In this week’s Market Outlook we take a look at the key charts of the week with #EURUSD, #GBPUSD, #USDCAD and more!
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Today, we’re going to take a look at the Forex Market Outlook.
Currency Strength Meter
I’m going to start with the currency strength meter. One thing to note is that the US Dollar continued to fall last week.
It is now at a -7, which is the lowest it can go. It means that it’s the weakest against the majority or all other major currencies.
Usually, when we get to the -7 area, we see a reversal to that market. So, we’re either going to get a continuation next week like what the JP Yen had when it was at -5.
It’s going to be an interesting because on the opposite side of things, we have the GB Pound and the Swiss Franc up at the +6 areas, which has been an area where it reversed from in the past.
The strength meter this week shows us that the USD was the weakest currency last week and the GBP was the strongest. The USD is now the weakest currency out of all major currencies and is in a key area where it could reverse.
The last time we saw a currency at that level, the market took a few weeks before seeing the strength enter. However, the USD Index is at support this time.
The GBP is at +6, making the GBP/USD an interesting pair to watch as we could see the uptrend continue or completely reverse.
This is telling me that the GBP/USD is in a strong uptrend but could be up for a reversal. If the US Dollar was at -5, I would have still looked for further long opportunities, but seeing this, the GBP/USD chart looks interesting.
We have a strong bearish weekly close at 1.42, which is a really strong level on the GB Pound. Will the market hold this area on a weekly timeframe? If it does, then we should see further downside.
There are a few things we could look into. The first one is a trend line support running through where the market found support recently, at the 1.41 level. The GB Pound does like to bounce between these whole numbers and psychological levels, and we can see that at the 1.41 level. We may see a move down for the GB Pound into that area.
In the four-hour timeframe, the price already changed in cycle. We have a bit of a demand zone. It’s almost like a move back up and a continuation down into the 1.41 area.
So, that’s what I’m looking for on the GB Pound. We’re looking for its potential to find resistance and move back down to 1.41. So, that’s only if the US Dollar finds strength.
The GBP/USD rejected the 1.4200 level once again, forming a double top pattern on the daily timeframe. The four-hour timeframe changed its trend recently, forming a lower low. This suggests that we could see a reversal from the previous lows down to the support of 1.4100.
If we look at the US Dollar index in the weekly timeframe, we could be in for this. The reason is the way the candlesticks are forming at this level.
The market has been to these areas before. The last time it was here, we saw strong buying activity. As the price is approaching the demand zone, we’re starting to see lower ranging candlesticks that are starting to get a little bit smaller in size.
The USD Index weekly chart is interesting because the market is at a support where buyers have stepped in before. The weekly candlesticks are showing signs of a reversal too, with the fact that they are smaller in range compared to what we saw recently. Could this be a sign of the momentum shifting?
If the price does this, we could usually see a move to the upside. If it breaks through that weekly high, I would expect further longs if we were to get that breakthrough there.
Moving on to EUR/USD. There is a little bit of support at 1.2160. If that strength comes in, we should expect a breakout of this channel and a move down to 1.2.
EUR/USD is the inverse of the USD index. If the market shows USD strength, we could see the currency pair break the support of 1.2160 and trendline support. If the price does this, we can anticipate a reversal to the trend.
If it doesn’t, then we could see a continuation. As I said in the Forex Market Wrap last week, there is a zone at 1.23 where the price may want to retest. But this, combined with the US Dollar Index and the weekly, the slowdown in the candlesticks is something that interests me.
When you see a slowdown, you usually see a reversal. So, I think that we could get that pretty soon.
Moving on to USD/CAD. The only reason I’m looking at this again is looking at the length of the weekly candlesticks, we’re getting very shallow in those areas.
I’m expecting a move back up. If we get that, we could see it go all the way up into this previous structure area at 1.2468. Anywhere in there could be a possible area for the market to move back into.
The USD/CAD weekly timeframe is also interesting for the same reasons as the USD Index. The weekly candlesticks are smaller in range suggesting that the selling momentum is slowing and a reversal could occur.
That’s going to be the Forex Market Outlook this week. Keep an eye on the US Dollar. It could make a turn soon.
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