Region of the Daily Price Chart where the 50 and 100 SMAs are converging.

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Indices

S&P 500

As of Thursday 18th July, the S&P 500 index was up 20% from the low of 3,808 printed on 13th March. That +20% gain strengthens the argument that stocks have entered a new bull market, especially as the index traded at price levels as low as 3,573 in October 2022. The tech-stock-heavy Nasdaq 100 index showed some weakness in the run into last week’s close, highlighting how the bulls won’t have things all their own way. But with earnings season peaking in the coming days, there will be enough fundamental analysis-style data available to drive prices higher if the likes of Microsoft, Alphabet, Ford, Chevron, and Coca-Cola can post earnings beats.

S&P 500 Chart – Daily Price Chart

Source: IG

S&P 500 – Hourly Price Chart

Source: IG

Short positions

• Entry Level 1: 4,578 – New year-to-date price high recorded on 19th July.
• Price Target 1: 4,481 – Region of the 20 SMA on the Daily Price Chart.
• Price Target 2: 4,389 – In extension, region of the 50 SMA on Daily Price Chart and the trendline of the bull-run in stocks which started on 13th March.
• Stop Loss:  > 4,600 – There are few resistance levels above the trade entry point, but the round number price bar of 4,600 could be where those in long positions decide to lock in some profits.

Long positions

• Entry Level 1: 4,481 – Buying into short-term price weakness, which takes price to the region of the 20 SMA on the Daily Price Chart. This metric has guided price since 26th March.
• Price Target 1: 4,578 – New year-to-date price high recorded on 19th July.
• Stop Loss: < 4,389 – Convergence of two support levels: the 50 SMA on Daily Price Chart and the trendline of the bull run in stocks, which started in March.

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Crypto – Bitcoin & Ethereum

While price levels in forex and stock markets were realigning last week, the leading cryptos traded in relatively tight trading ranges. Both Bitcoin and Ethereum posted modest losses on the week but still sit above key technical support levels, and while they hold, there is room for another surge in prices in both coins.

Bitcoin Price Chart – Daily Price Chart

Source: IG

Bitcoin Long positions

• Entry Level 1: 30,195 – A break of the 20 SMA on the Daily Price Chart would suggest renewed upward momentum.
• Price Target 1: 31,827 – Current year-to-date price high printed on 13th July.
• Price Target 1: 36,180 – 50% Fib retracement level of the bull run which took place between March 2019 and November 2021.
• Stop Losses: < 29,031 – Region of a convergence of the 50 SMA on the Daily Price Chart.

Ethereum

Ethereum Chart – Daily Price Chart

Source: IG

Ethereum Long positions

• Entry Level 1: 1,864 – Buying into weakness takes price to the level of the 100 SMA on the Daily Price Chart.
• Price Target 1: 2,000 – Psychologically important ‘round number’ support/resistance level, tested again on the 13th and 14th July.
• Price Target 2: 2,141 – In extension, the year-to-date price high printed on 16th April.
• Stop Losses: 1,806 – Marks the 23.6% Fib retracement price of the 2022 price crash, which also sits just above the round number 1,800 price level. A tighter stop loss is offered in the form of the 50 SMA on the Daily Price Chart, which is currently in the region of 1,853.

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Risk Statement: Trading financial products carries a high risk to your capital, especially trading leverage products such as CFDs. They may not be suitable for everyone. Please make sure that you fully understand the risks. You should consider whether you can afford to risk losing your money.