Action in GBP (the British pound) has been quite bullish and profitable for us recently.
We're making great profits -- especially in my long term favorite pair -- and those look set to continue for the next few weeks at least.
I'll cover all that in just a moment.
But first, our regular look at the US Dollar Index (USDI) so we start off with the big picture.
USDI has been locked in a narrow trading range for the past several weeks. However, the key reversal bar made four weeks ago suggests the dollar is vulnerable to trading lower over the short term. All the way down to the lower edge of that channel, and perhaps even lower.
The main beneficiaries are likely to be the Euro (EUR) and the British pound (GBP).
I can see prices rising to 1.1900 and 1.3500 respectively in EURUSD and GBPUSD.
Let's look at the reasons why ...
On the face of it, EURUSD (the Euro against the dollar) looks bearish with that ongoing head and shoulders pattern.
However, a strong reversal a few weeks ago has driven EURUSD higher with some strength. Instead of rolling over and dropping, the Euro has shown a lot of strength.
It could go to at least 1.19 (the highs of the right hand shoulder). And if it can break that then 1.20 and even higher is possible.
But right now I'm not taking a position. EURUSD looks promising, but there's a better candidate to take on the long side: GBPUSD.
GBPUSD is another one that looks bearish at first glance. There's been a double top flanked by a shoulder on each side to make a convincing head and shoulders pattern.
However, the pound refused to drop when it hit the neckline of that head and shoulders.
There was a temporary false breakdown and since then a rally broke above the neckline once again. I think there's enough power behind this rise to hit 1.35 or better (the high point of the right hand shoulder).
I told my Pattern Trader members to go long GBPUSD on this basis and so far the trade is working.
But the real star of the GBP stable is my old favorite GPBNZD (the pound against the New Zealand dollar).
GBPNZD recently closed at a multi-year high price above 1.99. I've been very bullish on this currency pair since October 2016 when significant bottoming price patterns emerged. The double bottom and rounding bottom indicated a major reversal of trend from the previous bearishness.
More recently the ascending triangle has proved to be strong support, especially when it's been reinforced with numerous key reversals. And last week GBPNZD managed to close above the neckline of that triangle.
We might slide sideways for a bit, but I expect that neckline to offer strong future support.
That strong weekly close suggests much higher prices are to come over the course of the next several weeks and months. Buy any weakness in this pair.
These profits are looking good, but I think there's much more to come before we see the end of 2018:
The 797 pips we've racked up so far could be much, much more before GBP's latest rally is done (especially if you're holding GBPNZD).
In fact, I think GBP's so strong, it's likely to offer a good opportunity against the Euro too in the EURGBP pair.
Here the main pattern is the emerging (and bearish) triple top. When you couple that with last week's close below a six-month rising trendline, we see strong signs this pair is poised to go lower very soon.
So what else do I like?
Another promising short is USDCAD (the U.S. dollar against its Canadian counterpart).
There's a historical double top and more recently a downward channel. Last week USDCAD closed on the low and looks likely to drop all the way to the bottom of the channel and perhaps even lower.
Get into this trade with a sell stop if you want to exploit the weakness we're seeing here.
Meanwhile U.S. stock indexes continued their inexorable rise Both the S&P and DJIA closed at six-month highs. So it appears the path of least resistance appears higher for now.
The NASDAQ is still making up lost ground but also had a strong week:
And here's the S&P looking strong and primed to potentially make new highs in the near future.
The Dow's key reversal last week also points to higher prices in the near term:
And that concludes this week's analysis.
Going long GBPNZD remains my strongest and best trade. Also consider profiting from strength in GBPUSD and weakness in EURGBP and USDCAD.
Autumn is looking very promising for big trades on the horizon. We could be seeing some serious action soon in these pairs and more.
Remember, the exact same profitable patterns show up in FX as well as in the stock market. Once you learn them, you can trade anything profitably.
So I’ve put together my 21 most powerful Forex strategies for you.
The key point is that once you learn the ideas and concepts, they're with you forever. You'll know when to trade and when NOT to trade for the biggest profits from large moves.