In this week’s Forex Outlook we take a look at what is expected to be a choppy week in the market but there are a few key trades that are showing trends forming. In order to know when, where and how to react, we must understand the global intermarket relationships that take place and what equity markets we must keep an eye on to catch the trends on the onset.
Forex and the U.S. Dollar
We start by taking a look at the U.S. Dollar which is a major player against the Euro, Swiss Franc, British Pound and Canadian Dollar. Recent market chatter from the ECB and FOMC has been wreaking havoc on the dollar. VantagePoint’s forecast showed this market going short back in the beginning of March and this trend is still holding true. There was a little bit of recovery mid-month but this market is still down.
If we look at the DAX we can see the inverse relationship this market has to the U.S. Dollar.
Oil prices closed the week with a big move up closing at $40.99 and while a mild recovery is possible this week we still do not expect to see a trend to the upside yet.
With U.S. Dollar weakness we also see Gold showing a minor boost up.
These global equity markets are key factors to what is driving, impacting and influencing the prices of Forex pairs and understanding these relationships can help Forex traders be better prepared for what is likely to happen.
Outlook for Major Forex Pairs
Euro/U.S. Dollar (EUR/USD) is approaching key levels this week.
U.S. Dollar/Swiss Franc (USD/CHF) is showing suggested strength. In order to see this pair move up we are looking for Gold and the S&P 500 to show weakness.
British Pound/U.S. Dollar (GBP/USD) our short-term indicators recently turned to the upside but the medium and long-term indicators are not showing a cross to the upside yet so we’ll wait to see how this one pans out.
U.S. Dollar/Japanese Yen (USD/JPY) our forecast from last week, which indicated a sell signal, came to fruition. This move was called by looking at the global equity markets and was predicted by VantagePoint 4 days before the trend actually occurred.
U.S. Dollar/Canadian Dollar (USD/CAD) if we look at the big picture of this pair we see 2 really long and accurate moves called by VantagePoint. Starting back in October 2015 when VantagePoint forecasted this pair to move up and in late January 2016 when it forecasted the pair down. In order to see this pair regain its move to the upside we need equity markets to fall, commodity prices to fall and we need to keep a close eye on the price of oil, which has an inverse relationship. If oil prices move down we can expect this pair to move up.
Australian Dollar/U.S. Dollar (AUD/USD) has been showing weakness but what we’re watching to see if this pair makes a move to the downside is again, the equity markets that are closely related such as the Nikkei, DAX and S&P 500. Even markets like copper and oil. If they turn up we can expect this pair gets pushed up so we can get ready for a good short trade in this pair.
New Zealand Dollar/U.S. Dollar (NZD/USD) is showing a potential break to the downside. This pair trades almost identical to AUD/USD so we’re keeping an eye on the same global equity markets that impact them both.
If we remain cognizant of these global market relationships that affect prices in the Forex market we can get ahead of trends and become more profitable in the market.