Get the Forex Forecast using fundamentals, sentiment, and technical positions analyses for major pairs for the week of July 11, 2022 here.
The difference between success and failure in Forex / CFD trading is very likely to depend mostly upon which assets you choose to trade each week and in which direction, and not on the exact methods you might use to determine trade entries and exits.
So, when starting the week, it is a good idea to look at the big picture of what is developing in the market as a whole, and how such developments and affected by macro fundamentals, technical factors, and market sentiment. Read on to get my weekly analysis below.
U.S. Dollar Index
The weekly price chart below shows the U.S. Dollar Index printed a large bullish candlestick which closed at a new 20-year high, in line with the long-term trend, which is bullish. This is significant as breaks to new high closes suggest the price will rise further over the coming days. However, note there is a large upper wick, and that the price did not advance on Friday, so we may have seen a climax suggesting the price will not rise further soon.
It looks wise to trade the US Dollar long over the coming week once it starts rising again on shorter time frames, at least until the release of US CPI data on Wednesday which could cause volatility in the Dollar.
EUR/USD
Recent weeks and months have seen a lot of strength generally in the US Dollar, but the Euro is also standing out lately as an especially weak currency due to concerns over the ECB running out of options to tackle resurgent inflation, making the EUR/USD currency pair potentially exciting to trade short.
The price fell sharply last week, reaching a level close to parity, and making its lowest weekly close in 19 years. However, it is important to note that the daily chart saw the week conclude with a strong and bullish pin bar, suggesting we may be about to see a rise in the price. If this bullish pin bar is taken out by a strong bearish reversal, that would be a very bearish sign.
I suggest waiting for a daily close below $1.0100 before considering entering a short trade here.
USD/JPY
Last week saw a strong advance by the US Dollar, but the Japanese Yen was also strong, meaning the price of the USD/JPY currency pair advanced little. However, having seen reversals in the Dollar’s major counterparties the EUR/USD and the GBP/USD, it may be that further Dollar strength will be expressed against other currencies such as the Japanese Yen.
Breakouts are typically more powerful after periods of consolidation, and we have seen the price trade quite tightly below recent long-term highs.
I am prepared to take a long trade in this currency pair if we get a daily (New York) close above ¥136.66 (ideally above the round number at ¥137.00).
GBP/USD
The British pound had a choppy week, breaking down below the 1.20 level at one point before recovering. In this general area, I would expect to see a lot of noisy behavior, but I still favor fading short-term rallies that show signs of exhaustion. After all, the US dollar is like a wrecking ball against almost everything else, so the British pound won’t be any different. With that being the case, I do think that eventually we will look to reach the 1.15 level, but this particular week might be noisy.
USD/CAD
The US dollar rose against the Canadian dollar but still struggles with the idea of breaking above the 1.31 level. At this point, it’s an obvious area of significant resistance. If we were to break above the 1.31 level, I think we have a real shot at seeing a major breakout. This week will probably be more about chopping away at that potential barrier than anything else. I would anticipate that oil will have a lot to say as to where we go as well, as the usual correlation between the Canadian dollar and crude oil should continue.
Bottom Line
I see the best opportunities in the financial markets this week as likely to be:
- Short of EUR/USD following a daily (New York) close below $1.0100.
- Long of USD/JPY following a daily (New York) close above €136.66 (ideally €137.00).
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