Forex Forecast: Forex Pairs

Get Forex forecasts using fundamental, sentiment and technical position analysis for major pairs for the week of April 11, 2022 here.

The difference between success and failure in Forex trading will most likely depend primarily on which currency pairs you choose to trade each week and in which direction, not on the exact trading methods you might use to determine entries and breakouts. commercial outlets.

At the start of the trading week, it is good to have an overview of what is developing in the market as a whole and how these developments are affected by macroeconomic fundamentals and market sentiment.

There are some strong tendencies in the markets, so it’s an interesting time to trade.

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Fundamental analysis and market sentiment

I wrote in my previous article last week that the best trade of the week would probably be long on USD/JPY, after a daily close (New York) above ¥123.12. It was a good move as USD/JPY rose 0.54% after closing Tuesday at ¥123.60.

The news continues to be dominated by the Russian invasion of Ukraine which is now in its seventh week. Russian forces withdrew from the northern part of the enterprise, concentrating on southern and eastern Ukraine. However, the war no longer seems to have much impact on the markets, beyond helping to keep the prices of certain agricultural products such as corn on the rise.

Markets have shifted further into risk aversion mode over the past week, with almost all major stock markets ending the week lower, while the US dollar strengthens and the Japanese yen weakens. Some agricultural commodities are also at or approaching long-term highs. This can probably be explained by three factors:

  1. the the war in Ukraine still arouses concern and has escalation potential, although that seems increasingly unlikely.

  2. Inflation continues to register higher than expected levels in more developed economies, with the exception of Japan, pushing most central banks towards more hawkish policies, with the exception of the Bank of Japan.

  3. the FOMC meeting Minutes released last week show the Federal Reserve brushed last month’s rate hike of 0.50%, double the 0.25% hike that was implemented, and is pursuing a strong target of reducing its balance sheet by up to $95 billion a month. It represented a minor hawkish tilt.

In other news last week:

  1. The inversion of the 2- and 10-year US Treasury yield curve corrected itself last week, after reversing for the first time since 2006. Such a reversal in yields is traditionally seen as an indicator of an impending recession and is therefore generally negative for equity markets. However, most analysts don’t see that as a likely outcome right now.

  2. The Reserve Bank of Australia released its monthly rate statement after holding its cash rate at 0.10%, in which the Bank adopted a more hawkish slant by removing dovish policy language, indicating a likely rate hike in June 2022. The Aussie dollar responded by rising to a new 9-month high.

  3. The Bank of Japan continued to encourage a weaker yen, with Governor Kuroda saying that although the yen’s recent weakening has been “somewhat rapid”, further yen weakness would be positive for the Japanese economy. A maximum figure of ¥130 for USD/JPY has been quoted by the Bank.

  4. Canadian jobs data came in almost as expected, showing a drop to an unemployment rate of 5.3%.

Last week, the global number of new confirmed cases of coronavirus fell for the third week in a row. About 64.7% of the world’s population has now received at least one vaccine and 6.3% are known to have contracted the virus.

The largest increases in new confirmed coronavirus cases are currently occurring in Barbados, Bhutan, China and Taiwan.

Next week: 11and – 15and April 2022

The coming week in the markets is expected to be volatile as many major data releases are expected, including from three central banks. These are, in likely order of importance:

  1. US CPI (inflation)

  2. Main refinancing rate and ECB monetary policy statement

  3. UK CPI (inflation)

  4. RBNZD cash rate and rate statement

  5. Bank of Canada Rate Statement, Overnight Rates and Monetary Policy Report

  6. American PPI

  7. Australian unemployment

  8. US retail sales

Technical analysis

US dollar index

The weekly prize chart below shows the US dollar index rose sharply last week, in line with the long term uptrend, printing a bullish candlestick that closed in the upper quarter of its range. It was the highest weekly close seen since May 2020. The weekly candlestick low was not far from the support level at 12293. Dollar bulls will be encouraged by the fact that the nearest support level, shown in blue at 12293 in the price chart below, continued to hold and the price continued to move higher. to new heights. However, the price is not far from a key resistance level at 12470 which could hamper further progress, at least in the short term.

It will probably be wise to take positions in favor of the US Dollar in the Forex market over the coming week.

US dollar index weekly chart

S&P 500 Index

The world’s largest stock index, the S&P 500, fell last week, after rejecting the resistance level at 4596 that I have noted for the past few weeks. On the daily chart, the price is again trading below its 200-day simple moving average. These are bearish signs. However, downward momentum is not strong enough to make any short trade here an interesting prospect.

I see the US stock market as an uncertain trade right now due to signs of deteriorating consumer demand and a tightening of monetary policy by the Federal Reserve.

S&P 500 weekly chart

USD/JPY

The USD/JPY has risen very strongly in recent weeks, finally peaking the penultimate week at its highest closing price seen in over 6 years above ¥125. Last week the price rose sharply again, after making a significant retracement, although the price has yet to reach ¥125 for the second time. Last week’s closing price was the highest seen in over 6 years.

There is a reason to keep looking on the bullish side after such a strong price move and resumed its bullish momentum and public statements from the Bank of Japan suggesting that it could tolerate a price increase as high as ¥130 before intervening.

As the price settled above a former key resistance level at ¥123.12 last week, I am ready to immediately take a long bias on this currency pair.

USD/JPY Weekly Chart

10-year US Treasury yield

There’s been a lot of focus on US Treasury yields lately, after the yield curve briefly inverted a few weeks ago, and as the Fed and other major central banks begin to take significant steps to tighten monetary policy.

The US dollar is the strongest major currency right nowand that’s partly because yields on its Treasuries continue to hit new highs.

The 10-year yield is rising more sharply than the 2-year yield, so the bullish momentum for Treasury yields is there. This makes a long trade attractive if you have access to the right instrument to do so, such as a micro future or an ETF.

10-Year U.S. Government Bond Yield Daily Price Chart

Sugar

After consolidating in recent months, the long-term uptrend seems to have resumed with a strong to burst above recent range. The daily price chart below shows strong Breakout candlestick that not only closed at the highest price seen in 5 years, but also closed just off the top of its range and above the large round number at $10. These are bullish signs, and for trend and breakout traders, in this era of rising commodity prices, this could be an interesting trade.

Teucrium Sugar ETF Daily Price Chart

But

The price of corn has increased significantly since the start of 2022 after consolidating during the second half of 2021. We’ve seen the price go up very steeply and continue, and the price of this staple food keeps getting more and more expensive, in part because of the ongoing war in Ukraine. We are in an era of high and rising commodity pricespartly spurred by historically high levels of inflation as well as creaking supply chains.

The initial rise in early 2022 shown in the price chart below is a classic “cup and handle” Forex chart templatewhich can often indicate a strong price rise ahead, as seems to have been the case here.

There are good reasons to trade corn long, but it is not clear that the current price is at an optimal entry point. Some traders will prefer to wait for a bearish retracement followed by a resumption of the uptrend before entering.

Teucrium Corn ETF Daily Price Chart

Conclusion

I see the best opportunities in financial markets this week are likely to be long in USD/JPY, the 10-year US Treasury yield, sugar and corn.

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