Get Forex forecasts using fundamental, sentiment and technical position analysis for major pairs for the week of June 27, 2022 here.
The difference between success and failure in Forex/CFD trading is very likely to depend primarily on which assets you choose to trade each week and in which directionnot on the exact methods you might use to determine trade entries and exits.
So, as you start the week, it’s a good idea to get an overview of what’s developing in the market as a whole, and how those developments are affected by macro fundamentals, technical factors and sentiment. of the market. Read on to get my weekly analysis below.
Fundamental analysis and market sentiment
I wrote in my previous post last week that the best trades of the week were probably:
- Long USD/JPY following a daily close (New York) above €135.47.
- Short of BTC/USD. This trade produced a loss of 4.16%.
- Short of ETH/USD. This trade produced a loss of 9.75%.
The crypto losses are far less than the huge gains made in crypto exchanges over the previous week.
The news is currently dominated by political topics that do not have a major economic impact. After more than four months, the war in Ukraine has faded from its former place as the main topic of the news and seems to have little effect on the markets, except perhaps to weigh on fears of a global recession. There are fears about a potential blockade on agricultural products such as wheat and maize, but their prices are generally trading lower now.
Last week was dominated by a slight rebound in risk appetite. It is to highlight that “fear” indicators such as the VIX are showing levels well below those seen in previous bear markets. The US stock market is still in a bear market.
The past week has seen all of the strong trends break out of their highs and lows, with significantly lower overall directional movement. With the end of the month approaching in a few days, after a very active spring season in the markets this year, we may be on the verge of entering a summer lull of lackluster markets with no breakout. This often happens during the months of July and August, hence the saying “sell in May and go”.
Important economic data releases from the past week arrived as follows:
The chairman of the US Federal Reserve testified before Congress. He said the recession was a possible result of the course of rate hikes, but it had little lasting effect.
British CPI – an annualized rate of 9.1% was expected and achieved. Cope CPI was a bit lower than expected. Overall, it had little impact.
Canadian CPI – a month-over-month increase of 1.4% was reported compared to the 1.0% expected.
Minutes of the Reserve Bank of Australia’s monetary policy meeting. Inflation is expected to rise, rate hikes of less than 0.25% per meeting over the next few months are also expected.
German Flash Manufacturing and Services PMI. This figure is slightly lower than expected.
Retail sales in Canada. It came much stronger than expected. Given the high and rising rate of inflation, this suggests that the Canadian economy is still overheating despite recent rate hikes.
The Forex market saw a slight selloff in the US Dollar last week as the Japanese yen, whose weakness is still tacitly encouraged by the Bank of Japan, also looks weak. The euro is the strongest major currency.
Global coronavirus infection rates rose again last week against the long-term downward trend, suggesting we may be witnessing the start of a major new wave, possibly driven by the new omicron BA5 sub-variant. Significant increases in the number of new confirmed coronavirus cases are currently occurring in Austria, France, Israel, Bahrain, Cyprus, Germany, Greece, Guatemala, Italy, Lithuania, Malta, Mexico, in Morocco, Singapore and the United Arab Emirates.
The week ahead: 27e June – 31st June 2022
The coming week in the markets should be much less volatile than last week. There are very few major scheduled releases that have the potential to move the markets significantly. These are, in likely order of importance:
US Core PCE Price Index Data – it could give clues about inflation.
US CB consumer confidence data
U.S. Manufacturing ISM PMI Data
It’s a public holiday in Canada on Friday the 31stst June.
US dollar index
The weekly prize chart below shows the u.s. dollar index showed a downtrend inside bar after falling from a 20-year high the previous week, against the long-term uptrend. This is important because a US Dollar trend reversal would have a major impact on the Forex market.
It should be noted that the long-term uptrend of the US dollar has been driven, so far, by rising inflation and interest rates. However, the closer the U.S. economy gets to a statistical recession, the more downside pressure the U.S. dollar may face.
It’s probably a good idea not to trade the US Dollar long over the coming week unless it makes a strong move higher for a day or two.
US dollar index weekly chart
Bitcoin rose last week after falling very sharply the previous week, in line with its long-term downtrend. The week ended with a bullish inside bar trading near its high, suggesting that this bullish retracement could last for some time.
Despite the minor bullish signs, there has been some very strong selling and I think it is not wise to go long on Bitcoin this week.
It looks like Bitcoin is still likely to fall further down the road. The price could easily reach the $13,000 area technicallymeaning a short here could still be an interesting trade.
I would be willing to enter a short trade if we get a daily close (New York) below $18,500 during this week.
The price chart below shows that $13,788 looks like the technical support level, which could mean a full Bitcoin bubble burst.
BTC/USD daily chart
Bitcoin rose quite firmly last week – more than Bitcoin – after falling very sharply the previous week, in line with its long-term downtrend. The week ended with a bullish inside bar trading near its high, suggesting this bullish retracement could last for some time
Despite the minor bullish signs, there were very strong selling and I think it is not wise to go away from Ethereum this week.
It looks like Ethereum is still likely to fall further down the road. The price could easily reach the $571 area technicallymeaning a short here could still be an interesting trade.
I would be willing to go short if we get a daily close (New York) below $993 during this week.
The price chart below shows $571 looking like the technical support level, which could signify a full burst of the crypto bubble.
ETH/USD daily chart
After initially hitting a new 20-year high, the USD/JPY currency pair fell quite sharply before recovering later in the week to produce a small net weekly gain.
The US Dollar appears to have lost strength and its long-term uptrend may have already peaked two weeks ago, although it is too early to say that with confidence. However, the Japanese yen remains relatively weak and is criticized by its central bankthe Bank of Japan, which desperately needs to revive the Japanese economy, whose inflation remains below the 2% target.
It’s of course unclear how far the move could go, or if it will even happen at all. The best sign to look for will be if this currency pair manages to close in New York at another new 20-year high closing price. USD/JPY remains a long if we see a daily (New York) close above €136.59.
USD/JPY daily chart
- Long USD/JPY following a daily close (New York) above €135.47.
- Short of BTC/USD after a daily close (New York) below $18,500.
- ETH/USD short after a daily close (New York) below $993.