FX Week Starting: 05-02-2016

Am going to start trading false breakouts (only) on fx as a slow introduction of trading fx into my skill-set. Don't want this to take up too much time so will focus on setups on the daily chart, making a plan early in the week for the coming trading week.

The General Setup:

(1) Watch major levels on most pairs.

(2) Have Bollinger bands up. Not for a signal, but just to keep an eye on the tightness of the bands to ensure I'm not looking to fade a breakout from a contraction.

(3) Use RSI(14) to look for divergence on the daily.

(4) Ideally the fx pair would have had a couple of days strength/weakness into the resistance/support. 

(5) Should only pierce the support/resistance intraday.

(6) Look for a move back to recent swing low/high.

(7) Entry is only a counter-trend move to close the BB on the H1 after the breakout or over/under the 20MA. Stop the goes above/below the high. Should be able to risk less than 0.5ATR.

(8) Trade should work relatively quickly, so don't be afraid to get rid of the trade for around break-even if it's not working.

(9) Minimum risk-reward should be 2:1. Ideally get it up to >3.

EURUSD:

Super interested in this at current price. 1.1460-1.1530 is an extremely important zone of resistance. Given that it's not a clear level it makes it harder to play the "fake-out". However, it could be considered that 1.1500 is the "true" level.

Has rallied 250 pips in 5 straight green days to get to this level so should be getting somewhat exhausted.

The divergence isn't super clean on the RSI, but it definitely is there. If the price breaks out it will probably cancel out the divergence signal.

No high risk euro events this week, but a couple of US events to pay attention to.

GBPUSD: 

Along with EURUSD is also currently at it's zone of resistance. Overall I prefer the EURUSD setup, however if the GBPUSD setup triggers over the euro one I am happy to take it.

The price level is much cleaner (1.4670).

Bollinger bands potentially indicating the making of an uptrend, although they didn't contract convincingly.

Divergence not visible on the daily, but is on the H4.

No high risk pound events this week, but again there is US events.

EURJPY: Super clear level on EURJPY at 122.05. The last fakeout below this level worked really well, but as they say, you don't want go back to the well too much. This one is in complete contradiction with EURUSD, which is quite nice, because if both trades trigger they will somewhat hedge.

Bollinger bands certainly haven't contracted.

Very clear RSI divergence.

No high risk yen events this week.

Risk-reward provided on the H1 bollinger trigger wasn't the greatest, so tiny size taken. The target at 2:1 seems a long way away.

AUDJPY:

79.50-80.00 is the zone of interest. Very clear zone, with plenty of range for a decent trade if get appropriate risk-reward.

Bollinger bands haven't contracted.

No divergence on RSI, but it is getting over-extended coming into the level.

There is an RBA rate decision on Tuesday.

USDCHF:

0.9500/0.9475 is the level of support.

Depending on what the RSI does when it's down there it could have divergence at that level.

BB's not contracting.

Thus far has had 6 straight down days into the level.

NZDUSD:

Not at all an impressive uptrend. The last false break of high was rewarded with a 2-3R trade. Will look for similar 0.7000+.

USDCAD: An impressive down-move thus far. It is very consistent, so not worth looking for an entry yet. A 2000 pip move on a major pair means it is worth seriously monitoring for a trend change. Will watch 1.2360, or for a break in the consistent downtrend.