In the latest Forex Weekly Outlook, we say goodbye to 2016 and hello to a brand new year. Which pairs are ready to breakout, and which look like they will repeat their 2016 trends.
The U.S. Dollar Index came across pressure last week around the resistance area above 103.00. The market closed the week at 102.286 and comes into this week with a key VantagePoint level of 102.331. The medium-term crossover discussed in last week’s Forex Weekly Outlook came into play and will continue to limit further IDX strength.
The SPY felt the effects of a strong correlation with the IDX and the IDX’s pressured week. The market ended up turning slightly bearish for the week and closed at 2236.20. It comes into 2017 with a key level of 2242.16. We could see some sustained market flow through President-elect Donald Trump’s inauguration as traders are eager to see how his policies on capital gains taxes could affect the equities markets.
The remaining global indices are also feeling the same pressure around their respective tops. These markets, specifically the DAX and the NIKKEI will regularly move in tandem with the SPY throughout the year.
Oil had a strong finish to 2016 but continues to get hung up on the resistance trend line sitting above 54.00. That level, which has been in place since October, has trapped the market between that value and the key VantagePoint level of 52.54. The market held above that last week with a 53.72 close. If we get as sustained break that falls below the key level, we could see a more significant selloff.
Gold leveled off last week as a bottom may have formed around the 1140.00 area. The market closed last week at 1151.70 and comes into this week trying to regain a bullish mindset with a key level of 1155.01. Breaking above this level will go a long way towards that mindset. But, it’ll take some IDX weakness for that to be sustainable. The one positive for this market is we seem to be in a similar situation to market position from one year ago. The market trades sideways through April before the bulls took hold of it.
Inter-market relationships are always key when trading Forex. It’s extremely important to understand these relationships so that you can use them as leading indicators for other markets. Remember, intermarket relationships will traditionally overpower any indicators.
Forex Weekly Outlook for Major Pairs
Forex pairs are highly influenced by the global equities and understanding the relationships will almost certainly add to your success as a Forex trader.
Euro/U.S. Dollar (EUR/USD) has taken kindly to the turnaround by gold and is trying to get back to the resistance line around 1.0520. The market comes into the week with a key VantagePoint level of 1.0496 after a 1.0517 close to 2016. Bullish indicators suggest we could see some growth this week and test that resistance line.
U.S. Dollar/Swiss Franc (USD/CHF) briefly broke through the bottom of the wedge this pair has been trading in for the last few weeks. The pair fell as low as 1.0061 before closing the week at 1.0180. This week’s key level will be 1.0211. Our indicators are showing bearish bias, including the RSI that fell below 50. It did hold above the 40 level, which could explain why the pair turned around last week instead of continuing lower.
British Pound/U.S. Dollar (GBP/USD) also ended 2016 on a bullish swing. It closed at 1.2329 and comes into this week with a key VantagePoint level of 1.2372. The pair appears to be coming into a wedge with the key level and the support line that is coming in around 1.2200. As the RSI came out of the oversold area with a 45.4 level we see some potential for sustained growth.
U.S. Dollar/Japanese Yen (USD/JPY) sees another tight wedge forming on this pair. The pair closed last week at 116.93 and comes into this week with a key level of 116.22. We also see that if we have a bearish break of that level, there’s a support line that is sitting on the heels of that area.
The Commodities Currencies
U.S. Dollar/Canadian Dollar (USD/CAD) is seeing bearish tendencies after a bounce off the upper resistance line last week. The pair tested the upper resistance line around 1.3600 early last week but immediately came off it and closed at 1.3432. The key level to watch for this week is 1.3428. Recent patterns suggest the creation of a top or bottom on Monday, so be on the lookout for a violent move to start the week followed by a reversal.
Australian Dollar/U.S. Dollar (AUD/USD) is showing some bearish tendencies even though the key level suggests bullish direction. We closed last week at 0.7194 and enter this week with a key level of 0.7273. But, those figures are going against what the indicators suggest. The neural index is down, the MACD is below the trigger, and the RSI tested and failed to break the 40 level. All signs that bears have momentum in this pair, at least in the short term.
New Zealand Dollar/U.S. Dollar (NZD/USD) traders can take much of the same analysis mentioned with the Aussie. Our indicators are bearish even though our key level of 0.6974 is higher than our close of 0.6918.
The Forex Weekly Outlook is designed to help traders remain aware of the intermarket correlations of these global market relationships. You can become more profitable if you know how to get ahead of trends and understand how these relationships can expand your portfolio.