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 growth in the global coronavirus pandemic which continues.
Big Picture 5th July 2020
In my previous piece last week, I saw the most attractive trade set-up for as likely to be long of Gold in U.S. Dollar terms following a daily (New York) close above $1771. This was a slightly profitable call, as Gold closed at $1772.65 last Monday and ended the week up by 0.14% at $1775.09.
Last week’s Forex market saw the strongest rise in the relative value of the New Zealand Dollar and the strongest fall in the relative value of the Euro.
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 209,379 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 days to new all-time highs of over 57,000 cases per day. Cases are also rising in Asia and Africa.
Latin America and the Caribbean are now responsible for approximately 51% of confirmed new daily deaths, with the U.S.A. at about 11% and Europe at about 9%. The strongest growth in new confirmed cases is happening in Brazil, the U.S.A., Algeria, Argentina, Bolivia, Bulgaria, Costa Rica, Croatia, Dominican Republic, El Salvador, Guatemala, India, Indonesia, Iraq, Israel, Kazakhstan, Kenya, Mexico, Montenegro, The Philippines, Romania, Serbia, South Africa, Uzbekistan and Venezuela.
The U.S. stock market rose last week but is not breaking strongly to new highs. The sector which has been doing best is technology, with the NASDAQ 100 Index closing the week at a new all-time high, as big tech companies are seen as major gainers from the changes wrought by the coronavirus pandemic.
There is evidence that the coronavirus pandemic in the U.S.A. is peaking to a new crest throughout many states in the south and west. 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.
Although last week saw better than expected U.S. jobs data, many analysts see the number as compiled a little too early to give a true picture of the economic impact of the recent resurgence of coronavirus cases in the U.S.A.
Technical Analysis
U.S. Dollar Index
The weekly price chart below shows last week printed another small bearish candlestick which followed 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 bearish. There is no true long-term trend, as the price is lower than it was 3 months ago but slightly higher than it was 6 months ago. 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.
NASDAQ 100 Index
Last week saw this major technology index close, at an all-time high price with a strong bullish move over the week, which closed near the high. These are all bullish signs and the chances are that the index will advance again over the coming week. The coronavirus pandemic is boosting major tech companies such as Amazon.
Gold
Last week printed a small doji candlestick which closed at a new 8-year high weekly closing price, after hitting a new 8-year high price. The price action of recent weeks is showing a strong long-term bullish trend with a breakout above the former key psychological level of resistance at $1750. However, the price may not rise over the coming week as this area just below $1800 was a bearish inflection point when it was last reached, so I see that it will be a better time to trade Gold once we get a daily close above the natural nearby resistance level at $1800.
NZD/USD
Last week saw a strong bullish candlestick which closed near its high, as part of a strong 3-month bullish trend which is breaking to new highs. Broadly improving global risk sentiment has helped boost the New Zealand Dollar, as has the near-total suppression of the coronavirus in New Zealand. Meanwhile, the USD seems poised to begin a true long-term downwards trend. It looks likely that we will see higher prices in this Forex currency pair over the coming week.
Bottom Line
Bottom LineI see the most attractive trade set-ups for this week as likely to be long of the NASDAQ 100 Index, and long of Gold in U.S. Dollar terms following a daily (New York) close above $1800.