The difference between success and failure in Forex / CFD trading is very likely to depend mostly upon which assets you choose to trade each week and in which direction, and not on the exact methods you might use to determine trade entries and exits.

So, when starting the week, it is a good idea to look at the big picture of what is developing in the market as a whole, and how such developments and affected by macro fundamentals, technical factors, and market sentiment. Read on to get my weekly analysis below.

Fundamental Analysis & Market Sentiment

I wrote in my previous piece on 21^st August that the best trades for the week were likely to be:

1. Short of the GBP/USD currency pair, which fell by 0.75%.
2. Long of Natural Gas, which rose by 1.04%.

This produced an average win of 0.90%.

The news is currently dominated by the Federal Reserve Chair Jerome Powell’s speech on Friday, which was received negatively by markets. Powell stated that inflation was still too high, too persistent, and too dangerous as a driver of long-term expectations to be met with anything other than tough monetary measures as part of a struggle to drive it down. Powell said this would necessarily cause some pain to the economy and he signaled there is no chance of a dovish pivot which some analysts had been hoping for after recent inflation data suggested that CPI has already peaked in the USA. Powell’s speech at the Jackson Hole symposium sent stock markets sharply lower, and hit risk sentiment hard, which sent money flowing into the US Dollar in the Forex market and out of riskier currencies such as the British Pound, the Euro, and the commodity currencies.

A 0.50% rate hike at the Fed’s next meeting is all but certain, while analysts now see a real chance of a 0.75% as an alternate possibility.

It is worth pointing out that although the US stock market had been rising in recent week, the US stock market has technically been in a bear market for some time, with the US yield curve being inverted for several weeks now. The US is also arguably in a recession, having seen two successive quarters of GDP contraction, although wages growth and the job market remain relatively buoyant. The case for recession was boosted by data released last week which showed that in Q2 2022, US GDP shrunk at an annualized rate of -0.6%.

To recap there were two other important economic data releases last week apart from the US Preliminary GDP data. The results were as follows:

1. US Core PCI Price Index data – the month-on-month increase was only 0.1%, lower than the 0.2% which had been expected, slightly boosting hopes that US inflation has already peaked.
2. US, UK, German, and French Flash PMI data – the results were mixed, but overall, more negative than had been expected, suggesting there may be a slowing in producer output in the EU, the UK, and the USA.

The Forex market saw a rise by the Australian and US Dollars last week. The rise was broad but especially strong against the New Zealand Dollar.

Rates of coronavirus infection globally dropped last week for the sixth consecutive week. The most significant growths in new confirmed coronavirus cases overall right now are happening in Japan, South Korea, Russia, and Taiwan.

The Week Ahead: 29^th August – 2^nd September 2022

The coming week in the markets is likely to show a slightly higher level of volatility than last week, with Friday’s higher level of market activity following Powell’s speech likely to continue. Releases due are, in order of likely importance:

1. US Non-Farm Payrolls, Average Hourly Earnings, and Unemployment data (plus the earlier forecast)
2. German Preliminary CPI data
3. US JOLTS Job Openings data
4. US CB Consumer Confidence
5. US ISM Manufacturing PMI data
6. Swiss CPI (inflation) data

Technical Analysis

U.S. Dollar Index

The weekly price chart below shows the U.S. Dollar Index printed a bullish candlestick which closed up, in line with the long-term trend, which is bullish. The weekly closing price is a 20-year high, and the week’s rise came after the price rejected the support level below just under 105.00 a few weeks ago. These are all bullish signs, and with the chair of the Fed giving a very hawkish speech a few days ago about the need for more rate hikes to fight US inflation, the bullish technical picture is supported by sentiment and monetary policy fundamentals.

It will probably be a good idea to look for long trades in the US Dollar over the coming week. This is a very powerful, long-term bullish trend in the most important currency in the Forex market, and it remains likely to continue if sentiment remains driven by the fear of ongoing interest rate hikes negatively impacting risky assets, with the US Dollar acting as a primary safe haven.

EUR/USD

Last week saw the EUR/USD currency pair print a bearish candlestick. This pair is technically interesting as it again printed the lowest weekly close seen in almost 20 years.

The Euro is beset by worry over the impact of ECB rate hikes which have begun and must continue. These hikes are going to put a severe strain on government bond markets in southern Europe, notably Italy.

The strength of the US Dollar and the technical breakdown we see here, plus fundamental headwinds against the Euro, see a short trend trade opportunity continue in this currency pair. However, it is probably helpful to use relatively wide trailing stop losses for this pair, as using ATR 3 has over the years produced better results than ATR 1.

GBP/USD

Last week saw the GBP/USD currency pair print a bearish candlestick. This pair is technically interesting as it printed the lowest weekly close seen since the coronavirus panic in March 2020.

The British Pound is troubled by fundamental woes, including new increased inflation figures above 10%, and a Bank of England forecast of a coming recession which will last for five quarters and see GDP shrink by 2.2%.

The strength of the US Dollar and the technical breakdown we see here, plus fundamental headwinds against the Pound, see a short trend trade opportunity continue in this currency pair. However, it is important to use relatively tight trailing stop losses for the British Pound, as using ATR 1 has over the years produced much better results than the more typical ATR 3.

NZD/USD

The New Zealand Dollar was the biggest loser of all major currencies last week, despite the RBNZ’s rate hike two weeks ago by 0.50% to 3.00%, the highest rate of any major currency. We finally see a technical breakdown below recent support here, with the price making its lowest weekly close since May 2020.

It is notable that the price closed right on the low of the week, which is a bearish sign.

There may be further bearish momentum in the NZD/USD currency pair over the coming week, with the NZD the weakest of all major currencies suggesting that this can be an interesting currency on the short side.

Natural Gas

Although we are seeing a bearish market with most commodities and risky assets shrinking against safe havens such as the US Dollar, we have seen Natural Gas gain very slightly over the past week to make new multi-year highs.

Volatility is very high and price movement can be extremely choppy.

Long natural gas can be an attractive trend trade as we are seeing a breakout in the price chart. However, anyone trading natural gas should be very, very mindful of the extremely high level of volatility we have seen here over recent months, and trade very small position sizes which respect the volatility.

What is even more concerning for anyone thinking of going long here is the fact that we see the current weekly candlestick form as an inverted bearish hammer, which hints that there may not be much upside left over the near term.

As commodities in general and energies are quite weak, I do not have strong faith in a long trade here, which is another reason to keep the position size very small if you are trading natural gas over the coming week.

Bottom Line

I see the best opportunities in the financial markets this week as likely to be short of the EUR/USD, GBP/USD, and NZD/USD currency pairs.

Ready to trade our Forex weekly forecast? Here’s a list of some of the best Forex trading platforms to check out.

Get the Forex Forecast using fundamentals, sentiment, and technical positions analyses for major pairs for the week of August 15, 2022 here.

The difference between success and failure in Forex / CFD trading is very likely to depend mostly upon which assets you choose to trade each week and in which direction, and not on the exact methods you might use to determine trade entries and exits.

So, when starting the week, it is a good idea to look at the big picture of what is developing in the market as a whole, and how such developments and affected by macro fundamentals, technical factors, and market sentiment. Read on to get my weekly analysis below.

Fundamental Analysis & Market Sentiment

I wrote in my previous piece on 7^th July that the best trades for the week were likely to be:

• Looking for short-term short trades in the EUR/USD currency pair, which probably would not have worked well if attempted.
• Trying to exploit the pivotal point in the S&P 500 Index at 4172 if it was reached. This could have worked well by going long on Wednesday’s open above that level, which would have netted a profit of 2.10% over the rest of the week.

The news is currently dominated by the lower-than-expected annualized US inflation rate, which was released last Wednesday, showing there was no month-on-month inflation and that the headline rate has fallen from 9.1% to 8.5%. These data suggest that US inflation may have peaked, which would reduce hawkish pressures on the Fed. While a rate hike of 0.75% is still widely expected to be executed at the Fed’s next meeting, the lower CPI had the effect of weakening the Dollar and boosting riskier assets such as stocks and other currencies such as the commodity currencies.

The risk-on rally that had already been showing signs of emerging came into full bloom after the release of the US CPI data, and the week ended with the S&P 500 Index having recovered more than half its losses incurred during the calendar year of 2022.

The outlook regarding risk appetite is obviously more bullish now. The US stock market is still in a bear market, but rose again last week, although the US yield curve remains inverted. The US has seen two successive quarters of GDP contraction but is not officially in a recession. If the US is in a recession, the slowdown is very patchy so far.

To recap there were a few other important economic data releases last week. The results were as follows:

1. US Purchasing Power Index data – a month-on-month decrease of 0.5% was recorded compared to an expected increase of 0.2%. This boosted the claim that US inflation has already peaked.

2. UK GDP data: a month-on-month contraction of only 0.6% was recorded when a much heavier contraction of 1.2% had been widely expected. The leaves the quarterly contraction at only 0.1% against the expected 0.2%. However, it is widely expected that the British economic climate will continue to deteriorate over the coming months, reinforced by the Bank of England’s recent pessimistic forecast.

3. US UoM Consumer Sentiment data: consumers were more bullish than expected.

The Forex market saw a decline by the US Dollar last week. The decline was broad but especially strong against the commodity currencies, especially the Australian and New Zealand Dollars.

Rates of coronavirus infection globally dropped last week for the fourth consecutive week. The most significant growths in new confirmed coronavirus cases overall right now are happening in Barbados, Chile, Mongolia, Serbia, Tonga, and Trinidad.

The Week Ahead: 15^th August – 19^th August 2022

The coming week in the markets is likely to show a similar or lower level of volatility to last week, as the data releases due this week are light and unlikely to contain enough to news to strongly move the entire market. Releases due are, in order of likely importance:

1. US FOMC Meeting Minutes

2. UK CPI data

3. Canadian CPI data

4. Reserve Bank of New Zealand Official Cash Rate, Rate Statement, and Monetary Policy Statement

5. Australian Monetary Policy Meeting Minutes

6. US Retail Sales data

7. Australian Unemployment data

It is a public holiday in France and Italy on Monday 15^th August.

Technical Analysis

U.S. Dollar Index

The weekly price chart below shows the U.S. Dollar Index printed a bearish candlestick which closed lower, against the long-term trend, which is bullish. The overall picture technically still looks quite bullish however, as the key support level just below the 105.00 handle is clearly holding, with the recent weekly candlestick showing a long lower wick.

It will probably be a good idea to not trade the US Dollar short over the coming week until we get a daily close below 104.92 here. This is a very powerful, long-term bullish trend in the most important currency in the Forex market, and it remains likely to reassert itself despite an increasing feeling among some analysts that US inflation may have peaked.

US Dollar Index Weekly Chart

AUD/USD

Last week saw this currency pair print a large, bullish engulfing candlestick. The Australian Dollar was one of last week’s big winners as we saw risk appetite really bounce back after that lower US CPI print. The Aussie for several years now has acted as a key risk-on barometer.

Despite the strength of last week’s bullish price movement, it is far from clear what will happen next here, as the price is in area which has been quite congested recently. We also see a weak but long-term bearish trend in this currency pair which is still technically valid.

If the US Dollar Index gets established below key support this week, we might well see a further rise in price here.

AUD/USD Weekly Chart

S&P 500 Index

The S&P 500 Index is technically in a bear market, but rose last week for the fourth consecutive week, by quite a healthy amount. The price closed the week right on the top of its range at a new 3-month high. The S&P 500 Index has now recovered more than half of the total loss it suffered during the calendar year of 2022 so far, breaking up above the 50% Fibonacci retracement level.

Another bullish sign is that the resistance level which had been printed at 4172, was easily broken to the upside.

It is also useful to note that while the NASDAQ 100 Index has also been rising firmly, the bullish momentum is greater in the wider market than in the tech market, making the S&P 500 Index a superior vehicle to trade this advance.

Further upside is likely over the coming week in the absence of any unexpectedly bad inflation news from the FOMC Meeting Minutes or UK or Canada CPI data.

S&P 500 Index Weekly Chart

Bottom Line

I see the best opportunities in the financial markets this week as likely to be in looking for short-term long trades in the S&P 500 Index whenever short-term momentum turns strongly bullish during normal market hours.

Ready to trade our weekly Forex analysis? We’ve made a list of the best brokers to trade Forex worth using.

Get the Forex Forecast using fundamentals, sentiment, and technical positions analyses for major pairs for the week of August 8, 2022 here.

The difference between success and failure in Forex / CFD trading is very likely to depend mostly upon which assets you choose to trade each week and in which direction, and not on the exact methods you might use to determine trade entries and exits.

So, when starting the week, it is a good idea to look at the big picture of what is developing in the market as a whole, and how such developments and affected by macro fundamentals, technical factors, and market sentiment. Read on to get my weekly analysis below.

Fundamental Analysis & Market Sentiment

I wrote in my previous piece on 17^th July that the best trades for the week were likely to be:

• Short of EUR/USD following a daily (New York) close below parity ($1.0000).
• Long of USD/JPY following a daily (New York) close above €138.92 (ideally €139.00).

My forecast produced no trades as neither of these set-ups emerged over the week, which was enough to stay out of trouble on the long side.

The news is currently dominated by the higher-than-expected increase in average hourly earnings and net new non-farm payrolls jobs data which were announced last week. These data suggest that the US economy is still powering ahead and generating inflationary pressure, so the market took it as a sign that the Fed will have to maintain a very hawkish course of rate hikes and a generally tighter course of monetary policy. This boosted the US Dollar and the 2-year USD yield. US average hourly earnings rose by 0.5% over the month while an increase of only 0.3% had been forecast. Non-farm payroll jobs increased by 528,000 which was more than double the number expected.

US inflation data to be released this week is expected to show a month-on-month increase of 0.2%, with core CPI expected to climb by 0.5%.

The Bank of England raised its base rate by 0.50% last Thursday as had been expected, to a new rate of 1.75%. However, the Bank degraded its economic forecasts and is now expecting inflation to reach as high as 13% later this year, plus a five-quarter recession producing an economic contraction of 2.2% in GDP. This is one of the most negative outlooks seen in any G20 country.

The outlook regarding risk appetite is unclear. The US stock market is still in a bear market, but rose again last week, although the US yield curve remains inverted. The US has seen two successive quarters of GDP contraction but is not officially in a recession. If the US is in a recession, the slow down is very patchy so far.

To recap there were a few important economic data releases last week. The results were as follows:

1. US Average Hourly Earnings – an annualized rate of 0.5% was recorded compared to an expected 0.3%. This suggests inflationary pressures remain strong.

2. US Non-Farm Payrolls: 528k new jobs were created compared to an expected 250k. This suggests inflationary pressures remain strong.

3. The Bank of England raised its interest rate by 0.50% to a new rate of 1.75%.

4. The Reserve Bank of Australia raised its interest rate by 0.50% to a new rate of 1.85%.

5. US Jolts Job Openings came in almost as expected.

6. Swiss CPI data showed inflation unchanged month-on-month. A decline of 0.1% had been expected.

7. Canadian employment data came in slightly worse than expected.

The Forex market saw a firm advance by the US Dollar last week. The advance was broad but especially strong against the Japanese Yen, the British Pound, and the Australian and New Zealand Dollars.

Rates of coronavirus infection globally dropped last week for the third consecutive week. The most significant growths in new confirmed coronavirus cases overall right now are happening in Barbados, Chile, Japan, South Korea, Romania, and Serbia.

The Week Ahead: 8^th August – 12^th August 2022

The coming week in the markets is likely to show a higher level of volatility than last week, as the US CPI data release due has become the major event in the month’s Forex calendar. Releases due are, in order of likely importance:

1. US CPI data

2. British GDP data

3. US PPI data

4. US Preliminary UoM Consumer Sentiment data

It is a public holiday in Japan on Thursday 11^th August.

Technical Analysis

U.S. Dollar Index

The weekly price chart below shows the U.S. Dollar Index printed a bullish candlestick which closed higher, in line with the long-term trend, which is bullish. This may be significant as the price seems to have rejected the support level shown by the blue horizontal line in the price chart below just below the 105.00 handle, with a long lower wick.

It will probably be a good idea to try to trade the US Dollar long over the coming week once it starts rising again on shorter time frames. This is a very powerful, long-term trend in the most important currency in the Forex market.

 

EUR/USD

Last week saw this currency pair print a bearish engulfing candlestick, but it looks a little weak as the real body is so narrow. However, the price has remained quite close to its recent 20-year lows below the parity level, which suggests that the bearish trend here is strong and worth persisting with.

The Euro has been showing some relatively strength, but I am quite confident it will move lower soon as we see such strong selling every time the price gets close to the $1.0300 handle.

Looking for short trades here when the hourly and 4-hour charts begin to make decisive lower highs will probably be the best strategy here over the coming week.

S&P 500 Index

The S&P 500 Index is technically in a bear market, but rose last week for the third consecutive week, although not by a large amount. However, it is notable that the price is not far from making a new 2-month high.

There has been short-term bullish price action that has enabled day traders to profit from longs on momentum days, but traders should zoom out and note the flipped support to resistance level which has now been printed at 4172, as shown within the below price chart.

A daily close this week above 4172 will be significant for bulls and suggest more upside. Alternatively, a failure following a test of that level followed by renewed bearish momentum could be a good short trade entry signal.

Bottom Line

I see the best opportunities in the financial markets this week as likely to be in looking for short-term short trades in the EUR/USD currency pair, and in trying to exploit the pivotal point in the S&P 500 Index at 4172 if it is reached.

Ready to trade our Forex weekly analysis? We’ve shortlisted the best Forex trading brokers in the industry for you.

Get the Forex Forecast using fundamentals, sentiment, and technical positions analyses for major pairs for the week of July 11, 2022 here.

The difference between success and failure in Forex / CFD trading is very likely to depend mostly upon which assets you choose to trade each week and in which direction, and not on the exact methods you might use to determine trade entries and exits.

So, when starting the week, it is a good idea to look at the big picture of what is developing in the market as a whole, and how such developments and affected by macro fundamentals, technical factors, and market sentiment. Read on to get my weekly analysis below.

Fundamental Analysis & Market Sentiment

I wrote in my previous piece last week that the best trades for the week were likely to be:

• Short of GBP/USD following a daily (New York) close below $1.1975. This set up on Tuesday and produced a losing trade of 0.65%.
• Short of BTC/USD following a daily (New York) close below $18,500. This did not set up.
• Short of ETH/USD following a daily (New York) close below $993. This did not set up.

The news dominated by the delayed resignation of British Prime Minister Boris Johnson and the assassination of former Japanese Prime Minister Shinzo Abe. News of Johnson’s resignation gave a small boost to the British Pound, which had been rapidly losing value over recent days. The murder of Abe had little effect upon the Yen.

 After more than four months, the war in Ukraine has partly faded away from its former place as a lead news item and appears to be having little effect on markets except a possible weighing on global recession fears. Although there was much talk about a rise in the prices of agricultural commodities such as Wheat and Corn, recent weeks have seen strong falls in the prices of commodities.

The outlook regarding risk appetite is unclear. The US stock market is still in a bear market, but rose quite firmly last week, although the US yield curve remains inverted, and US stocks rose over the week. The US Dollar Index rose very strongly over the week, closing at a new 20-year high.

The past week has seen overall directional movement remain quite strong.

There were a few important economic data releases clast week, which is why market volatility picked up. The results came in as follows:

1. US FOMC Meeting Minutes – the Fed expressed its determination to continue raising rates as much as necessary to bring down inflation. Markets reacted little, there were no surprises in the statement.

2. US Non-Farm Payrolls data – this came in much higher than expected, with 372k new jobs created compared to the expectation of about 260k.

3. Swiss CPI – this came in higher than expected, with a month on month increase in prices running at 0.5% compared to the 0.3% which had been expected, vindicating the SNB’s recent action of hiking its interest rates.

4. Australia Cash Rate & Rate Statement – as expected, the RBA hiked rates by 0.5% to 1.35%.

5. US JOLTS Job Openings – this came in slightly stronger than expected.

6. US Employment data – the US unemployment rate remains historically low at 3.6%.

7. Canadian Employment data – Canada saw a net loss of jobs, but its unemployment rate fell from 5.1% to 4.9%.

The Forex market saw another strong advance by the US Dollar last week. The Australian Dollar and the Japanese Yen were also strong currencies. The Euro was especially weak, and the EUR/USD currency pair reached a new 19-year low not far from parity.

Rates of coronavirus infection globally again rose last week against the long-term downwards trend, suggesting that we are in a new major wave, possibly driven by the new omicron BA5 subvariant. The significant growths in new confirmed coronavirus cases overall right now are happening in Bangladesh, Bolivia, Belgium, Colombia, Croatia, Dominican Republic, Lebanon, Montenegro, Pakistan, Switzerland, Albania, Austria, Belarus, Brunei, Cyprus, France, Germany, Greece, Guatemala, Iraq, Italy, Japan, Mexico, New Zealand, Singapore, Tunisia, and the UAE.

The Week Ahead: 11^th July – 15^th July 2022

The coming week in the markets is likely to be even more volatile than last week, as there are several high-impact data releases scheduled this week, including highly important US CPI data. They are, in order of likely importance:

1. US CPI – this has become the major market event, with markets strongly hoping that US inflation has peaked

2. Chinese GDP data

3. US Retail Sales data

4. RBNZ Official Cash Rate & Rate Statement

5. Bank of England testimony before UK parliament

6. Bank of Canada’s Overnight Rate, Rate Statement, and Monetary Policy Report

7. US PPI data

8. Australian Employment data

9. US Preliminary UoM Consumer Sentiment data

It is a public holiday in France on Thursday 14^th July.

Technical Analysis

U.S. Dollar Index

The weekly price chart below shows the U.S. Dollar Index printed a large bullish candlestick which closed at a new 20-year high, in line with the long-term trend, which is bullish. This is significant as breaks to new high closes suggest the price will rise further over the coming days. However, note there is a large upper wick, and that the price did not advance on Friday, so we may have seen a climax suggesting the price will not rise further soon.

It looks wise to trade the US Dollar long over the coming week once it starts rising again on shorter time frames, at least until the release of US CPI data on Wednesday which could cause volatility in the Dollar.

 

US Dollar Index Weekly Chart

EUR/USD

Recent weeks and months have seen a lot of strength generally in the US Dollar, but the Euro is also standing out lately as an especially weak currency due to concerns over the ECB running out of options to tackle resurgent inflation, making the EUR/USD currency pair potentially exciting to trade short.

The price fell sharply last week, reaching a level close to parity, and making its lowest weekly close in 19 years. However, it is important to note that the daily chart saw the week conclude with a strong and bullish pin bar, suggesting we may be about to see a rise in the price. If this bullish pin bar is taken out by a strong bearish reversal, that would be a very bearish sign.

I suggest waiting for a daily close below $1.0100 before considering entering a short trade here.

 

EUR/USD Daily Chart

USD/JPY

Last week saw a strong advance by the US Dollar, but the Japanese Yen was also strong, meaning the price of the USD/JPY currency pair advanced little. However, having seen reversals in the Dollar’s major counterparties the EUR/USD and the GBP/USD, it may be that further Dollar strength will be expressed against other currencies such as the Japanese Yen.

Breakouts are typically more powerful after periods of consolidation, and we have seen the price trade quite tightly below recent long-term highs.

I am prepared to take a long trade in this currency pair if we get a daily (New York) close above ¥136.66 (ideally above the round number at ¥137.00).

 

USD/JPY Daily Chart

Bottom Line

I see the best opportunities in the financial markets this week as likely to be:

• Short of EUR/USD following a daily (New York) close below $1.0100.
• Long of USD/JPY following a daily (New York) close above €136.66 (ideally €137.00).

You can use one of the best Forex brokers to trade this weekly Forex forecast.

Get the Forex Forecast using fundamentals, sentiment, and technical positions analyses for major pairs for the week of July 4, 2022 here.

The difference between success and failure in Forex / CFD trading is very likely to depend mostly upon which assets you choose to trade each week and in which direction, and not on the exact methods you might use to determine trade entries and exits.

So, when starting the week, it is a good idea to look at the big picture of what is developing in the market as a whole, and how such developments and affected by macro fundamentals, technical factors, and market sentiment. Read on to get my weekly analysis below.

Fundamental Analysis & Market Sentiment

I wrote in my previous piece last week that the best trades for the week were likely to be:

• Long of USD/JPY following a daily (New York) close above €135.47. This set up on Monday and produced a losing trade of 0.15%.
• Short of BTC/USD following a daily (New York) close below $18,500. This did not set up.
• Short of ETH/USD following a daily (New York) close below $993. This did not set up.

The news is currently dominated by political items that do not have major economic impact. After more than four months, the war in Ukraine has faded away from its former place as a lead news item and appears to be having little effect on markets except possible weighing on global recession fears. Although there is much talk about a rise in the prices of agricultural commodities such as Wheat and Corn, recent days have seen strong falls in the prices of commodities.

Last week was dominated by continuing poor risk appetite. The US stock market is still in a bear market. The first half of 2022 was the worst for the US stock market since 1970. The US Dollar is strengthening.

The past week has seen overall directional movement notably lower, although valid trends remain effective in the Forex and cryptocurrency markets.. As we are now in July, it may be that we are about to get into a summer lull of dull markets with no breakouts. This often happens during the months of July and August, hence the adage “sell in May and go away.”

There were very few important economic data releases clast week, which is why market volatility was so low. The results came in as follows:

1. US Core PCE Price Index data – rose by 0.3% month on month, lower than the 0.4% which had been expected, giving some hope that inflation in the US may have already peaked.

2. Euro area annual inflation is expected to be 8.6% in June 2022, up from 8.1% in May according to a flash estimate from the EU. 

3. US CB Consumer Confidence data – came in a bit lower than expected, suggesting consumer demand is shrinking.

4. US ISM Manufacturing PMI data – came in a bit lower than expected, which is typically bearish for the US Dollar.

The Forex market saw another advance by the the US Dollar last week. The Canadian Dollar, the Swiss Franc, and the Japanese Yen are also strong currencies. The other major currencies are all weak, especially the British Pound.

Rates of coronavirus infection globally again rose last week against the long-term downwards trend, suggesting that we are in a new major wave, possibly driven by the new omicron BA5 subvariant. The significant growths in new confirmed coronavirus cases overall right now are happening in Albania, Bangladesh, Brunei, Croatia, Iraq, Israel, Lebanon, Pakistan, Qatar, Switzerland, UK, Austria, Bahrain, Cyprus, France, Germany, Greece, Guatemala, Haiti, Italy, Mexico, Malta, Morocco, and the UAE.

The Week Ahead: 4^th July – 8^th July 2022

The coming week in the markets is likely to considerably more volatile than last week, as there are more high-impact data releases scheduled this week. They are, in order of likely importance:

1. US FOMC Meeting Minutes

2. US Non-Farm Payrolls data

3. Swiss CPI

4. Australia Cash Rate & Rate Statement

5. US JOLTS Job Openings

6. US Employment data

7. Canadian Employment data

It is a public holiday in the USA on Monday 4^th July.

Technical Analysis

U.S. Dollar Index

The weekly price chart below shows the U.S. Dollar Index printed a bullish outside bar after falling from to end the week at a new 20-year high, in line with the long-term trend, which is bullish. This is significant as breaks to new high closes suggest the price will rise further over the coming days.

It is worth noting that the US Dollar’s long-term bullish trend has been boosted, so far, by rising inflation and interest rates. However, as the US economy comes closer to a statistical recession, the more the US Dollar may become subject to bearish pressures.

It looks wise to trade the US Dollar long over the coming week unless it is hit hard by the release of FOMC Meeting Minutes, which is unlikely.

US Dollar Index Weekly Chart

BTC/USD

Bitcoin fell again last week, but not by a large amount, after spending the previous week making a small consolidation after it had been falling very sharply recently in line with its long-term bearish trend. The week ended with a bearish engulfing bar which is trading very near its low, suggesting a stronger bearish breakdown could be very close.

It looks as if Bitcoin is likely to fall further eventually. The price could easily reach the $13k area technically, meaning a short here could still be an interesting trade.

I am ready to enter a short trade if we get a daily (New York) close below $18,500 during this week.

The price chart below shows that $13,788 looks like the technical support level which might signify a full bursting of the Bitcoin bubble.

BTC/USD Daily Chart

ETH/USD

Just like Bitcoin, Ethereum also fell over the course at last week and remains near its low, in line with a long-term downwards trend which has seen it lose a great deal of value – as much as 30% two weeks ago.

It looks as if Ethereum is still likely to fall further eventually, and the moment of the major breakdown seems close. The price could easily reach the $571 area technically, meaning a short here could still be an interesting trade.

I am prepared to enter a short trade if we get a daily (New York) close below $993 during this week.

The price chart below shows that $571 looks like the technical support level which might signify a full bursting of the crypto bubble.

ETH/USD Weekly Chart

GBP/USD

Recent weeks and months have seen a lot of strength generally in the US Dollar, but the British Pound is also standing out lately as an especially weak currency due to expectations of inflation reaching greater than 11% soon as well as other economic woes, making the GBP/USD currency pair exciting to trade short.

The price has recently made new 2-year lows, which is technically significant, and closed last week at the lowest weekly closing price seen in 2 years after falling over the week.

There are good reasons to be bearish here, but technically we saw some strong buying last week when the price briefly traded below the round number at $1.2000. Therefore, I recommend waiting for a daily close below the support level at $1.1975 before considering entering a short trade here.

GBP/USD Weekly Chart

Bottom Line

I see the best opportunities in the financial markets this week as likely to be:

• Short of GBP/USD following a daily (New York) close below $1.1975.
• Short of BTC/USD following a daily (New York) close below $18,500.
• Short of ETH/USD following a daily (New York) close below $993.

Get the Forex Forecast using fundamentals, sentiment, and technical positions analyses 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 mostly upon which assets you choose to trade each week and in which direction, and not on the exact methods you might use to determine trade entries and exits.

So, when starting the week, it is a good idea to look at the big picture of what is developing in the market as a whole, and how such developments and affected by macro fundamentals, technical factors, and market sentiment. Read on to get my weekly analysis below.

Fundamental Analysis & Market Sentiment

I wrote in my previous piece last week that the best trades for the week were likely to be:

• Long of USD/JPY following a daily (New York) close 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 wins made in crypto trades during the previous week.

The news is currently dominated by political items that do not have major economic impact. After more than four months, the war in Ukraine has faded away from its former place as a lead news item and appears to be having little effect on markets except possible weighing on global recession fears. There are fears concerning a potential blockade regarding agricultural commodities such as Wheat and Corn, but their prices are generally trading lower now.

Last week was dominated by a small rebound in risk appetite. It is noteworthy that “fear” indicators such as the VIX are showing much lower levels than were seen in previous bear markets. The US stock market is still in a bear market.

The past week has seen all the strong trends come off their highs and lows, with overall directional movement notably lower. As the end of the month approaches in just a few days, following a very active spring season in the markets this year, it may be that we are about to get into a summer lull of dull markets with no breakouts. This often happens during the months of July and August, hence the adage “sell in May and go away.”

Last week’s important economic data releases came in as follows:

1. Chair of the US Federal Reserve Testified Before Congress. He said that recession was a possible outcome of the course of rate hikes, but this had little lasting effect.

2. British CPI – an annualized rate of 9.1% was expected and reached. Cope CPI was a little lower than expected. Overall, this had little impact.

3. Canadian CPI – a month on month increase of 1.4% was reported compared to the expected 1.0%.

4. Reserve Bank of Australia Monetary Policy Meeting Minutes. Inflation expected to increase, rate hikes less than 0.25% per meeting over coming months also expected.

5. German Flash Manufacturing & Services PMI. This came in slightly lower than expected.

6. Canadian Retail Sales. This came in much stronger than expected. Taken with the high and increasing rate of inflation, this suggests that the Canadian economy is still overheating despite recent rate hikes.

The Forex market saw a minor selloff in the US Dollar last week while the Japanese Yen, whose weakness is still tacitly encouraged by the Bank of Japan, also looks weak. The Euro is the strongest major currency.

Rates of coronavirus infection globally again rose last week against the long-term downwards trend, suggesting that we may be seeing the start of a new major wave, possibly driven by the new omicron BA5 subvariant. The significant growths in new confirmed coronavirus cases overall right now are happening in Austria, France, Israel, Bahrain, Cyprus, Germany, Greece, Guatemala, Italy, Lithuania, Malta, Mexico, Morocco, Singapore, and the UAE.

The Week Ahead: 27^th June – 31^st June 2022

The coming week in the markets is likely to be much less volatile than last week. There are very few releases of high importance scheduled which have the potential to significantly move markets. They are, in order of likely importance:

1. US Core PCE Price Index data – this might give some clues about inflation.

2. US CB Consumer Confidence data

3. US ISM Manufacturing PMI data

It is a public holiday in Canada on Friday 31^st June.

Technical Analysis

U.S. Dollar Index

The weekly price chart below shows the U.S. Dollar Index printed a bearish inside bar after falling from a 20-year high the previous week, against the long-term bullish trend. This is significant as a trend reversal in the US Dollar would have a major impact on the Forex market.

It is worth noting that the US Dollar’s long-term bullish trend has been boosted, so far, by rising inflation and interest rates. However, as the US economy comes closer to a statistical recession, the more the US Dollar may become subject to bearish pressures.

It is probably a good idea not to trade the US Dollar long over the coming week unless it makes a strong upwards movement for a day or so.

US Dollar Index Weekly Chart

BTC/USD

Bitcoin rose last week after falling very strongly the previous week in line with its long-term bearish trend. The week ended with a bullish inside bar which is trading near its high, suggesting that this bullish retracement might last for a while.

Despite the minor bullish signs, there has been very strong selling and I think it is unwise to go long of Bitcoin this week.

It looks as if Bitcoin is still likely to fall further eventually. The price could easily reach the $13k area technically, meaning a short here could still be an interesting trade.

I would be prepared to enter a short trade if we get a daily (New York) close below $18,500 during this week.

The price chart below shows that $13,788 looks like the technical support level which might signify a full bursting of the Bitcoin bubble.

BTC/USD Daily Chart

ETH/USD

Bitcoin rose quite firmly last week – more so than did Bitcoin – after falling very strongly the previous week in line with its long-term bearish trend. The week ended with a bullish inside bar which is trading near its high, suggesting that this bullish retracement might last for a while

Despite the minor bullish signs, there has been very strong selling and I think it is unwise to go long of Ethereum this week.

It looks as if Ethereum is still likely to fall further eventually. The price could easily reach the $571 area technically, meaning a short here could still be an interesting trade.

I would be prepared to enter a short trade if we get a daily (New York) close below $993 during this week.

The price chart below shows that $571 looks like the technical support level which might signify a full bursting of the crypto bubble.

ETH/USD Daily Chart

USD/JPY

After initially powering up to yet another 20-year high, the USD/JPY currency pair dropped quite sharply before recovering a little later in the week, to produce a small net weekly gain.

The US Dollar seems to have lost its strength and its long-term bullish trend may have already peaked two weeks ago, although it is too early to say this with any confidence. However, the Japanese Yen remains relatively weak and is being talked down by its central bank, the Bank of Japan, which desperately needs to reflate the Japanese economy, whose inflation remains below the target of 2%.

It is of course unclear how much further the move might run, or whether it will even happen at all. The best sign to look for will be whether this currency pair manages to close in New York at another new 20-year high closing price. USD/JPY remains a buy if we see a daily (New York) close above €136.59.

USD/JPY Daily Chart

Bottom Line

I see the best opportunities in the financial markets this week as likely to be:

• Long of USD/JPY following a daily (New York) close above €135.47.
• Short of BTC/USD following a daily (New York) close below $18,500.
• Short of ETH/USD following a daily (New York) close below $993.

The difference between success and failure in Forex / CFD trading is very likely to depend mostly upon which assets you choose to trade each week and in which direction, and not on the exact methods you might use to determine trade entries and exits.

So, when starting the week, it is a good idea to look at the big picture of what is developing in the market as a whole, and how such developments and affected by macro fundamentals, technical factors, and market sentiment. Read on to get my weekly analysis below.

Fundamental Analysis & Market Sentiment

I wrote in my previous piece last week that the best trades for the week were likely to be:

• Long of USD/JPY. This produced a gain of 0.35%.
• Long of the 2YR US Treasury Yield. This produced a gain of 1.35%.
• Short of BTC/USD. This produced a whopping gain of 30.97%.

These were great calls overall, especially my short Bitcoin forecast, resulting in a huge weekly profit.

After more than four months, the war in Ukraine has faded away from its former place as a lead news item. Russian forces are currently conducting a strong offensive in eastern Ukraine and are having some success through massive firepower and a willingness to use artillery regardless of civilian casualties, which are numbering tens of thousands. As a permanent member of the UN Security Council, Russia cannot be diplomatically censured, showing what the United Nations has become, and putting its twisted focus on smaller conflicts with far lower civilian death tolls into sharp focus for all to see. The war initially caused quite strong movements in some markets, especially in certain agricultural commodities such as Wheat and Corn, but now seems to be having little effect as agricultural commodities have generally begun to trade lower.

Last week was dominated by continuing risk-off sentiment, with a focus on inflation and rate hikes, as three major central banks raised their interest rates, broadly by more than had been expected: the US Federal Reserve, the Bank of England, and the Swiss National Bank.

A continuing strong decline in cryptocurrencies, especially the week’s 30% decline in the US Dollar value of Bitcoin, was also a prominent news item. Several cryptocurrency exchanges have frozen withdrawals. Short trades in cryptocurrencies will continue to attract speculators in this environment, while margin calls will force retail liquidations. There will be more casualties in the cryptocurrency ecosystem.

Last week’s important economic data releases came in as follows:

1. The US Federal Reserve hiked its Federal Funds Rate by 0.75% to 1.75%, at a time when many analysts had been expecting a hike of only 0.50%. This higher-than-expected inflation print at the end of the previous week convinced the Fed to hike by more than 0.50%.

2. The Bank of England hiked its Official Bank Rate by 0.25% to 1.25% as was widely expected.

3. The Swiss National Bank made a shock rate hike of 0.50%, putting its Policy Rate up to -0.25%: still negative, and the lowest interest rate of any major central bank.

4. The Bank of Japan left its Policy Rate at -0.10%, and its Statement contained no surprises: the bank continues to pursue a dovish policy aimed at reflating the economy and bringing inflation up to the 2% target, giving an overall unusually dovish policy by global standards.

5. US Retail Sales data came in lower than expected, suggesting consumer spending may be getting impacted by rising inflation.

The Forex market saw a minor selloff in the US Dollar while the Japanese Yen, whose weakness is still tacitly encouraged by the Bank of Japan, continues to weaken. However, the greenback regained some of its strength to close the week higher against other major currencies.

There is increasing hope that the coronavirus pandemic may be almost over, although rates of coronavirus infection globally rose last week against the long-term downwards trend. The significant growths in new confirmed coronavirus cases overall right now are happening in Austria, Bahrain, Morocco, Chile, Germany, Guatemala, Israel, and the UAE.

The Week Ahead: 20^th June – 24^th June 2022

The coming week in the markets is likely to be less volatile than last week. There are fewer releases of high importance scheduled which have the potential to significantly move markets. They are, in order of likely importance:

1. Chair of the US Federal Reserve Testifies Before Congress.

2. British CPI – an annualized rate of 9.1% is expected.

3. Canadian CPI – a month on month increase of 1.0% is expected.

4. Reserve Bank of Australia Monetary Policy Meeting Minutes.

5. German Flash Manufacturing & Services PMI.

6. Canadian Retail Sales.

Technical Analysis

U.S. Dollar Index

The weekly price chart below shows the U.S. Dollar Index hit a 20-year high last week, in line with the long-term bullish trend, but printed an indecisive doji candlestick signaling a potential bearish reversal. This is significant as a trend reversal would have a major impact on the Forex market.

It is worth noting that the US Dollar’s long-term bullish trend has been boosted, so far, by rising inflation and interest rates. However, as the US economy comes closer to a statistical recession, the more the US Dollar may become subject to bearish pressures.

Despite the potential reversal, the Dollar gained everywhere over the week, so it remains unwise to trade Forex short Dollar over the coming week.

BTC/USD

Bitcoin fell very strongly last week in line with its long-term bearish trend. The week ended with a close at a new 18-month low and the printing of a large bearish candlestick, showing a decline in value of more than 30%.

These are very bearish signs, and there has been panic in the crypto sector due to the collapse of certain stablecoins such as Luna/Terra. This helps the bearish case. Even worse, we are beginning to see crypto exchange refuse withdrawal requests, suggesting there will be corporate collapses and lawsuits galore.

It looks like Bitcoin is likely to keep falling, as it is showing strong downwards momentum and trading in “blue sky.” The price could easily reach the $13k area very soon, meaning a short here could still be an interesting trade.

The price chart below shows that $13,788 looks like the technical support level which might signify a full bursting of the Bitcoin bubble.

ETH/USD

Ethereum fell very strongly last week in line with its long-term bearish trend. The week ended with a close at a new 18-month low and the printing of a large bearish candlestick, showing a decline in value of more than 32%.

These are very bearish signs, and there has been panic in the crypto sector due to the collapse of certain stablecoins such as Luna/Terra. This helps the bearish case. Even worse, we are beginning to see crypto exchange refuse withdrawal requests, suggesting there will be corporate collapses and lawsuits galore.

It looks like Ethereum is likely to keep falling, as it is showing strong downwards momentum and trading in “blue sky.” The price could easily reach the $512 area very soon, meaning a short here could still be an interesting trade.

The price chart below shows that $512 looks like the technical support level which might signify a full bursting of the Ethereum bubble.

USD/JPY

The USD/JPY currency pair dropped quite sharply but then rose firmly to recover most of its losses after the Bank of Japan signaled no change in its very dovish, inflationary monetary policy. Volatility and momentum are unusually strong, which supports the case for a further rise in the price, which made another new 20-year high earlier in the week.

We have a “perfect storm” here dominating the Forex market, with the US Dollar the strongest major currency with long-term strength behind it as the Federal Reserve implemented an exceptionally large rate hike of 0.75% last week. Meanwhile, the Japanese Yen is the weakest major currency and is being talked down by its central bank, the Bank of Japan, which desperately needs to reflate the Japanese economy, whose inflation remains below the target of 2%.

It is of course unclear how much further the move might run, but clear opportunities like this are rare in Forex, so trading this currency pair long is worthy of very serious consideration. USD/JPY remains a buy if we see a daily (New York) close above €135.47.

Bottom Line

I see the best opportunities in the financial markets this week as likely to be:

• Long of USD/JPY following a daily (New York) close above €135.47.
• Short of BTC/USD.
• Short of ETH/USD.

The pair’s outlook is still bearish, with the next key support level to watch being at 1.0400.

Bearish View

• Sell the EUR/USD pair and set a take-profit at 1.0400.
• Add a stop-loss at 1.060.
• Timeline: 1-2 days.

Bullish View

• Set a buy-stop at 1.0550 and add a take-profit at 1.0650.
• Add a stop-loss at 1.0.480.

The EUR/USD pair dropped sharply as investors reacted to the hawkish interest rate decision by the European Central Bank (ECB) and the strong US inflation data. It dropped to a low of 1.0475, which was the lowest level since May 19^th.

Fed Decision Ahead

The US dollar strengthened while stocks tumbled after data showed that American inflation was still surging. According to the Bureau of Labor Statistics (BLS), the headline consumer inflation rose from 8.3% to 8.6% in May. This figure was higher than the median estimate of 8.1% and it was the highest level in over 40 years.

The strong inflation data happened mostly because of the rising prices of energy and food prices. The price of most food items like eggs, milk, and meat has jumped by more than 10% in the past 12 months. At the same time, the cost of energy has also jumped sharply. During the weekend, Gass Buddy’s average of gasoline prices jumped to $5 for the first time on record.

These numbers came a day a week after the US published strong jobs numbers. The data revealed that the country’s unemployment rate remained at 3.6% in May as the economy added over 390k jobs. The participation rate remains strong.

Therefore, analysts believe that the Federal Reserve will continue tightening its monetary policy as planned in a bid to fight the soaring inflation. The Federal Open Market Committee (FOMC) will start its meeting this week and deliver a 0.50% hike. Some analysts are even pricing in a 0.75% rate hike.

The EUR/USD also declined as investors focused on the interest rate decision by the European Central Bank. The ECB left rates unchanged and signaled that it will start hiking in the coming month.

EUR/USD Forecast

The EUR/USD pair declined to the lowest level since May 19th after the latest consumer inflation data. It fell to a low of 1.0475 and managed to move below the symmetrical triangle pattern shown in black. The pair has also dropped below the 23.6% Fibonacci retracement level. At the same time, it has moved below the 25-day and 50-day moving averages.

Therefore, the pair’s outlook is still bearish, with the next key support level to watch being at 1.0400. A move above the resistance level at 1.0550 will invalidate the bearish view.

Get the Forex Forecast using fundamentals, sentiment, and technical positions analyses for major pairs for the week of June 13, 2022 here.

The difference between success and failure in Forex / CFD trading is very likely to depend mostly upon which assets you choose to trade each week and in which direction, and not on the exact methods you might use to determine trade entries and exits.

So, when starting the week, it is a good idea to look at the big picture of what is developing in the market as a whole, and how such developments and affected by macro fundamentals, technical factors, and market sentiment. Read on to get my weekly analysis below.

Fundamental Analysis & Market Sentiment

I wrote in my previous piece two weeks ago that the best trade for the week was likely to be:

• Short of BTC/USD following a daily (New York) close below $28,000. This was a good call as Friday’s close was below that level – Bitcoin trades over the weekend – at $27,488 and at the time of writing, BTC/USD is down by 18.84% from that price. This is a big profit.

After more than four months, the war in Ukraine is beginning to fade away from its former place as a lead news item. Russian forces are currently conducting a strong offensive in eastern Ukraine and seem to be having some successes, although Ukrainian forces are also counter attacking. The war initially caused quite strong movements in some markets, especially in certain agricultural commodities such as Wheat and Corn, but now seems to be having little effect beyond helping to keep the agricultural commodities sector buoyant. The rise in commodity prices can be partly attributed to rising global inflation.

Markets have moved more firmly into risk-off mode, with a global environment of higher-than-expected inflation data and central bank rate hikes.

Bearish sentiment on risky assets got a tailwind from surprisingly poor data Friday on US CPI (inflation), which showed an unexpected increase in the annualized rate from 8.5% to 8.6%, which is another new 40-year record high. This has now triggered an expectation that the Federal Reserve may hike its interest rate this week by 0.75% rather than the 0.50% which had formerly been expected. This sent US treasury and corporate bond yields higher and US stock markets lower, as yields on stocks are becoming less competitive. Reinforcing the global theme of rising rates, the Reserve Bank of Australia hiked its interest rate last week, and the European Central Bank was forced to make a stronger conditional commitment to a rate hike at its next meeting in July.

Last week’s important economic data releases came in as follows:

1. US CPI (inflation) data came in at 8.6%, exceeding the consensus expectation which was an expectation of a fall from the previous month’s 8.5%. The month-on-month increase was considerably higher than had been expected.

2. The European Central Bank left its Main Refinancing Rate unchanged as expected but was forced to make stronger commitments to rate hikes soon.

3. The Reserve Bank of Australia hiked rates by 0.50% to 0.85% when a hike of only 0.25% had been expected.

4. Canadian employment data came in stronger than had been expected.

Cryptocurrencies seem to finally be making extraordinarily strong breakdowns, with minor coins generally in serious trouble as they decline in value by the day, and Bitcoin trading well below its recent support in the $28,000 area. Short trades in cryptocurrencies will continue to attract speculators in this environment, while margin calls will force retail liquidations. There will likely be more casualties in the cryptocurrency ecosystem.

The Forex market is dominated by renewed strength in the US Dollar while the Japanese Yen, whose weakness is still tacitly encouraged by the Bank of Japan, continues to weaken.

There is increasing hope that the coronavirus pandemic may be almost over, with rates of coronavirus infection globally falling again last week in line with a long-term downwards trend. The only significant growths in new confirmed coronavirus cases overall right now are happening in Belize, Brazil, Chile, Guatemala, and the UAE.

The Week Ahead: 13^th June – 18^th June 2022

The coming week in the markets is likely to more volatile than last week. There are several releases of high importance scheduled which have the potential to significantly move markets. They are, in order of likely importance:

1. US FOMC Federal Funds Rate, Statement, and Projections – markets are expecting a 0.50% rate hike, but there is a significant chance the Fed may hike by 0.75%.

2. US Retail Sales – this is expected to increase, a decrease may suggest a recession is more likely.

3. Bank of England Official Bank Rate and Monetary Policy Summary – a rate hike of 0.25% is expected.

4. SNB Policy Rate and Monetary Policy Assessment – it is expected rates will remain unchanged, leaving the Swiss Franc with an unusually low, negative interest rate of 0.75%.

5. US PPI – this is expected to increase by 0.8% month-on-month, a higher increase will suggest inflation is likely to increase further.

6. Australian Employment data

Technical Analysis

U.S. Dollar Index

The weekly price chart below shows the U.S. Dollar Index rose strongly last week, in line the long-term bullish trend, printing a bullish candlestick that closed extremely near the top of its range. This is significant as it looked like that Dollar may have peaked near a multi-year inflection point, as can be seen in the price chart below.

A notable feature in the Forex market this week was that the rise in the greenback has been against almost all other currencies, showing the market is currently being driven by US Dollar strength.

Much will likely now depend on what the Federal Reserve does and says this Wednesday. Until then it will likely be unwise to bet against the USD.

BTC/USD

Bitcoin fell again last week in line with its long-term bearish trend. The week ended with a close at a new 17-month low and the printing of a large bearish candlestick. The price chart below ends at Friday’s close but over the weekend, at the time of writing, the price has fallen to as low as the $22k area.

These are very bearish signs, and there has been panic in the crypto sector due to the collapse of certain stablecoins such as Luna/Terra. This helps the bearish case.

It looks like Bitcoin is likely to keep falling, as it is showing strong downwards momentum and trading in relative “blue sky.” The price could easily reach the $13k area very soon, making a short here an interesting trade.

USD/JPY

The USD/JPY currency pair powered dramatically higher to reach a new 20-year high in a movement which has dominated the Forex market. Volatility and momentum are unusually strong, which supports the case for a further rise in the price.

We have a “perfect storm” here dominating the Forex market, with the US Dollar clearly the strongest major currency with long-term strength behind it as the Federal Reserve flirts with an exceptionally large rate hike of 0.75% next week. Meanwhile, the Japanese Yen is the weakest major currency and is being talked down by its central bank, the Bank of Japan, which desperately needs to reflate the Japanese economy, whose inflation remains below the target of 2%.

It is of course unclear how much further the move might run, but clear opportunities like this are rare in Forex, so trading this currency pair long is worthy of very serious consideration. USD/JPY remains a buy.

US 2YR Treasury Yield

2-year US treasury yields have been rising since October 2021 in a strong and dramatic long-term trend. It is not well known that major rates such as this one, have been one of the most profitable instruments for trend traders over recent decades.

This trend saw a strong resumption on Friday when US CPI (inflation) data came in with an unexpectedly high increase to a new 40-year high, as it increases the prospect of a Federal Reserve rate hike next Wednesday as high as 0.75%.

2-year rate yields are rising in several countries, not just in the US, increasing the bullish case here.

Many brokers do not offer rate yields, but it can be traded with slightly less effectiveness as short 2-year US treasuries, or as a futures contract.

Bottom Line

I see the best opportunities in the financial markets this week as likely to be:

• Long of USD/JPY.
• Long of the 2YR US Treasury Yield.
• Short of BTC/USD.

Get the Forex Forecast using fundamentals, sentiment, and technical positions analyses for major pairs for the week of May 30, 2022 here.

The difference between success and failure in Forex / CFD trading is very likely to depend mostly upon which assets you choose to trade each week and in which direction, and not on the exact methods you might use to determine trade entries and exits.

So, when starting the week, it is a good idea to look at the big picture of what is developing in the market as a whole, and how such developments and affected by macro fundamentals, technical factors, and market sentiment. Read on to get my weekly analysis below.

Fundamental Analysis & Market Sentiment

I wrote in my previous piece last week that the best trades for the week were likely to be:

• Short of the S&P 500 Index following a daily (New York) close below 3,900. This did not happen, so there was no trade.
• Short of BTC/USD following a daily (New York) close below $28,606. This did not happen until Friday’s close, so there was no trade.

The news remains dominated by the Russian invasion of Ukraine, which is now into its fourth month, but has been met by an effective, NATO-armed Ukrainian defense, funded by the US alone with more than $40 billion to date. Russian forces are currently conducting a strong offensive in eastern Ukraine and seem to be having some successes, although Ukrainian forces are also counter attacking. The war initially caused quite strong movements in some markets, especially in certain agricultural commodities such as Wheat and Corn, but now seems to be having little effect beyond keeping the price of Wheat relatively high.

Markets had been exhibiting risk-off sentiment in recent weeks, which was expressed mostly in falling stock markets and bearish action in cryptocurrencies. However, the past week has seen global stock markets recover, with especially strong upward movement in the US market represented by the S&P 500 Index.

One reason for the stronger optimism on US stocks was the strong US consumer spending data released last week. There are plenty of economic concerns remaining in the background however, such as historically high rates of inflation, and the pace of rate hikes which will certainly be implemented over the coming months by major central banks.

Last week’s important economic data releases came in as follows, with no major surprises:

1. US FOMC Meeting Minutes showed the next two months are likely to bring rate hikes of 0.5%, which is in line with general expectations.

2. US Preliminary GDP annualized from Q1 2022 showed a decline of 1.5% compared to the 1.3% which had been expected. The data had little impact on the market.

3. US Core PCE Price Index data showed an increase of 0.3% which was expected. This could be seen as positive for US CPI (inflation).

4. The Reserve Bank of New Zealand hiked rates by 0.5% to 2.00% which is the highest rate of any major currency.

5. German Flash Manufacturing & Services PMI data produced no real surprise.

Cryptocurrencies continue to look very weak, with minor coins generally in serious trouble as they decline in value by the day, but it is notable that Bitcoin buyers are still stepping in when Bitcoin threatens to break down below the $28,607 area. It should be said the price action is weak, and there remains a serious and immediate danger of strong falls in major cryptocurrencies. Short trades in cryptocurrencies will continue to attract speculators in this environment, while margin calls will force retail liquidations.

The Forex market is still dominated by a sell-off in the US Dollar which continues. The main factor driving the Forex market now is US Dollar weakness. Commodity currencies were the best performers over the past week, and commodity indices are rising towards new highs, with energy commodities performing especially well.

There is increasing hope that the coronavirus pandemic may be almost over, with rates of coronavirus infection globally falling again in line with a long-term downwards trend. The only significant growths in new confirmed coronavirus cases overall right now are happening in the Bahamas, Belize, Chile, the USA, Costa Rica, Panama, and Taiwan.

The Week Ahead: 30^th May – 3^rd June 2022

The coming week in the markets is likely to be equally or less volatile than last week. There are a few releases of high importance scheduled. They are, in order of likely importance:

1. US Non-Farm Payrolls / Average Hourly Earnings & Unemployment Rate – this will be analyzed for clues as to the strength of the US economy and could impact decisions on future US rate hikes.

2. Bank of Canada Rate Statement & Overnight Rate – the BoC is expected to hike rates by 0.50%.

3. US ISM Manufacturing PMI

4. Australian GDP data – expected to show a small increase.

5. US JOLTS Job Openings

Technical Analysis

U.S. Dollar Index

The weekly price chart below shows the U.S. Dollar Index fell again last week, against the long-term bullish trend, printing a bearish candlestick that closed very close to the bottom of its range. This reversal is not very notable technically, apart from its location in the chart confluent with a long-term high, with reinforces the bearish case that we may have seen a major bearish inflection point.

A notable feature in the Forex market this week was that the selloff in the greenback has been against almost all other currencies, showing the market is currently being driven by US Dollar weakness.

Despite the long-term bullish trend, it will probably be a mistake to expect a rising Dollar over this coming week.

US Dollar Index Weekly Chart

BTC/USD

Bitcoin fell again last week in line with its long-term bearish trend, for the ninth consecutive week. The week ended with a close at a 17-month low and the printing of a small bearish candlestick.

These are bearish signs, and there has been panic in the crypto sector due to the collapse of certain stablecoins such as Luna/Terra. This helps the bearish case. Another interesting factor is that the US stock market has shown positive correlation with Bitcoin, but this correlation is now breaking down – the S&P 500 Index rose firmly last week.

However, crucially, the price remains very reluctant to make a firmly bearish daily close below the very pivotal support level at $28,607 – the price somehow keeps refusing to spend very long below that level, although the price has traded meaningfully lower. Over the past few days, this key support area seems to have survived tests from above.

Bitcoin is poised on the edge of an abyss, but we may see a long-term bullish rebound from this area. A key indicator is likely to be whether we get a daily close below this very pivotal round number of $28,000.

I wrote something similar about Bitcoin last week, except I thought the key support level to use was a little higher, at $28,607. I am not discouraged by this as the price action continues to look bearish and heavy, and I continue to believe we are more likely to see a significant downwards movement in the price before we see any strong bullish rebound.

BTC/USD Weekly Chart

Bottom Line

I see the best opportunity in the financial markets this week as likely to be: