The euro has been destroyed last week by concerns that the new lockdowns will hurt economic expansion. This has boosted the US dollar as investors are looking for refuge, and the future economic surveys will be critical for whether this cycle carries on. For the meantime, markets are divided on whether the Reserve Bank of New Zealand will deliver a single or double rate increase, leaving the NZDUSD vulnerable in case the central bank ‘plays it safe’.
In contrast, the US dollar has eliminated its competitors recently as a series of positive data releases driven expectations for earlier Fed rate increases. Money markets are now pricing in two rate hikes for next year and a 35% chance for a third one. The US is arguably the strongest major economy at this moment. Consumption is booming, inflation is sizzling hot, lost jobs are coming back quickly, wage growth is firing up, and business surveys point to a powerful spell of growth ahead. On top of everything, Congress is about to bring more spending to this party.
On the economic data front, next week will have some important announcements starting from Tuesday with the UK, US and EU’s Flash Services and Manufacturing PMI’s with emphasis on the German PMIs. On Tuesday, Japanese banks will be closed in observance of Labour Thanksgiving Day.
Wednesday will be a volatile day for Forex markets as the day starts with the New Zealand’s Monetary Policy and Rate Statement. Later the US quarterly Preliminary GDP will be released as well as the Durable Goods Orders and the Unemployment Claims. Later, and again in the US the monthly Core PCE Price Index and Revised UoM Consumer Sentiment will be released and finally at night the FOMC Meeting Minutes.
Thursday and Friday will be relatively quiet as US banks will be closed in observance of Thanksgiving Day.
Major Currencies Performance and Signals
EUR/USD
The Euro suffered heavy losses for the second week in a row. EUR/USD cannot erase its losses due to policy divergence between the ECB and the Fed. The European currency was hurt by concerns over widespread lockdowns. We expect the bearish momentum to continue.
FORECAST: SELL
Resistance: 1.1300, 1.1350, 1.1400
Support: 1.1250, 1.1200, 1.1150
GBP/USD
The British pound rallied a bit during last week, but as you can see the 1.3500 level has offered resistance. It seems that the pound is running out of steam and may be getting ready to break down. Investors will be looking at the US dollar for the next move.
FORECAST: SELL
Resistance: 1.3500, 1.3550, 1.3600
Support: 1.3450, 1.3400, 1.3350
AUD/USD
The Aussie was hurt by the dollar last week. It is worth noting that we are starting to see a little bit of a shift into a “risk off” type of world, and if that is the case the Australian dollar will most certainly endure. We expect the US strength will continue.
FORECAST: SELL
Resistance: 0.7250, 0.7300, 0.7350
Support: 0.7200, 0.7150, 0.7200
USD/JPY
The Japanese Yen as expected was range bound between the 114.50 and the 113.50 prices but managed to break up through the 114.73 level last week. We expect this week the USDJPY will have a bullish direction.
FORECAST: BUY
Resistance: 114.50, 115.00, 115.50
Support: 114.00, 113.00, 113.50
USD/CAD
The Loonie is trying to break the 1.2650 price on the upside and seems that next week the trend will continue the bullish side. Now it’s up to the US economic data next week to stir up volatility.
FORECAST: BUY
Resistance: 1.2650, 1.2700, 1.2750
Support: 1.2600, 1.2550, 1.2500
Warning:
Trading on CFDs involves a high level of risk, including full loss of your trading funds. Before proceeding to trade, you must understand all risks involved and acknowledge your trading limits, bearing in mind the level of awareness in the financial markets, trading experience, economic capabilities and other aspects.
Disclaimer:
Market Trends, Charts, Trading Ideas or other information provided by BKFX (Pty) Ltd and/or third parties are not intended as an investment advice and/or recommendation. The information provided is not presented as suitable or based on your specific need. You are responsible for your own investment decisions and you should not trade with money you cannot afford to lose. Any views or opinions presented in this Article are solely those of the author and do not necessarily represent those of the Company, unless otherwise specifically stated. The Company may provide the general commentary which is not intended as an investment advice and must not be construed as such. Seek advice from a separate financial advisor if an investment advice is needed. The Company assumes no liability for errors, inaccuracies or omissions, inaccuracies or incompleteness of information, texts, graphics, links or other items contained within this article/material.