Start the week of December 7, 2020 with our Forex forecast focusing on major currency pairs here.
The euro broke out during the previous week, and the 1.20 level is now to be thought of as potential support. I suspect that the market got a bit ahead of itself, so a pullback early in the week would be welcomed. At that point, I would be more than willing to buy the euro, especially the closer we get down towards the 1.20 level. From a longer-term perspective, it certainly looks as if the euro could go looking towards the 1.23 level based on a simple technical analysis.
The British pound is going to continue to be a mess, and it is difficult to understand where we will go next until we understand what deal will emerge from Brexit talks this weekend. As things stand right now, the market has broken above the 1.35 level but pulled back rather drastically again. This will be pretty simple: if we get a deal over the weekend, we will break above the 1.35 handle and go looking towards the 1.3750 level under most circumstances. However, if the negotiators continue to be fatalistic, it is possible that we could drop a bit heading into the middle part of the week, as we are getting into “crunch time” when it comes to the Brexit negotiations.
The Australian dollar continues to show strength, but it is struggling with the idea of the 0.75 level above. Much like the euro, I think we are going to see pullbacks as potential buying opportunities, which is essentially how I plan on playing this market: simply buying the dips. The US dollar will continue to soften, but the Australian dollar will probably see support near the 0.7350 level, extending down to at least the 0.7250 level. I have no interest in shorting the Aussie.
The US dollar has broken down against the Canadian dollar during the course of the week, and it looks like we could go further. Pay close attention to the crude oil markets, because they have a major influence on what happens with Canada and its economy. But right now it looks as if oil is ready to go higher, so rallies will be sold into when it comes to the loonie over the next several sessions.