In this week’s Week Ahead Analysis we take a look at the key charts of the week with #USDINDEX, #EURUSD, #NZDUSD, and more!
Watch the video to learn more…
Week Ahead Analysis
This week the market is flooded with red folder data as the majority of central banks announce rate decisions before we enter into the Christmas period of trading. This week the topic of the markets will be who doesn’t hike interest rates by 50 bps this week? As the Fed, SNB, BoE, and ECB all are forecast to hike interest rates by 50 bps. A high volatility week like this could see the market shift towards less risky assets like the Japanese Yen or USD.
Investors are going to be keeping a keen eye on the CPI data out of the US which comes out the day before the Fed announces its rate decision. The CPI data is forecast to come in lower which will back up the Federal Reserve’s decision to slow the pace of tightening. However, the shock could come if the CPI numbers beat forecasts and previous numbers. This could pressure the Fed to hold on to the 50 bps move and force 75 bps to move instead. A move like this would surely cause a shock to the market and the USD would significantly strengthen.
This week’s strength meter shows us that the NZD was the strongest currency last week but remains in the reversal zone. The USD and CAD were the weakest currencies and both currencies are also in the reversal zones. The USD could be the currency to reverse going into this week considering the amount of high-impact data releases.
The USD Index will be watched closely this week as the market will look to see how investors take the data announced. Currently, the price is trading close to the 105.00 handle where it seems to have stalled. If the USD strengthens this week and this level is held as support then we would expect a break higher back towards the 108.00 level. Alternatively, if the price were to trade below the support then a move down to the 103.50 level is more likely.
The price of EURUSD will be one to watch as it is the inverse of the USD Index. The price of EURUSD is trading towards the key resistance of 1.0600 and key higher time frame trendline resistance. If the USD weakens the price could trade through these resistance levels offering room to trade to the upside. However, USD strength could push the price back lower toward the key support level of 1.0225.
The price of NZDUSD is on our watchlist this week similar to last week due to the strength meter. Last week it showed us that the NZD was the strongest currency and the USD was the weakest offering long opportunities. However, the currencies are also in key reversal zones on the meter showing that at any moment the price could begin to reverse. Now the price is approaching the key highs at 0.6450 we could begin to see sellers enter the market. If they do then the price could begin to break through the newly formed lows. However, if the USD does not strengthen and the NZD does not weaken then the market could continue through the 0.6450 and head towards the 0.6550 level.
We think the price of Gold will be an interesting watch going into this week’s trading. Will investors seek it out as a haven for the high volatility week ahead? or will the USD continue to dominate the price of Gold? Either way, the price could offer opportunities for both the upside and downside. Currently, the market is trading at the key resistance level of $1800.00. A break above this level would signify the USD weakness and moving to the next resistance of $1875.00 would be likely. However, if the USD does strengthen then the market could hold at the $1800.00 resistance level and move back toward the lows at $1725.00.
Did you see our Forex Market Wrap Analysis? You can see it here.
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