WEEKLY FOREX TRADING TIPS – 2023.08.29

FOCUS ON: Markets Brace for Collection of Big News Announcements

• After an ‘unchanged’ week in terms of prices, traders prepare for batch of important news announcements
• US Non-Farm Payroll jobs data due on Friday
• Inflation and sentiment reports to be released throughout the week

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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: 09:40

US Dollar Basket Index (DXY)

A shift in sentiment on Tuesday last week coincided with the Jackson Hole Symposium and saw investors and traders adopt a more risk-off approach. However, the DXY index failed to break the price high of 104.13 recorded on 31st May as the run into the close of the week saw risk appetite return. That resulted in the index giving back some of its gains as the security offered by the greenback appeared less appealing.

US Dollar Basket Chart – Daily Price Chart

Source: IG

US Dollar Basket Chart – Hourly Price Chart

Source: IG

Short positions

• Entry Level 1: 104.12 – Price high of 25th August. Upward momentum in the DXY index last week resulted in price moving towards and retreating from the resistance level formed by the (104.26) six-month price high recorded on 31st May.
• Price Target 1: 103.20 – The price level which previously acted as resistance in June, July, and the week starting 16th August can now be expected to act as support.
• Price Target 2: 102.96 – Region of the 20 SMA (Simple Moving Average) on the Daily Price Chart.
• Stop Loss:  > 104.26 – Price high printed on Wednesday 31st May.

Long positions

• Entry Level 1: 103.20 – Applying a pull-back strategy should price retreat to the support/resistance level that has guided it over the last three months.
• Price Target 1: 104.12 – Three-month price high recorded on 25th August.
• Price Target 2: 104.26 – In extension, multi-month price high printed on 31st May.
• Stop Loss: < 102.96 – Region of the 20 SMA on the Daily Price Chart.

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GBPUSD

The national holiday on Monday is followed by a quiet week regarding UK economic data. Still, big news announcements from the US and Eurozone can be expected to influence sterling-based currency pairs. Last week’s break of the 100 SMA on the Daily Price Chart can only be described as ‘bearish’, and there are few technical support levels below current price levels.

Daily Price Chart – GBPUSD Chart – Daily Price Chart

Source: IG

GBPUSD Chart – Hourly Price Chart

Source: IG

Short positions

• Entry Level 1: 1.26788 – Any short-term strength which takes price back to test the 100 SMA would offer an opportunity to enter new short positions.
• Price Target 1: 1.25480 – Intraday price low of 25th August.
• Price Target 2: 1.24645 – Region of 200 SMA on the Daily Price Chart.
• Stop Loss:  > 1.26909 – Tight stop loss provided by the 20 SMA on the Daily Price Chart.

Long positions

• Entry Level 1: 1.26909 – A break of the 20 SMA on the Daily Price Chart might be unlikely but would indicate a significant change in market momentum.
• Price Target 1: 1.28041 – Price high of 22nd August, region of the 100 SMA on the Daily Price Chart, and 1.2800 ’round number’ price level.
• Price Target 2: 1.28539 – 23.6% Fib retracement level of long-term price trend.
• Stop Loss: < 1.25480 – Month-to-date price low printed on 24th August.

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EURUSD

Data on consumer confidence, inflation and retail sales is due from Germany this week and comes at a time when EURUSD sits just below the key 200 SMA on the Daily Price Chart. Any negative surprises in that data can be expected to be followed by further price falls in the euro.

EURUSD Chart – Daily Price Chart

Source: IG

EURUSD Chart – Hourly Price Chart

Source: IG

Short positions

• Entry Level 1: 1.08609 – Region of the 200 SMA on the Daily Price Chart. Last week’s break below this key metric posted the first close below it since November 2022.
• Price Target 1: 1.06351 – Intraday low of 31st May, which now represents a key swing-low pattern of the EURUSD rally, which started in September last year.
• Stop Loss:  > 1.108975 – The 20 and 100 SMAs on the Daily Price Chart have converged, making this region a possible position to place stop-losses.

Long positions

• Entry Level 1: 1.08609 – If price can manage to break back above the 200 SMA on the Daily price chart, it would also post a break of the trendline formed by the downward price movement started on 2nd August.
• Price Target 1: 1.09133 – 100 SMA on the Daily Price Chart.
• Price Target 2: 1.10918 – In extension, the price high of 3rd May, along with the other price highs recorded in the first half of the year, forms a potential double-top price pattern.
• Stop Loss: < 1.07658 – With few support levels below the 200 SMA, it could be worth applying a tight stop loss using August’s month-to-date price low as a guide.

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Indices

S&P 500

The 20 SMA on the Daily Price Chart could be the key indicator for the coming week’s trading in the S&P 500 stock index. With the US Non-Farm Payroll jobs report due on Friday, it could be that price trades within a range that follows that key metric until the unemployment data gives traders a clearer indication of the health of the US economy.

S&P 500 Chart – Daily Price Chart

Source: IG

S&P 500 – Hourly Price Chart

Source: IG

Short positions

• Entry Level 1: 4,433 – Price is trading in line with the 20 SMAs on the Daily and Hourly Price Charts. A break below either of those would indicate downward momentum continues to dominate the markets.
• Price Target 1: 4,370 – Region of the 100 SMA on the Daily Price Chart. Acted as support on 18th and 25th August.
• Price Target 2: 4,336 – Swing low price level recorded on 18th August.
• Stop Loss:  > 4,477 – Region of the 50 SMA on the Daily Price Chart.

Long positions

• Entry Level 1: 4,433 – As long as the 20 SMA on the Daily Price Chart continues to provide support, it will provide an entry point for those looking to go long on the world’s most important stock index.
• Price Target 1: 4,477 – Region of the 50 SMA on the Daily Price Chart.
• Price Target 2: 4,500 – In extension, trendline of the upward rally which started in March 2022. Previously acted as support, it can now be expected to provide resistance.
• Stop Loss: < 4,370 – 100 SMA, which also sits just above swing-low support levels.

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Crypto – Bitcoin & Ethereum

A small but notable divergence in the price of the two biggest cryptos suggests price volatility could be about to pick up in the foreseeable future. Whilst the price of Bitcoin was unchanged on the week, the second-ranking coin, ETH, gave up 1.44% in value. Both coins now sit just above key support levels.

Bitcoin Price Chart – Daily Price Chart

Source: IG

Bitcoin Long positions

• Entry Level 1: 25,358 – Intraday price low recorded on 22nd August.
• Price Target 1: 28,438 – Convergence of the 50 and 100 SMAs on the Daily Price Chart.
• Price Target 2: 31,827 – In extension, current year-to-date price high printed on 13th July.
• Stop Losses: < 24,767 – Support level provided by the price low printed on 15th June.

Ethereum

Ethereum Chart – Daily Price Chart

Source: IG

Ethereum Long positions

• Entry Level 1: 1,622 – Support level marked by price low recorded on 15th June. In that instance, price rebounded off the 200 SMA on the Daily Price Chart.
• Price Target 1: 1,813 – Convergence of the 50 and 100 SMAs on the Daily Price Chart.
• Price Target 2: 2,000 – Psychologically important ’round number’ price level which acted as resistance on 13th and 14th July.
• Price Target 3: 2,141 – In extension, the year-to-date price high printed on 16th April.
• Stop Losses:  < 1,542 – Month-to-date price low of 17th August.

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