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Jul 12, 2016

VantagePoint Forex Weekly Outlook July 11th, 2016

In the latest Forex Weekly Outlook, we see our equities and major pairs test the support and resistance lines that have been in place for some time now. As we enter the summer trading patterns, it’s important to know your key levels to keep an eye on and how each pair has done in the past so that you can be better prepared for the choppy summer patterns.

Forex and the U.S. Dollar

The U.S. Dollar Index received some good news with the nonfarm payroll report showing a lower unemployment rate for the first time in three months. This can hopefully give the IDX some momentum to break through the upper trend line. There’s no upward movement against the major currencies if the trend line can’t be broken. The market closed above the key VantagePoint level of 95.616 at 96.327 but the resistance line will be key for determining how the major pairs will react this week. The remaining indicators suggest a bullish tone against the EUR, CHF, and GBP.

The SPY continues to push higher, but the resistance line just above 2100 continues to push back. If we can break the 2130 area, we could see a significant rally in the SPY but optimism is guarded as we head into summer trading trends.

The DAX represents the global equities as a whole as it has continued to see a decline in recent weeks. Typically, the SPY and global equities trade with close to 90% correlation. As the SPY is the only market that is going higher, it suggests the DAX and other global equities are setting the expectation for it to turn around soon.

Oil saw a lower trend line break last week and saw the market drop approximately 5%. Traders who were familiar with the key VantagePoint levels could have seen a nice profit from a recent short position. While some experts may have liked to oil in long positions, none of the VantagePoint indicators have recently suggested anything of the sort.

Gold will continue to see support as long as the equities continue to show bearish trends. Overall, gold remains bullish as 2016 moves forward. We could see significant pressure around the key VantagePoint level of 1320.91 thanks to the strong labor report numbers that could bring a corrective move in the coming weeks.

Intermarket relationships will remain key to the equities and will play a big role in the outcomes of the forex pairs. Remember that the intermarket relationships will traditionally overpower any indicators you may be working with.

Forex Weekly Outlook for Major Pairs

Forex pairs are highly influenced by the global equities and understanding the relationships will almost certainly add to your success as a Forex trader.

Euro/U.S. Dollar (EUR/USD) peppered the key VantagePoint level of 1.1139 most of the last week only to be met with sellers pulling the pair back down. As we closed below that level at 1.1048, shorts would be favored. Our leading indicator predicted RSI is sitting at a 31.8 level which suggests bearish momentum. This could lead to some selling pressure lasting into the middle of the week.

U.S. Dollar/Swiss Franc (USD/CHF) is taking advantage of the inverse relationship with EUR/USD. It saw bullish momentum coming off of last week. We saw a three-day test of the key VantagePoint level at 0.9732 resulting in Friday’s close at 0.9829. Our predicted MACD came off the zero line strong and is confirmed by the Predicted RSI value rising to 72.3. Couple all of that with a resistance trend line break and the software clearly shows its bias towards long positions this week.

British Pound/U.S. Dollar (GBP/USD) is one of the few markets continuing to show follow through with the movement that came directly after the Brexit vote. It could be setting up for a potential swing low, but the bearish trend could continue. Our close on Friday of 1.2945 is below all of our key VantagePoint levels. The positive news for this pair is that the VantagePoint predictive indicators are showing short-term strength and the predicted RSI has flat-lined around the 19.3 value. But until we find our base, it is still very treacherous waters to trade in, even if there is a slight short position bias.

U.S. Dollar/Japanese Yen (USD/JPY) is showing short position bias according to the VantagePoint software. We didn’t see a break of the 103 level that we referenced last week. The unemployment report could make it possible for this pair to recoup some of its losses but we haven’t seen it as of yet. If the SPY follows the DAX and NIKKEI lower, we could see this pair move lower as well.

U.S. Dollar/Canadian Dollar (USD/CAD) saw a lower trend line form that intersects the key VantagePoint 18-day EMA at 1.2932. Long positions have presented favorably while above this level. We met the swing high trend line again last week, but couldn’t push through. Lower oil prices will help accomplish this as well as a risk-off environment. Our indicators suggest this could be just on the horizon. The predictive indicators suggest short-term strength adding the predicted MACD and RSI as support. It’ll be very important to know your levels on this pair this week.

Australian Dollar/U.S. Dollar (AUD/USD) continues to maintain bullish momentum despite a credit downgrade on the Aussie from Standard and Poor’s. The pair closed at 0.7563, slightly above the key VantagePoint level of 0.7469. Our predictive indicators and neural index suggest short-term strength this week. The predictive MACD is holding above the zero line as well. If we can avoid a risk-off environment, we can see this pair continue to be bullish.

New Zealand Dollar/U.S. Dollar (NZD/USD) is still riding along the lower trend line, testing and retesting its durability. We’ve yet to break through it as we closed above our key VantagePoint level of 0.7129. Our predicted RSI suggests some more bullish momentum could still be left in the recent trend. But, a pullback could appear this week.

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.