In this week’s Market Outlook, we take a look at the key charts ahead of the election with #EURUSD, #USDCHF, #NZDUSD and more!
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Hi, and welcome to this Blueberry Markets video update with me, John Kibbler, Head Currency Analyst.
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In this video, we’re going to go through the Forex Market Outlook. I’m going to start by saying Happy New Year! I hope you have a great trading year and if you have any comments, questions, or anything you’d like to see from the YouTube channel this year, let me know in the comments section below, and we’ll get back to you at some point.
Let’s start with the first strength from the weak table of the week and what’s apparent to me is that we’ve got a nice little divergence play on the go in terms of the divergence between the strength and weakness and seasonal analysis. Typically, we see the US Dollar fall throughout December, and that’s quite evident with what happened on the strength and weakness analysis recently. We’ve seen the US Dollar move lower for the majority of the past few months. So, we’ve seen the US Dollar fall into this extreme of being weak.
Now, let’s head over to the US Dollar index seasonal chart. We can see here, again through December, the market falls. So, we know that the seasonal analysis at the moment for the US Dollar is playing out because we’ve seen that fall throughout December, which is shown here on the strength and weakness analysis.
So, what happens in January? Typically, in January, the market finds a bottom and rallies up until April. What we’re looking for at this time of the year is for the US Dollar to rally.
So, if I were to look at the strength and weakness table, it’s saying that the US Dollar is extremely weak. It’s at a point where we could start to see it reverse. We’ve got seasonal analysis suggesting that the market finds a bottom at the end of the year and throughout the start of the year, and we usually see the US Dollar rally in January. So, we’ve got a couple of things there suggesting that we could start seeing the US Dollar rally.
Last week, we looked at the potential for the US Dollar to start gaining a little bit of strength. And what I quite like here on EUR/USD, in particular, was the fact that the market came up into an area of interest for us and started to drop slightly. We were looking for the market to break and form some new lows, but, we said that that might be a little bit early because of the Christmas season With low liquidity period, we don’t typically see too much going on. But, what we did see is a nice strong bearish rejection at these previous structure highs. So, it looks to me like the US Dollar bullishness could start coming into play here.
Now one way we could do to see that happen is if we start getting breaks of lows, and the current low is just through here. What I’d like to see from the EUR/USD price is a breakout of this area. So, we’ve got this little consolidation pattern. If we were to break through these lows, we could see a change in trend, and we could see a drop from the start of the year through to April.
The most-traded areas of last week were up at this 1.2286, which is through here, and the most traded area from the week before was 1.2185. We did have a slight retest of that, but we didn’t get a conclusive test of this. So, this week’s plan is to see if the price will climb back up into 1.2286, I would look for the market to defend that level to see the price push down from that point and head towards this 1.2855. So, that’s what I’m going to be looking for 1.2185. That’s what I’m going to be looking for on the EUR/USD in line with the dollar strength’s potential.
Kiwi did something nice. Suppose I go into the weekly timeframe. First, we looked at the most traded area in this block, through here, and we said that that number was around about 7223. The market came into that point, spiked into it and rejected away from it, which is a really good sign for us because, at the moment, it’s showing us that the market is defending this level, through here. If the institutions, for instance, play short at this point and the market moved away, are they going to defend that level? Are we going to see the same thing again come April? Then again, April typically sees the US Dollar lose a little bit of value.
So, I’m looking at this thinking that we will get some downside here on Kiwi. Now, onto NZD/USD. We’re looking at the daily timeframe as well. If we’re zooming in, we’ve got this nice potential setting up where the market is making those higher highs that we’re starting to see with this expansion pattern in here, which we could lead to a downside as well. But, what we have here is that the market came up into that key level, then rejected it.
The most-traded are of last week was 7198, which is this level, through here. The most-traded level of the week before was 7095. So, what I’m looking for is maybe a retest, or we may see the price breakthrough and retest the major level again. But, if we were to see a market rally up, hit this level or even reject this 7199, I’d be happy to short in and around this point for targets around 70953, the most-traded level of last week, which could be a nice retest of that area. I’d like to see the price at least retest one of these two levels when looking for some short opportunities there.
Another market that interests me is USD/CHF. If we look at the daily timeframe on USD/CHF, the market broke lower here, but then closed quite quickly back above those previous structure lows.
Are we going to see some double bottom pattern here with the price then moving to the upside? Now, I looked at the most traded area within this consolidation zone through here. So, 0.9115 is a nice area to look for potential targets because if we were to start seeing the price trade back to the upside, this was the most traded level in this area. I would expect a retest of that point. Whether the price then breaks out and continues or we breakdown is the question for when we get to that point, but I like the opportunity of buying into this area, through here.
A couple of different levels again to be aware of: the most traded area of last week is where the price is sitting at right now. If I expand that through there, this 0.8848 is what the price is retesting at the moment. There’s a little bit of resistance up here around 0.8885. What I’d like to know again is if the price is trading above it, could we get back to it for the potential rally up into this key level? Then are we going to break out of the traded level the week prior? If we break above that like we’re anticipating, that’s when I’d start looking for longs up into a major level of 9115. So, keep an eye on this one as well.
Three charts that I like the look of going into this week – EUR/USD, NZD/USD especially I like that one and USD/CHF.
Thanks for watching and I’ll speak to you soon.
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