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January 2: The Best Forex Setups And Plays For The New Year

The first trading day of the new year is here and what’s more exciting than starting with a clean slate? Now it’s up to you what you’ll do with the new opportunities. By the way, this is the best moment to join our unique trader development program and get the trading journal to put yourself in the best spot and take trading seriously.

In this week’s watchlist, we will take a broader look at the daily timeframes of a few markets to get a bigger picture view on what is happening right now. Also, there are some interesting setups happening right now on the higher timeframes and it seems like a few of the recent trends are rolling over.

 

Dollar Index

The path for the US Dollar seems to be higher over the next few months, given the recent developments in the US and also considering the FED’s position. However, we still can find good short-term selling opportunities on the US Dollar in the meantime. The Dollar gapped lower substantially opening below the daily 20 SMA. This is not the time to short and I mentioned it before that Monday morning reversals are low probability trades and gaps tend to close. I do feel slightly bearish but I want to see how traders in Europe and New York respond to the recent weakness.

The top at 103.50 was classic and the Friday sell-off was a good indication what might be waiting for us going forward.

dxy

 

S&P 500

The S&P looks very similar to what we are seeing on the USD Index. Price has broken below the 20 SMA last week and we have pulled away already. The question many traders have is, whether this is going to be a runaway trade or will price give us a retest opportunity? Obviously, there is no way of knowing but if we see more selling, this could lead to new safe haven flows and help other trades unfold as we will see shortly.

spx

 

AUD/USD

The Aussie is showing a roll-over pattern at the psychological significant 0.716 area. Price went from making lower lows to putting in a double bottom to now making higher lows. The recent swing even showed a higher high, but price hasn’t confirmed it yet and we have been pulling lower. A continuation of the USDX  bearishness would help this setup.

audusd

 

Euro Bund

Price found resistance at 164.5 with a classic reversal pattern: an exhaustion gap into the level, a Doji at the level, followed by a strong reversal candle. To the downside, 162.8 is the next level to watch. This market could offer decent opportunities on the 4H and/or 1H timeframe.

bund

 

EUR/JPY

The EUR/JPY shows a very early stage market top on the daily. Lots of rejection wicks to the upside and lower highs indicate that buyers might be losing interest and strength here. However, as long as we don’t see a lower low, which will happen on a break of 121.8, this is not a market you should short. At the same time, the EURJPY could benefit from safe-haven flows and a stronger Yen.

eurjpy

 

Gold

Gold has found support at the 1120 level and slowly turned. Last week, we saw the break of the 20 SMA and now price is moving back into it. The question, again, is whether this will be a retest and start more buying or will price drop back into 1120 and maybe give us another squeeze. Keep an eye on the Dollar Index and on the S&P for more clues on how to trade Gold.

gold

 

USD/CHF

The USDCHF has been very volatile last week and this high volatility is not necessarily something I like to see in the pairs I trade, but the overall setup seems promising and the USD bearish turnaround can already be felt here.

usdchf

 

USD/JPY

And finally, the USDJPY which is one of my favorite pairs this week. The small consolidation after the deep push into the resistance are is very interesting and the USDX and the S&P safe haven flows would both impact this trade. That’s why a see a good potential here going forward if the setups unfold as explained above.

It’s too early to call a short reversal though and as long as price doesn’t convincingly break the daily 20 SMA, it’s not a short. We can still see some buying in the range so take your finger off the mouse and wait it out. There is probbaly enough downside potential so that you can wait for additional confirmation.

usdjpy

 

And that’s it. Keep in mind that this is just a selection of my watchlist and I highly encourage you to do your own market selection and write your own trading plans. You will quickly see the benefits of such a routine in your own trading.

Happy trading 🙂

 

 

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