This week’s Forex Weekly Outlook takes a look at this monumental election and how it will affect the markets once the dust settles. There will be a lot of uncertainty in the markets both leading into and coming out of the results on Tuesday night.
Forex and the U.S. Dollar
The U.S. Dollar Index would normally use a positive U.S. labor report number as a catalyst. But there’s nothing normal about Election week (especially this election). We can look at our key VantagePoint level for the week of 97.783 as the IDX returned to the Brexit high range. On a normal week, we’d take notice that our indicators are showing bearish bias.
The global equities including the SPY, DAX and NIKKEI were all bearish last week. Some look at this as a pre-election reaction that will either be heightened or erased completely come Wednesday.
The lack of demand for oil continues as it closed last week at 44.07. The charts show a firm double top at the 50.00 and 52.00 ranges. Moves entering that range should be strongly considered as sell opportunities.
Gold closed at 1304.50 last week and comes into the week with a key VantagePoint level of 1283.64. We did see a triple EMA cross occur last week and a majority of our indicators are showing a bullish bias. If any market is going to see a delayed reaction to the election, Gold is a prime candidate.
Intermarket relationships are key when trading Forex. It’s important to understand these relationships to use them as leading indicators for other markets. The intermarket relationships in play will commonly overpower any indicators you may be working with.
Forex Weekly Outlook for Major Pairs
Forex pairs are highly influenced but the global equities and understanding the relationships will almost certainly add to your success as a Forex trader.
Euro/U.S. Dollar (EUR/USD) traders should keep an eye on gold as the intermarket relationship between will have these two markets mirroring each other. The key VantagePoint level for this week is 1.1028 after a close of 1.1140.
U.S. Dollar/Swiss Franc (USD/CHF) fell back into the heart of the Brexit range last week. We enter this week with a key VantagePoint level of 0.9822 and a bearish tone from all of our major indicators.
British Pound/U.S. Dollar (GBP/USD comes into the week with a key level of 1.2355 on the heels of a 1.2518 close last Friday. Holding above this area will see the GBP with a rare opportunity to generate some bullish momentum.
U.S. Dollar/Japanese Yen (USD/JPY) is heavily influenced by the equity markets and the recent bearish momentum has allowed for a positive uptick for this pair. If the post-election equities recover, however, the money will come out of the JPY almost immediately.
The Commodities Currencies
U.S. Dollar/Canadian Dollar (USD/CAD) is arguably the most influenced pair of this election. If the USD suffers based on the results, the CAD will be the first currency to turn bearish with it. Traders of this pair should continue to pay attention to oil as the bearish market does pull down the value if the CAD.
Australian Dollar/U.S. Dollar (AUD/USD) shows a key VantagePoint level of 0.7623. While our batch of indicators leaves us with a relatively flat interpretation it’s probably best to consider waiting out this market until at least Wednesday to make sure we have the best idea of how this market will turn.
New Zealand Dollar/U.S. Dollar (NZD/USD) is again testing the Brexit high range around the 0.7300 area. A bearish Friday closed the week at 0.7324 with our key VantagePoint level for this week at 0.7208.
The Forex Weekly Outlook is designed to help traders remain aware of the intermarket correlations of these global market relationships. You can become more profitable if you know how to get ahead of the trends and understand these relationships can potentially expand your portfolio.