Get the Forex Forecast using fundamentals, sentiment, and technical positions analyses for major pairs for the week of April 12, 2021 here.
The difference between success and failure in Forex trading is very likely to depend mostly upon which currency pairs you choose to trade each week and in which direction, and not on the exact trading methods you might use to determine trade entries and exits.
When starting the trading 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 and market sentiment.
It is a good time to be trading markets right now, as there are a few valid long-term trends left in favor of the U.S. dollar against the Japanese yen, while U.S. and European stock markets are also strong with the major indices closing last week at all-time high prices.
Big Picture 11th April 2021
Last week’s Forex market saw the strongest rise in the relative values of the Swiss franc and the euro and the strongest fall in the relative value of the British pound. However, the U.S. dollar moved in a counter trend direction, so the Forex market was generally mixed without any strong drivers.
I wrote in my previous piece last week that the best trade was likely to be being long of the S&P 500 Index and the GBP/JPY currency cross. While the S&P 500 Index rose over the week by 2.36%, the GBP/JPY currency cross fell by 1.83%, giving an average win of 0.26%.
Fundamental Analysis & Market Sentiment
The headline takeaway from last week is that market sentiment is risk-on. Demand has been stoked by dovish monetary policy plus stimulus in the U.S., despitefears that policy will lead to untenable inflationary pressures. The week ended with the major U.S. stock index, the S&P 500, closing at an all-time high price of 4128.80 – the second consecutive weekly close above 4000. European stock markets also hit record highs, with the DAX Index also ending the week at another record high. Global stock markets were generally higher over the week.
The U.S. dollar fell somewhat over the past week after running into technical resistance, making currency crosses the main market drivers. The euro and Swiss franc showed some bullish momentum while the Japanese yen remained weak. The bullish momentum was driven mainly by analysts seeing a much stronger recovery in the Eurozone than had been expected due to the ongoing persistence of the coronavirus epidemic there, upgrading corporate earnings forecasts. Money has been flowing into euros to invest in European stock markets. Late Friday, the President of the ECB committed to potentially expanding its bond purchase program (if necessary) beyond March 2022 when it is scheduled to end, with Lagarde saying the Eurozone will see a strong economic rebound during the second half of 2021.
The main data event last week was the release of the FOMC’s meeting minutes, which had little impact.The coming week will see the release of U.S. CPI (inflation) and retail sales data, plus the RBNZ rate statement and Chinese GDP numbers.
Last week saw the global number of confirmed new coronavirus cases rise for the sixth consecutive week after falling for over two months, driven mainly by a resurgence of the virus in Europe and Latin America (especially Brazil). The total number of global deaths also rose again last week for the third week running.
Technical Analysis
U.S. Dollar Index
The weekly price chart below shows the U.S. Dollar index printed a weakly bearish small near-pin engulfing candlestick last week which followed a near-pin candlestick from the week before. The consolidation of the past few weeks appears to have ended, with the dollar showing a bearish reversal from the key resistance level identified at 11900. The index is above its price from three months ago, which is a bullish sign, but is still below the key resistance level mentioned as well as sitting below its price from six months ago, suggesting that the upwards movement may be capped over the near term. Overall, next week’s price movement in the U.S. dollar looks uncertain. For this reason, it will probably be wise to wait for the index to be established above 11900 before taking any long USD trades over the coming week.
S&P 500 Index
The incredible rise of the U.S. stock market since the initial impact of the coronavirus in March 2020 continues, with the price powering up last week to close right on yet another all-time high. An additional bullish factor is that the closing price was well above the big round number and psychological level at 4000.The price is in blue sky with bullish momentum, and the volatility is healthy enough to suggest the rise is likely to continue for some days.
Start the week of April 12, 2021 with our Forex forecast focusing on major currency pairs here.
EUR/USD
The euro rallied significantly during the course of the week, breaking above the top of the hammer from the previous week. By doing so, the market then broke above the 1.19 level after that. At this point, the market is likely to see a lot of choppiness just above. After all, we have just filled a gap for the second time, so now I think we are probably going to spend the next couple of weeks going back and forth. The 1.20 level above being broken would be a very bullish sign, and it certainly should be noted that it looks like we have recovered quite nicely during this previous week. However, if I am going to buy the euro this coming week, I am probably going to do so against other currencies.
GBP/JPY
The British pound fell significantly during the course of the week to reach down close to the ¥150 level. However, we have bounced just a little bit from that level on Friday, so the question now is whether or not that will truly hold. If we break down below the hammer from a couple of weeks ago, then I think this pair will go looking towards the ¥145 level. On the other hand, if we can stay above the ¥150 level, then it is likely that we will continue to grind sideways back and forth between ¥150 and 153.50.
NZD/USD
The New Zealand dollar has spent the last couple of weeks trying to recover against the greenback, and although it has been very quiet, its stability is a very good sign. If we break above the top of the candlestick from this week, it is very likely that we will then go looking towards the 0.74 handle. To the downside, the 0.6950 level has been significant support over the last couple of weeks, so if we were to break down below there it is likely that we go looking towards the 0.68 level. This pair will more than likely move right along with risk appetite.
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