WEEKLY FOREX TRADING TIPS – 2023.05.01

FOCUS ON: Price Consolidation Ahead of Bumper Round of News Announcements

• Medium-term bullish patterns remain intact despite short-term price consolidation.
• ECB and US Fed set to announce interest rates.
• US employment data to be released Friday.

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.

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UTC: 09:28

US Dollar Basket Index (DXY)

Signs of US dollar weakness during the middle of last week failed to result in a significant downward move in the price of the US Dollar Basket index. The rally in the greenback in Thursday’s and Friday’s sessions took price back into the 101.13 to 101.79 price channel that dominated trading during the week of 17th April. That suggests further sideways trading could be likely until major central banks update the markets on their interest rate policies this week.

US Dollar Basket Chart – Daily Price Chart – Sideways Trading Pattern

Source: IG

US Dollar Basket Chart – Hourly Price Chart

Source: IG

Short positions

• Entry Level 1: 101.78 – The top of the multi-week sideways trading pattern has acted as significant resistance. Range traders will continue to see the top of the channel as an opportunity to short-sell the dollar.
• Price Target 1: 101.33 – Region of the 20 SMA on the Daily Price Chart, which is currently in the mid-range area of the sideways channel.
• Price Target 2: 101.59 – Price low printed on Wednesday 26th April.
• Price Target 3: 100.00 – In extension, psychologically important price level.
• Stop Loss:  > 102.27 – Region of the 50 SMA on the Daily Price Chart and upper trendline of the downward price move, which started in September 2022.

Long positions

• Entry Level 1: 101.33 – Region of 20 SMA on Daily Price Chart. Long positions taken on the back of price lows of 1st Feb and 13th April, suggesting a double-bottom price pattern could be forming.
• Price Target 1: 101.78 – Resistance trendline of sideways trading channel.
• Price Target 2: 102.27 – 50 SMA on the Daily Price Chart and trendline resistance.
• Stop Loss: < 100.00 – ‘Round number’ support level.

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GBPUSD

Red-hot inflation reports continue to be released by UK authorities and point to further interest rate hikes shortly. Medium-term forecasts based on producer prices suggest that inflation could be about to cool off; however, until that is matched by retail prices, predictions that the Bank of England will raise the cost of borrowing continue to offer strength to sterling.

Daily Price Chart – GBPUSD Chart – Daily Price Chart

Source: IG

GBPUSD Chart – Hourly Price Chart

Source: IG

Short positions

• Entry Level 1: 1.24599 – The 20 SMA on the Daily Price Chart has acted as a key support level since 15th March. A break of that metric could open the door to downward price moves.
• Price Target 1: 1.24216 – Support/resistance offered by price highs of December 2022 and January 2023.
• Price Target 2: 1.23192 – Region of 50 SMA on Daily Price Chart.
• Stop Loss:  > 1.24468 – Resistance level formed by year-to-date price high of 28th April.

Long positions

• Entry Level 1: 1.24599 – Buying into short-term weakness, which takes price to the region of the 20 SMA on the Daily Price Chart.
• Price Target 1: 1.2700 – Round number resistance and region of the upper trendline of the downward price move, which started in June 2021.
• Price Target 2: 1.28759 – in extension, region of the 50 SMA on the Monthly Price Chart.
• Stop Loss: < 1.24216 – Support/resistance offered by price highs of December 2022 and January 2023.

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EURUSD

EURUSD tested through the support offered by the 20 SMA on the Daily Price Chart last week, and the closing price of 1.09742 on Monday 1st May marks the first time the currency pair has closed below that key metric since 16th March. The rally in the price of EURUSD, which started in March, has been impressive, but with the ECB due to update the markets on its interest rate policy on Thursday 4th May, traders can now consider strategies based on downward as well as upward price moves.

EURUSD Chart – Daily Price Chart – Break of 20 SMA

Source: IG

EURUSD Chart – Hourly Price Chart

Source: IG

Short positions

• Entry Level 1: 1.09839 – Interpreting the 20 SMA on the Daily Price Chart as resistance rather than support.
• Price Target 1: 1.0960 – Intraday price low of 2nd May. Support level formed by intraday price lows of 24th, 25th, 26th and 28th April.
• Price Target 2: 1.07523 – Swing-low formed on 17th April.
• Stop Loss:  > 1.1000 – Psychologically important price level which has acted as resistance since Thursday 13th April.

Long positions

• Entry Level 1: 1.09839 – Using a momentum-based strategy and buying EURUSD if it breaks back above the 20 SMA on the Daily Price Chart.
• Price Target 1: 1.1000 – ‘Round number’ resistance.
• Price Target 2: 1.10956 – Year-to-date price high printed on 26th April.
• Stop Loss: < 1.09093 – Swing-low price low of 13th April.

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Indices

S&P 500

The +2.7% price surge in the S&P 500 index on Thursday and Friday of last week has been followed by a not-unexpected period of price consolidation. US earnings season continues this week, and the US Federal Reserve updates on interest rates on Wednesday, making further dramatic price moves in either direction a distinct possibility.

S&P 500 Chart – Daily Price Chart – SMA Support

Source: IG

S&P 500 – Hourly Price Chart

Source: IG

Short positions

• Entry Level 1: 4,195 – Year-to-date price high of 2nd February 2023. Acted as resistance on 1st May.
• Price Target 1: 4,133 – Region of the 20 SMA on Daily Price Chart.
• Price Target 2: 4,000 – In extension, psychologically important price level.
• Stop Loss:  > 4,200 – Round number resistance level.

Long positions

• Entry Level 1: 4,159 – 50 SMA on the Hourly Price Chart. Despite last week’s price surge, the RSI on the Daily Price Chart is still at a modest 59.82, which leaves room for further upward price moves before the index becomes overbought.
• Price Target 1: 4,195 – Year-to-date price high of 2nd February 2023.
• Price Target 2: 4,202 – Region of 100 SMA on the Weekly Price Chart.
• Stop Loss: < 4,133 – Region of the 20 SMA on Daily Price Chart.

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Crypto – Bitcoin & Ethereum

The collapse of First Republic Bank has been followed by a purchase of the distressed lender by financial giant JP Morgan. That bailout has eased some concerns about the health of the fiat money system and resulted in some price weakness in crypto assets.

Fans of cryptos can point to other banks being in similarly precarious positions, which goes some way to accounting for Bitcoin’s year-to-date increase in value of +65% and Ethereum’s +50% year-to-date gain.

Bitcoin Price Chart – Daily Price Chart

Source: IG

Bitcoin Long positions

• Entry Level 1: 28,233 – Region of 50 SMA on Daily Price Chart.
• Price Target 1: 28,952 – Level of 61.8% Fib retracement formed by the upward price move in Bitcoin recorded between February 2019 and November 2021.
• Price Target 1: 30,000 – Psychologically important price level.
• Price Target 2: 36,154 – 50% Fib level of the 2019 – 2021 upward price move.
• Stop Losses:  < 26,981 – Swing-low of 24th April 2023.

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Ethereum

Ethereum Chart – Daily Price Chart

Source: IG

Ethereum Long positions

• Entry Level 1: 1,806 – 23.6% Fibonacci retracement level of the November 2021 to June 2022 price crash.
• Price Target 1: 1855 –50 SMA on the Daily Price Chart.
• Price Target 2: 2,000 – Psychologically important round-number support/resistance level.
• Price Target 3: 2,141 – Price high of 16th April 2023.
• Stop Losses:  < 1,728 – Region of the 100 SMA on the Daily Price Chart.

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