Forex Forecast: Pairs in Focus

Adam Lemon

The difference between success and failure in Forex trading is very likely to depend upon which currency pairs you choose to trade each week, and not on the exact trading methods you might use to determine trade entries and exits. The current market environment has changed from one of crisis to rebound, despite the growth in the global coronavirus pandemic which continues.

Big Picture 21st June 2020

In my previous piece last week, I suggested no trades for the coming week, as markets were in a state of flux and very unpredictable. I did think that the EUR/USD currency pair was likely to fall, which it did, although I had no specific trade there.

Last week’s Forex market saw the strongest rise in the relative value of the Japanese Yen and the strongest fall in the relative value of the British Pound.

Fundamental Analysis & Market Sentiment

The world is not coming to an end, but we are living in an extraordinary time of global health crisis, the type of which has not been seen in one hundred years. There is both fear and optimism, but it is important to remember that the evidence shows that the vast majority of people are going to survive and be healthy.

Friday saw daily new confirmed coronavirus cases hit a new all-time high of 180,874 cases. This is a sign that globally, the wave of disease is still advancing to a peak.

We have seen the epicenter of the global coronavirus pandemic move into Latin America, with Brazil now seeing more new deaths from the virus than any other country in the world, and a higher total death toll than any country except the U.S. The rolling averages of deaths have decreased significantly in the U.S. as a whole and in the U.K., which has recorded more deaths than any other country in Europe. European nations and the U.S. have relaxed restrictions. However, the U.S. has seen an increase in new cases over the past two weeks.

Latin America and the Caribbean are now responsible for approximately 46% of confirmed new daily deaths, with the U.S.A. and Europe at about 13% each. The strongest growth in new confirmed cases is happening in Brazil, U.S.A., India, Chile, Saudi Arabia, South Africa, Colombia, Turkey, Egypt, Panama, Argentina, and Romania. China is also seeing a renewed outbreak.

The U.S. stock market rose last week, with most of the upwards movement coming after the Federal Reserve announced it would begin buying individual corporate bonds.

Technical Analysis

U.S. Dollar Index

The weekly price chart below shows last week printed another bullish pin candlestick which completed a bullish lower inflection point candlestick formation rejecting the area around 12200 which has provided some support over recent months. This short-term price action is unquestionably bullish. There is no long-term trend, as the price is lower than it was 3 months ago but higher than it was 6 months ago. Overall, next week’s price movement in the U.S. Dollar looks more likely to be upwards based upon the recent price action. 

US Dollar Index Weekly Chart

Gold

Last week printed a bullish pin candlestick which closed near its high. The price action of recent weeks is showing a bullish consolidation just underneath the key psychological level of resistance at $1750. A bullish breakout beyond that level looks likely to happen soon, with the obvious catalyst being a daily close above the $1750 level.

Gold/USD Weekly Chart

Bottom Line

I see the most attractive trade set-up for this week as likely to belong to Gold in U.S. Dollar terms following a daily (New York) close above $1750.

Adam Lemon

Adam Lemon began his role at DailyForex in 2013 when he was brought in as an in-house Chief Analyst. Adam trades Forex, stocks and other instruments in his own account. Adam believes that it is very possible for retail traders/investors to secure a positive return over time provided they limit their risks, follow trends, and persevere through short-term losing streaks – provided only reputable brokerages are used. He has previously worked within financial markets over a 12-year period, including 6 years with Merrill Lynch.
Learn more from Adam in his free lessons at FX Academy

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