Image Source:
Fundamental Analysis & Market Sentiment
that the best trade opportunities for the week were likely to be:
The weekly gain of 1.91% equals 0.38% per asset. Meanwhile, last week’s key takeaways were as follows:
Another noteworthy item includes the remarks coming from a Bank of Japan official in suggesting that the Bank may pass on a rate hike at its next policy meeting. This could cause considerable weakness in the Japanese yen.Last week basically saw a continuation of the ongoing trend theme of a strong US dollar and stock market, with the tech-based Nasdaq 100 Index rising to reach a new all-time high. It is not a simple “risk-on” scenario, the boom is especially centered on US assets.Last week also saw rate cuts from three major central banks, despite the stickiness of US inflation. Also, the US inflation data came in as expected, and the data triggered a firm rise in US stock markets.
The Week Ahead: Dec. 16-20, 2024
The coming week has a big schedule with some of the biggest items in the Forex market. The US Fed policy meeting is expected to bring a rate cut, and two other central bank policy meetings are on the docket, although they are not expected to produce a rate cut. This means it will likely be another important week, as it is effectively the last trading week before Christmas, when many people will be away from the markets for two weeks or so.The coming week’s important data points include the following:
Monthly Forecast for December 2024
(Click on image to enlarge)For the month of December, I forecasted that the EUR/USD currency pair would fall in value. The performance of my forecast so far is as follows:
Weekly Forecast for Sunday, Dec. 15, 2024
Last week, I made no weekly forecast as there were no unusually strong price movements seen in currency crosses, which is the basis of my trading strategy.The US dollar was once again the strongest major currency over the week, while the Japanese yen was the weakest. Volatility fell slightly over this period, as only 41% of the most important Forex currency pairs and crosses changed in value by more than 1%.
Key Support/Resistance Levels for Popular Pairs
Technical Analysis – US Dollar Index
Last week, the US Dollar Index printed a bullish candlestick that continued in the direction of the long-term bullish trend. The recent price action also seems to have retested the upper trend line of the formerly dominant consolidating triangle chart pattern, which can be seen in the price chart below. The price is above its levels from three and six months ago, suggesting a healthy long-term bullish trend in the greenback that should be exploitable.I have plenty of fundamental reasons to be bullish on the US dollar. However, the upside over the coming week might be limited, so long-term trades long of the US dollar might be more successful than short-term trades. It should be noted that the price action is definitely more bullish than it was last week, and I think we will see another period of gains by the greenback this week.We will be getting highly important US Core PCE Price Index data and FOMC data on the US economy this week, so technical factors might not be very significant, with price action over the second half of this week likely to be more data-driven.(Click on image to enlarge)
Bitcoin
Bitcoin continued to chop around the $100,000 level over the past week, printing a bullish inside candlestick which failed to make a new record high. Although it can be argued that there are signs that the momentum has stalled or slowed, the price action remains bullish. A breakout over the coming week looks more likely to happen than a significant bearish breakdown.The strong long-term bullish trend is something worth paying attention to, and it has been given a tailwind by the Republican victory in the recent US elections. The price chart below shows a spectacular long-term bullish trend which has been ongoing for the past two years.To exploit the bullish breakout which I expect to happen in the safest way possible, I would wait for a new record daily high closing price before entering a new long trade, above the $103,647 mark.(Click on image to enlarge)
EUR/USD
The EUR/USD currency pair is in a valid long-term bearish trend. This currency pair typically takes its time to move, with its trends usually including plenty of deep retracements, but for almost three weeks after plunging to a new long-term low price well below the $1.0400 level, the price has consolidated without turning definitively bearish.The dollar is relatively strong, while the euro has been weakened a bit lately by the more dovish approach the European Central Bank took at its policy meeting last week.This currency pair often has very reliable trends, which is why I am interested in being short, but the price action off the lows over recent weeks has been too bullish for my liking, and we are still some way off the lowest daily close at the $1.0414 mark. So, I would wait for a New York close above that price before entering a new short trade here.(Click on image to enlarge)
NZD/USD
Last week, the NZD/USD currency pair printed a large, strongly bearish candlestick, closing right on its low. It closed at a two-year low, which would be a significant bearish breakdown in any asset.The Australian dollar has got a lot of attention lately as it weakened to new long-term lows as the RBA passed on a rate cut, but it is worth noting that the New Zealand dollar is also very weak, but even more so, making it attractive on the short side.The New Zealand dollar was weakened by last week’s 0.50% strong rate cut by the Reserve Bank of New Zealand, although it was widely expected. This currency pair does not trend very reliably, so I don’t take long-term trades in it, but it certainly looks very weak right now.(Click on image to enlarge)
USD/CAD
Last week, the USD/CAD currency pair printed a bullish candlestick, closing not far from its high, although it had some upper wick. It closed at a four-year high, which would be a significant bullish breakdown in any asset. The price action is certainly bullish, no question about that.This currency pair does not trend very reliably, so I don’t take long-term trades in it, but it certainly looks very strong right now. The main commodity currencies (Canadian dollar, New Zealand dollar, and the Australian dollar) are all weak, so they might be best traded as a short basket over the coming week against a stronger currency.(Click on image to enlarge)
Nasdaq 100 Index
Last week saw the Nasdaq 100 Index print another bullish candlestick to reach and close at a new record high for the second week running. The price closed not far from its high, although the candlestick was small and slightly doji-like, which suggests the trend may be running out of steam.More evidence in that direction is shown by narrowing of the linear regression analysis within the price chart below. However, when the price of a major stock market index is trading in blue sky territory, that is a bullish sign that must be paid attention to.US stock markets have been leading global equities, which is nothing unusual, boosted by President Trump’s reputation as being willing to do anything to generate economic and stock market growth, as well as his recent announcement of his intention to put strong tariffs on imports from Mexico and China.Maybe more importantly, the US stock market has been in a strong bullish trend for over one year now, so there is plenty of momentum supporting last week’s bullish move. I see the Nasdaq 100 Index as a buy.(Click on image to enlarge)
Cocoa Futures
Cocoa futures have been rising powerfully over the past five weeks, especially over the past week, which printed a very large, strong, bullish candlestick.Trading commodities long when they break to new six-month high prices, especially when there is powerful momentum as there is here, has historically been a very profitable trading strategy, so there are plenty of good reasons to be long here.During the second half of 2023 and the early months of 2024, the price increased by almost 600%, which is a meteoric rise. This happening so recently suggests that it could happen again, giving even more reason to be long here.Cocoa is a super-food and is becoming better known for its health-giving properties when used in moderation. This is another factor which could be giving the price a tailwind.I see cocoa as a buy, but I should point out that cocoa futures are very big, worth approximately $100,000, which is a dangerously large position size for most retail traders. Trading cocoa CFDs can be dangerous over the long-term, as overnight swaps will usually be very high. Therefore, I urge retail traders to look into cocoa ETFs or ETCs such as COCO which own cocoa futures but can be purchased for only a few US dollars per share.(Click on image to enlarge)
Bottom Line
I see the best trading opportunities this week as the following:
More By This Author:
