The most attractive trade set-ups for this week as likely to be long of Gold and Silver in U.S. Dollar terms as each half of one unit, and long of EUR/USD and short of USD/SEK as each half of one unit.
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 a questionable rebound, despite the continuing growth in the global coronavirus pandemic.
Big Picture 19th July 2020
In my previous piece last week, I saw the most attractive trade set-ups as likely to be long of the NASDAQ 100 Index, and Gold in U.S. Dollar terms following a daily (New York) close above $1800. This was not a profitable call, as the NASDAQ 100 Index fell by 2% over the week. However, Gold closed at $1802.342 last Monday and ended the week up by 0.43% at $1810.046. Therefore, a total loss of 1.57% was made this week.
Last week’s Forex market saw the strongest rise in the relative value of the Euro and the strongest fall in the relative value of the U.S. Dollar.
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.
Last Thursday saw daily new confirmed coronavirus cases hit a new all-time high just under 250,000 confirmed 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.A. The rolling averages of deaths have decreased significantly in Europe. However, the U.S.A. has seen a sharp increase in new cases over recent weeks to new all-time highs of over 75,000 cases per day, leading to rises in deaths in many states. Cases are also rising in Asia and Africa.
Latin America and the Caribbean are now responsible for approximately 48% of confirmed new daily deaths, with the U.S.A. at 14% and Europe at about 9%. The strongest growth in new confirmed cases is happening in Algeria, Argentina, Australia, Bangladesh, Bolivia, Bosnia, Brazil, Bulgaria, Cameroon, Colombia, Costa Rica, Croatia, Czech Republic, Ecuador, Ethiopia, El Salvador, Greece, Guatemala, Honduras, India, Indonesia, Iran, Israel, Japan, Kenya, Luxembourg, Mexico, Moldova, Montenegro, North Macedonia, Paraguay, Peru, Philippines, Romania, Serbia, Singapore, South Africa, Ukraine, and the United States.
The U.S. stock market rose a little last week but is not breaking strongly to new highs. The sector which had been doing the best lately, the NASDAQ 100 Index, closed the week down a little.
There is evidence that the coronavirus pandemic in the U.S.A. is peaking to a new crest in many states. New confirmed daily cases keep rising to hit new all-time daily high totals. There is concern about the persistence of unemployment from earlier closures and restrictions and the economic impact of the reversals of easing which are now being imposed in several states.
There most important economic data released last week was the ECB’s monthly input, which boosted the Euro as it was seen as likely to increase stimulus, and U.S. retail sales data which came in higher than expected.
U.S. Dollar Index
The weekly price chart below shows last week printed another relatively small bearish candlestick which followed another bearish candlestick last week. This short-term price action is unquestionably bearish. There is finally a long-term bearish trend, as the price is lower than it was both 3 and 6 months ago. The problem for bears is that the price is now close to the 12200 area which has provided support since early 2019, so a break below 12087 would be a significantly bearish technical development if it happens. Overall, next week’s price movement in the U.S. Dollar looks slightly more likely to be downwards than upwards based upon the recent price action.
Last week printed a small bullish inside candlestick which closed at a new 8-year high weekly closing price, after hitting a new 8-year high price. I again see that it is time to trade Gold in the long direction, as the signs point to higher prices over the coming week.
Last week printed a bullish candlestick which closed at a new 3-year high weekly closing price. The price also closed near the high of the weekly range. These are bullish signs and other precious metals such as Gold are also advancing against the U.S. Dollar. There is a good chance that the price of Silver will rise over the coming week.
Last week saw this currency pair print a large, bullish candlestick which closed above 1.1400. This was the highest weekly close made here since January 2019. There is a long-term bullish trend and a weak Dollar, with the Euro being boosted by the ECB last week.
This currency pair looks likely to rise further, but trends here can develop and move very slowly. Bulls should also beware of potentially strong resistance in the 1.1500 area.
Last week saw this currency pair print a relatively large, bullish candlestick which closed at a near 18-month low. We have seen some firm momentum in recent weeks in the Swedish Krona.
This currency pair looks likely to fall further over the coming week. However, the Swedish Krona does tend to move together with the Euro so if trading both be sure to reduce position sizes accordingly.
I again see the most attractive trade set-ups for this week as likely to be long of Gold and Silver in U.S. Dollar terms as each half of one unit, and long of EUR/USD and short of USD/SEK as each half of one unit.