Weekly Forex Forecast – GBP/USD, EUR

The past week was quiet in the markets, but the risks persisted, and the USD’s bearish trend continued as there are growing expectations of a more dovish tilt from the Fed and other major central banks.

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The yen is a popular asset during troubled times

The difference between success and failure in trading is likely to depend forexCFDs are mostly based on which assets you choose to trade each week and in which direction, not on the exact methods you might use to determine trade entries and exits.

So, as we start the week, it’s a good idea to look at the big picture of what’s developing in the overall market, and how those developments are affected by macro fundamentals, technical factors, and market sentiment. There are some short-term trends in the market right now that can be exploited profitably. Read on for my weekly analysis below.

Fundamental analysis and market sentiment

I wrote in my previous post on the 20th of November that the best trading opportunities for this week were not very clear and the best opportunities are likely to be short positions either buy USD/CAD if the sentiment on the USD is bullish or long. GBP/USD If sentiment towards the US dollar turns bearish again. This was a good call with GBP/USD up 1.68% while USD/CAD down just 0.07% – sentiment towards the US dollar has been solidly bearish for most of the week.

Two issues currently dominate the news – speculation about the extent of the upcoming “protectionism” by the Federal Reserve and possibly other major central banks, and measures China has taken to stimulate its economy.

Speculation on the Fed has been more pessimistic since the release of lower-than-expected US inflation data two weeks ago, indicating that inflation has finally begun to decline significantly. This was reinforced by the release of minutes from the FOMC’s last meeting last week which showed that members widely expect rates to peak in 2023 at around 5%, with another 1% or 1.25% of rate increases remaining in this range. session. This speculation helped bring the US dollar back again after hitting multi-decade highs just a few weeks ago.

China’s central bank lowered the reserve requirement ratio of Chinese banks, which will have the effect of unlocking a potential $70 billion of additional liquidity in the Chinese economy. This is expected to boost the Chinese stock markets when trading begins this week, and could boost highly correlated currencies like the Australian dollar as well.

Markets ended the week with an improvement in risk sentiment, with the US dollar continuing to sell off and equity markets rallying.

The other major market news last week was mostly the 0.75% interest rate hike by the Reserve Bank of New Zealand, which raised the interest rate to 4.25%, the highest rate for any major currency at the moment. The RBNZ also expected New Zealand to enter a one-year recession in the third quarter of 2023. There was other data showing that services sales in the US were weaker than expected, but both services and manufacturing performed slightly better in the UK, Germany, and France than expected.

The forex market saw the strongest strength in the British pound and the New Zealand dollar last week. The weakest currency was the US dollar.

Coronavirus infection rates rose very slightly but remained at a historically low level last week. The initial numbers have not been this low since the end of the first wave in the summer of 2021. The only significant increases in confirmed new coronavirus cases overall are now occurring in China, Japan, the United Kingdom and Venezuela.

Next week: November 28 – December 2, 2022

The next week is likely to see a higher level of volatility in the markets, as there are many major data scheduled, some of which are likely to have a strong impact. Scheduled ads are:

  • Public address to Federal Reserve Chairman Powell
  • US primary gross domestic product
  • US non-farm payroll data
  • Core PCE price index in the United States
  • Job opportunities in the United States JOLTS
  • Canadian gross domestic product
  • Swiss Consumer Price Index (Inflation)
  • Testimony of the Governor of the Reserve Bank of Australia before the Australian Parliament
  • Testimony of the Governor of the Bank of England before the British Parliament
  • US Manufacturing PMI from ISM
  • Canadian unemployment

Technical Analysis

US dollar index

The weekly price chart below shows that the indicator U.S. dollar It formed a bearish engulfing candlestick, representing another weekly decline. However, the support level shown in the price chart below at the level of 104.92 continued to hold, in fact, it has not been tested, so this remains ambiguous.

The long-term bullish trend in the US dollar is in serious trouble and may be over because we have finally seen the inflation numbers come down significantly, which indicates that the Fed will not be under much pressure to make more aggressive rate hikes – this is supported by the Fed minutes last week which indicates further increases of 1% to 1.25% on interest rates in this cycle. This makes sense to achieve a lower value for the US dollar, but higher values ​​for stocks, commodities and other risky assets.

The short-term trend in the US dollar is still uncertain due to the support at 104.92, so it might be wise to stay away from the forex market this week, or look carefully for short-term trades that do not include the US dollar, or sell the US dollar.

British pound / US dollar

Last week saw the formation of a pair British pound / US dollar For a strong bullish candle that closed above the highest level it had recorded last week, which is a somewhat bullish sign.

The long-term upward trend of the US dollar is likely to be over, and the pound once again showed some strength in the short term last week, and in fact it is one of the strongest major currencies.

I believe that this pair will continue to go higher provided that the US dollar is weak, with the pound continuing to strengthen somewhat due to the above-average volatility. This could be jeopardized if the Governor of the BoE gives a very bleak picture in the short term in his public comments due this week.

Weekly chart of the British pound / US dollar

EUR/USD

pair form EUR/USD Last week was a bullish engulfing candle, but the candle did not breach the top of last week’s range, so the upward trend seems weak. It will be difficult for the bulls to be convinced here until the price consolidates above the very key resistance level at $1.0486 or perhaps the big round number just above $1.0500.

I believe that this pair will continue to go higher provided that the US dollar is weak, although the GBP/USD seems to be the best way to go long over the next week.

EUR/USD weekly chart

Conclusion

I think that probably the best opportunity in the financial markets this week will be very cautious longs in the GBP/USD. However, swing or position traders should be very careful because the 50-day moving average is still below the 100-day moving average, which indicates that this upward trend has not yet been established.

Are you ready to trade our weekly forex forecast? Here are the best forex brokers to choose from.

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