Forex Forecast: Pairs in Brief

Get Forex forecasts using fundamental, sentiment and technical position analysis for major pairs for the week of January 7, 2021 here.

The difference between success and failure in Forex trading will most likely depend primarily on which currency pairs you choose to trade each week and in which direction, not on the exact trading methods you might use to determine entries and breakouts. commercial outlets.

At the start of the trading week, it is good to have an overview of what is developing in the market as a whole and how these developments are affected by macroeconomic fundamentals and market sentiment.

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The Forex / CFD market is currently showing strong trends, so now is a good time to look into Forex trading.

Overall picture 6and February 2022

Risk sentiment has improved somewhat over the past week, most major global stock indices ending the week at least slightly higher. The Forex market saw the US Dollar selling against its long-term uptrend, but there is also strong positive momentum from the Euro, while several energies and commodities (WTI Crude Oil, Gasoline, Soybeans, Cotton, maize) soared to new heights.

Last week’s Forex market was dominated by the European Central Bank’s refusal to rule out a rate hike in 2022, the Bank of England’s 0.25% rate hike to a new 0.50% interest rate and a significantly higher net gain in US non-farm payrolls, although the rate of unemployment in the United States fell from 3.9% to 4.0%. We also saw stronger than expected growth in Canadian GDP and employment in New Zealand. OPEC has again decided for another month to increase its oil production by another 400,000 barrels, as crude oil hits new multi-year high prices.

In the Forex market, the US Dollar weakened last week, with the US Dollar Index (USDX) falling back from its highest level in 18 months. The Swiss Franc was the week’s biggest loser in the Forex market, while the Euro strengthened the most of all major currencies.

Last week was the second week in a row in which the number of new confirmed coronavirus cases around the world fell. It may be that the omicron variant pandemic has started to recede, at least globally.

I wrote in my previous article last week that the best trades of the week were likely to be long WTI crude oil and short EUR/USD currency pair. This was a good call on WTI Crude Oil as it rose 5.40% during the week to close at $91.95. Unfortunately, the EUR/USD currency pair rose by 2.72%, so the average profit from the best trades of the week was 1.34%.

Fundamental analysis and market sentiment

Last week’s takeaways were:

  1. The ECB created a hawkish surprise in the market last week, refusing to rule out an acceleration in the pace of rate hikes including at least one hike in 2022.

  2. The Bank of England raised its key rate from 0.25% to 0.50%.

  3. Nonfarm payrolls in the United States rose by 467,000 net, well above the forecast of 110,000.

  4. OPEC again increased its crude oil production by another 400,000 barrels per month.

The week ahead should see a lower or possibly similar level of volatility compared to last weekwith markets experiencing localized trend movements with little underlying theme except perhaps that of high inflation and negative real interest rates. The week ahead will be quite slow in terms of economic data releases with nothing due except US CPI data (inflation). However, this can be a very important data printout for the markets and will be watched closely. A monthly increase of 0.4% is the consensus forecast.

Last week, the global number of new confirmed cases of coronavirus fell again. About 61.3% of the world’s population has now received at least one vaccine.

The largest increases in new confirmed coronavirus cases are currently occurring in Afghanistan, Armenia, Austria, Azerbaijan, Bahrain, Belarus, Bhutan, Brazil, Brunei, Chile, Costa Rica, Egypt, in Estonia, Georgia, Germany, Guatemala, Hungary and Indonesia. , Iran, Iraq, Japan, Jordan, South Korea, Kuwait, Lebanon, Lithuania, Netherlands, Oman, Romania, Russia, Singapore, Slovakia, Slovenia, Turkey, United Kingdom and Ukraine.

Technical analysis

US dollar index

The weekly prize chart below shows the US dollar index printed a large bearish candlestick last week, setting new resistance levels below 12215 and 12257 (the latter looking more reliable). This represents a bearish retracement from last week’s highest weekly close seen in 18 months. The price is also potentially supported by the support level at 12174.

If the support level at 12174 continues to hold, the long term uptrend should resume.

All in all, it seems clear that we have a very bullish picture for the USD. long and medium term, so it will probably be wise to trade in the direction of a long USD position over the coming week, at least in the Forex market. In other markets, it is likely that the USD will not be a key driver of price movements.

US dollar index weekly chart

WTI crude oil

For the fourth week in a row, WTI Crude Oil had its highest weekly close in 7 years last week and printed a relatively large bullish candlestick that looks healthy. The price closed in the upper quarter of the candlestick range, suggesting further upside ahead despite continued OPEC production increases. There are bullish signs, and I keep seeing WTI Crude Oil as an Interesting Buy.

WTI Crude Oil Weekly Chart

Soy

The prices of several “soft” agricultural commodities have risen sharply in recent weeksno doubt driven by higher inflation rates and negative real interest rates that we are seeing in many countries.

Among commodities, soybean futures have risen particularly strongly over the past three weeks. Last week’s sharp price rally ended with the highest weekly close since June 2021with the price rising firmly towards the end of last week.

It makes sense to look for long trades in commodities during this period of high inflationalthough be aware that the volatility of commodities can be very high, so it is important to trade them in relatively small positions.

Bulls should be aware that the 1600 price area could act as resistanceas it was crucial during the summer of 2021 where the price made new long-term highs.

I see soybeans as an interesting purchase.

Soybean Futures Weekly Chart

Conclusion

I see the best opportunities in financial markets this week like likely to be long of WTI crude oil and Soy. Forex traders may find long euro trades to be the most fruitful over the next few days.

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