The difference between success and failure in Forex trading is very likely to depend mostly upon which currency pairs you choose to trade each week and in which direction, and not on the exact trading methods you might use to determine trade entries and exits.
When starting the trading week, it is worthwhile looking at the big picture of what is developing in the market as a whole and how such developments and affected by macro fundamentals and market sentiment.
Big Picture 29th November 2020
In my previous piece last week, I saw the most attractive trade opportunities as likely to be in a long trade in the NZD/USD currency pair, and cautious short-term long trades in Bitcoin against the U.S. dollar. While the price of Bitcoin basically went sideways or fell slightly over the past week, the NZD/USD currency pair closed on Friday up by 1.30%, so this was a profitable call overall.
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 U.S. dollar. There is a strong trend against the U.S. dollar; meaning, it is an attractive time to be trading Forex.
Fundamental Analysis & Market Sentiment
Last week saw somewhat higher volatility in the Forex market, although there was very little news and no surprising economic data releases. We are seeing the U.S. dollar continue to weaken while the commodity currencies (AUD, NZD, and CAD) are strong and continue to advance. The EUR/USD currency pair made its highest New York close on Friday in more than 2 years, moving upwards in a firm bullish trend. President Trump is still refusing to concede the Presidential election but there seems to be no real chance that any of his legal challenges will succeed in changing any of the results so the electoral college seems set to confirm Joe Biden as President on 14th December. It is no longer possible to bet on Biden becoming the next U.S. President.
Another notable feature of the election result was that the Democrats seem to have made either no gains or only very limited gains in congressional elections, and it seems quite likely that Republicans will retain control of the Senate, although this will be determined by run-off elections in Georgia in January. If the Democrats win these, then there may be a stronger economic stimulus package, which could boost the U.S. stock market and weaken the U.S. collar.
Global stock markets remain generally bullish, with both the S&P 500 and the Nikkei 225 indices closing Friday at all-time weekly highs despite last week’s still worsening coronavirus infection rates in the U.S.A. and globally.
Last week’s major story in the U.S. has been a tailing-off in new daily confirmed coronavirus cases, although hospitalizations and deaths continue to rise strongly. Several states have announced new lockdowns and other restrictions in an attempt to stem the spread of the virus.
The big coronavirus stories globally right now are the sharp rise in deaths worldwide, and the fact that two major pharmaceutical companies, Pfizer, and AstraZeneca, seem to have a 90%+ effective vaccine almost ready for rollout next month in December.
Last Wednesday saw a record number of new deaths confirmed globally, at 12,243. There are initial signs that new cases globally may have seen a peak within the recent wave. The European Union is now reporting more deaths than the U.S. but both are showing falls in the number of new cases.
Europe is leading the share of the global death toll, at about 47%, while the U.S.A. is accounting for approximately 22%, and Latin America has 19% of the total. The strongest growth in new confirmed cases is happening in Armenia, Azerbaijan, Belarus, Belize, Brazil, Bulgaria, Burma, Canada, Colombia, Croatia, Cuba, Cyprus, Denmark, Dominican Republic, Estonia, Finland, Georgia, Germany, Honduras, Hungary, Indonesia, Iran, Japan, South Korea, Latvia, Lebanon, Lithuania, Mali, Mexico, Moldova, North Macedonia, Pakistan, Panama, Paraguay, Romania, Russia, Serbia, Slovakia, Slovenia, Sri Lanka, Sudan, Turkey, Ukraine, and Uruguay.
The coming week is likely to bring a similarly moderate or maybe somewhat higher level of activity to the Forex market. High-impact economic data due over the coming week includes the Reserve Bank of Australia’s monthly policy input and Australian GDP, Canadian employment data, and most importantly of all, U.S. non-farm payrolls numbers.
Technical Analysis
U.S. Dollar Index
The weekly price chart below shows the U.S. Dollar index printed a bearish candlestick. It closed very near the low of its range, which is a bearish sign. Significantly, this weekly close was the lowest in more than 2.5 years, suggesting a strong bearish trend. Overall, next week’s price movement in the U.S. dollar looks likely to be downwards. This is a good time to be trading the U.S. dollar short.
NZD/USD
The NZD/USD Index currency pair again closed Friday at a 2.5 year weekly high closing price, which is a bullish sign. The candlestick closed near the top of its price range, suggesting the price is likely to rise further over the coming week. A further bullish sign is that the price ended the week above the psychological round number at 0.7000. The only sign that bulls should be cautious is the previous bearish inflection point close by at 0.7059.
EUR/USD
The EUR/USD currency pair just made its highest weekly close in more than 2.5 years, and close right at the high of its weekly range. These are very bullish signs for this currency pair and suggest that now is a good time to be taking long trades in this currency pair which trends relatively reliably. However, it is worth noting that the price is still below the big round number of 1.2000 which was rejected strongly when it was hit a few weeks ago.
S&P 500 Index
The S&P 500 stock market index just made its highest weekly close of all time, closing right at the high of its weekly range. These are very bullish signs for the most important and biggest global stock market index, suggesting that the price is likely to rise higher still over the coming week. However, bulls should note that the highest all-time price is still a little ahead of the close, after having been made two weeks ago at 3646.
Bottom Line
I see the best likely opportunities in the financial markets this week as long of the EUR/USD currency pair and of the S&P 500 Index.