Weekly #forex Forecast: US Dollar Index,#EURUSD,#USDJPY,#GBPJPY,#USDCAD & #USDCHF (27 JUNE-1 JULY 2022)
Start the week of June 27, 2022 with our Forex forecast focusing on major currency pairs here.
Technical Analysis
U.S. Dollar Index
The weekly price chart below shows the U.S. Dollar Index printed a bearish inside bar after falling from a 20-year high the previous week, against the long-term bullish trend. This is significant as a trend reversal in the US Dollar would have a major impact on the Forex market.
It is worth noting that the US Dollar’s long-term bullish trend has been boosted, so far, by rising inflation and interest rates. However, as the US economy comes closer to a statistical recession, the more the US Dollar may become subject to bearish pressures.
It is probably a good idea not to trade the US Dollar long over the coming week unless it makes a strong upwards movement for a day or so.
USD/JPY
After initially powering up to yet another 20-year high, the USD/JPY currency pair dropped quite sharply before recovering a little later in the week, to produce a small net weekly gain.
The US Dollar seems to have lost its strength and its long-term bullish trend may have already peaked two weeks ago, although it is too early to say this with any confidence. However, the Japanese Yen remains relatively weak and is being talked down by its central bank, the Bank of Japan, which desperately needs to reflate the Japanese economy, whose inflation remains below the target of 2%.
It is of course unclear how much further the move might run, or whether it will even happen at all. The best sign to look for will be whether this currency pair manages to close in New York at another new 20-year high closing price. USD/JPY remains a buy if we see a daily (New York) close above €136.59.
GBP/JPY
The British pound initially spent most of the week going higher against the Japanese yen but has continued to struggle near the ¥168.50 level. That being said, I think based on the candlestick from both this past weekend and the one before it, it’s likely that we will continue to hear a lot of noise. Ultimately, we are in an uptrend, and as long as the Bank of Japan is going to continues to fight interest rates, that will put downward pressure on the Japanese yen, thereby allowing this market to continue cranking higher as it has been. Ultimately, this is a market that I think will show signs of value hunting on every dip.
EUR/USD
The euro has rallied during the course of the week, as we continue to see the 1.04 level offer a certain amount of support. This is a market in which I think you can continue to fade rallies, as the Federal Reserve is tightening its monetary policy going forward. On the other side of the equation, the ECB might tighten a bit, but it’s going to pale in comparison to the Federal Reserve as the United States is more worried about fighting inflation than finding energy such as the European Union.
GBP/USD
The British pound has been somewhat noisy during the course of the week as we are trying to find some type of bottom. Even if we do rally at this point, it’s likely that the 1.25 level is an area where a lot of people will find sellers, and I do think that you will continue to fade rallies going forward, but we may have a little bit to go before we get to serious selling pressure. Underneath, the 1.20 level is the target.
USD/CHF
I had expected the level at 0.9545 might function as support, as it had previously functioned as both support and resistance. Note how such “flipping” levels can be exceptionally reliable reversal points. The H1 chart below shows how the price rejected this level with a very clear bullish reversal – firstly a doji, then a pin bar - during last Friday’s London/New York overlap, which is typically a great time to be trading Forex. The entry point is marked by the up arrow within the price chart below. This trade has been profitable so far, achieving a maximum positive risk-reward ratio slightly higher than 1 to 1 based upon the size of the entry candlestick.
Bottom Line
I see the best opportunities in the financial markets this week as likely to be:
- Long of USD/JPY following a daily (New York) close above €135.47.
- Short of BTC/USD following a daily (New York) close below $18,500.
- Short of ETH/USD following a daily (New York) close below $993.
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