The difference between success and failure in Forex / CFD trading will most likely depend primarily on which assets you choose to trade each week and in which direction, not 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 article on the 14the August that the best trades of the week were probably:

  • Looking for short-term and long-term trades in the S&P 500 index during periods of short-term bullish momentum. However, we haven’t really seen any bullish momentum here in the past week.

The news is currently dominated by the FOMC meeting minutes that were released last week, showing that the Fed remains committed to continuing to hike rates until inflation drops significantly, and members of the Fed are worried about the economic impact of the current rate hikes. Recent inflation data released in the United States and Canada showed a slowdown in inflation, but UK inflation was revealed last week to be still on the rise, now running at an annualized 10.3%. The change in sentiment is in favor of risk aversion, which has had the effect of sending equities, commodities and cryptocurrencies tumbling, and boosting the US dollar strongly, mainly at the expense of commodity currencies. NZD, AUD and CAD.

It’s worth pointing out that although the US stock market rose last week, the US stock market has technically been in a bear market for some time, with the US yield curve having been inverted for several weeks now. The United States is also likely in recession, having experienced two successive quarters of GDP contraction, although wage growth and the labor market remain relatively buoyant.

To recap, there were a few other important economic data releases last week outside of the FOMC meeting minutes. The results were as follows:

  1. CPI data from the UK – an annualized inflation rate of 10.3% was reported compared to the rate of 9.8% which had been forecast.
  2. Canadian CPI data – a monthly increase of only 0.1% was reported, which was expected.
  3. Official Reserve Bank of New Zealand exchange rate, rate statement and monetary policy statement – the RBNZ raised its interest rate by 0.50% to 3.00%the highest rate of all major currencies, and signaled a more hawkish tightening trajectory over the coming months.
  4. Minutes from Australian monetary policy meeting – the RBA signaled its intention to take further tightening measures, but did not clearly define the way forward.
  5. US Retail Sales Data – Basic data came in stronger than expected, showing a monthly increase of 0.4% against a 0.1% decline that had been widely expected.
  6. Australian unemployment data – there was a net loss of around 40,000 new jobs when a gain was expected, but the overall unemployment rate fell to 3.4%.

The Forex market saw a sharp rise in the US dollar last week. The rise was broad but particularly strong against commodity currencies, particularly the New Zealand dollar.

Global coronavirus infection rates fell last week for the fifth week in a row. The largest increases in the number of new confirmed coronavirus cases are currently occurring in South Korea, Moldova, the Marshall Islands and Tonga.

Next week: 22n/a August – 26e August 2022

The coming week in the markets is expected to see a lower level of volatility than last week, although there will be a release of preliminary GDP data for the US which could move the market despite the low level. important data releases expected. The releases due are, in likely order of importance:

  1. Preliminary US GDP Data
  2. US Core PCI Price Index Data
  3. US, UK, German and French PMI Flash Data
  4. Jackson Hole Symposium (central bankers)

Technical analysis

US dollar index

The weekly prize chart below shows the US dollar index printed a long, strongly bullish candlestick that closed at its high, in line with the long term orient oneselfwhat is bullish. The weekly close is a 20-year high, and the week’s sharp rise came after the price rejected the support level below just under 105.00. These are all very strong bullish signs.

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 and long-term uptrend in the most important currency in the Forex market, and it is likely to continue as long as sentiment remains driven by fears that rate hikes will open interest would have a negative impact on risky assets, along with the US dollar. acting as a main refuge.

GBP/USD

Last week, the GBP/USD currency pair printed a large engulfing bearish candlestick. The pound wasn’t one of the biggest losers against the strong US dollar over the week, but this pair is technically interesting as it printed the lowest weekly close seen since the coronavirus panic in March. 2020.

The price briefly traded below $1.1800 on Friday before closing a little higher than that.

The pound is plagued by fundamental issues, including fresh double-digit inflation figures and a Bank of England forecast of a coming recession that will last five quarters and see GDP contract by 2, 2%.

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

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USD/USD

The New Zealand dollar was the biggest loser of all major currencies last weekdespite the RBNZ rising 0.50% to 3.00%, the highest rate of any major currency. However, there was no technical failure under recent support.

It should be noted that the price closed just at the low of the week, which is a bearish sign.

There could be new bearish momentum in the NZD/USD currency pair over the coming weekwith all the commodity currencies weak and the weakest NZD of all showing that this can be an attractive currency on the short side.

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Natural gas

Although we are seeing a bear market with most commodities and risky assets falling against safe havens such as the US Dollar, we have seen Natural gas gaining strongly over the past week to reach new multi-year highs.

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

Long natural gas may be an attractive trend as we see a breakout in the price chart. However, anyone trading natural gas should be very, very aware of the extremely high level of volatility we’ve seen here over the past few months, and are trading very small position sizes that respect volatility.

As raw materials in general and energies are quite low, I don’t have very strong faith in a long trade herewhich is another reason to keep the position size very small if you are trading natural gas over the coming week.

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Conclusion

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

  1. Short of the GBP/USD currency pair, and
  2. Natural Gas Long.

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