Fundamental Analysis & Market Sentiment
I previously wrote on Sunday, Nov. 17, 2024 that the best trade opportunities for the week were likely to be:
The weekly gain of 10.74% equals 5.37% per asset. Meanwhile, last week’s key takeaways include the following:
Apart from the inflation data, there were no data points last week that were truly interesting to the market, and even inflation is no longer the concern it was some months ago. Markets are more interested right now in global growth and the likely appointments of the upcoming Trump administration, which will take power in January. We saw US and European stock markets gaining again last week as risk sentiment in parts of the world improved.
The Week Ahead: Nov. 25-29, 2024
The coming week’s schedule is once again relatively light. Still, it has some important inflation-related data (including in the US) and central bank releases from the US Federal Reserve and the Reserve Bank of New Zealand. The docket includes:
Monthly Forecast for November 2024
I made no monthly forecast for November, as the long-term trends in the Forex market were too unclear at the time.
Weekly Forecast for Sunday, Nov. 24, 2024
I made no weekly forecast this week, as there were no unusually strong directional price movements over the trading period, which is the basis of my weekly trading strategy.Last week, the Australian dollar was the strongest major currency, while the euro was the weakest. Like the previous week, one-third of the most important Forex currency pairs and crosses changed in value by over 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 the recent breakout beyond the resistance level at 105.81, as well as the upper trend line of the formerly dominant consolidating triangle chart pattern, which can be seen in the price chart below.The price reached a new two-year high. These are bullish signs, but it should be noted that the candlestick has a large upper wick, showing that the dollar struggled to hold some of its gains. Another bearish note is hit by the price retreating from a high very close to the nearest overhead resistance level at the 107.95 mark.The price is above its levels from three and six months ago, suggesting a long-term bullish trend in the greenback that should be exploitable. The strong US dollar is supported by the expectation that the new Trump/Republican control of the executive and legislature in the US will lead to a more hawkish monetary policy. This has been evidenced by the strong increase in US Treasury yields over recent weeks.I have plenty of technical and 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.
Bitcoin
Bitcoin saw another week of extraordinary gains as it powered to new all-time highs, topping just below the big, round number at $100,000, which has still not been reached. The price rose by almost 10% last week.There is no reason not to be bullish, except for the fact that the price is now very close to the huge, six-figure number at $100,000. If the price arrives at, or very close to, that point, we will likely see massive profit taking as there will be a 25% gain within just a few weeks, an enormous rise in value for any asset. So, this leg of the bull run, or this whole trend, may not have much further to run.Bitcoin received a significant boost from the election victories of President Trump and Congressional Republicans in both Houses. Republicans are seen as more likely to favor lighter regulation of cryptocurrency, so their ascendancy has boosted both crypto in particular and risk sentiment in general, which can also help a risky asset like Bitcoin.It could be smart to be long of Bitcoin, but be mindful of the $100,000 figure as a potentially strong barrier. With such momentum and strong gains, a trend or momentum trader should be interested. However, waiting for a daily (New York) close above $100,000 before entering a new long trade in Bitcoin would probably be wise.Note that Bitcoin ETFs are not getting the full gain made by the underlying, so if you can afford it, you might want to buy Bitcoin futures instead of a Bitcoin ETF or even spot Bitcoin. There are Bitcoin micro futures available on the CME, which are only sized at 10% of the value of one Bitcoin.
EUR/USD
Last week, the EUR/USD currency pair printed a relatively large bearish candlestick, which made the lowest weekly close seen in almost two years. The weekly candlestick closed some way from its low, with a noteworthy lower wick on the candlestick.The price is below its levels from both three and six months ago, which is my preferred metric for calling a long-term bearish trend. Another bearish indicator is the fact that the 50-day moving average is below the 100-day moving average, which validates the trend.There are plenty of reasons to be short here, but I am a bit concerned about Friday’s spike lower and the fairly strong bounce. However, the price feels heavy, and lower prices are likely over the coming week.A shorter-term approach could be to look for short swing trades from retests and rejections of resistance levels above the recent price.
USD/JPY
I expected the USD/JPY currency pair to have potential support at the JPY153.33 level.The H1 price chart below shows how the price action rejected this support level with a small hourly pin bar, marked by the upward arrow. This rejection occurred soon after the start of the overlap of the London/Tokyo sessions, which can often be a great time for reversals in Japanese yen currency pairs and crosses.Note that this multi-candlestick reversal took a while to set up, but it was worth the wait for a decisive change in direction. So far, this trade has given a maximum profit of slightly more than 1.5 to 1.The US dollar remains in a long-term bullish trend, and the Japanese yen is prone to weakness, so long trade setups in this currency pair might be something to watch out for.
USD/CHF
I expected that the USD/CHF currency pair would have potential support at the $0.8805 mark.The H1 price chart below shows how the price action rejected this support level with a strong hourly inside bar, marked by the upward arrow. This rejection occurred soon after the start of the overlap of the London/New York sessions, which can often be a great time for reversals in the US dollar.So far, this trade has given an excellent maximum profit of approximately 1.5 to 1. The US dollar is in a strong long-term bullish trend, and the Swiss franc is relatively weak, like the euro with which it is strongly positively correlated, so there may be more opportunities for long trades here over the coming days and weeks.
Nasdaq 100 Index
The Nasdaq 100 Index rose last week, closing right on the high of its range, which is a bullish sign. This is a healthy, bullish rebound within a long-term bullish trend. The linear regression analysis applied in the price chart below also shows a consistent bullish trend over the shorter-term.The strong trend and the election victories of Trump and Congressional Republicans have provided a tailwind for higher stock market prices in the US. Notably, many other countries are seeing their stock markets struggling, partly due to fears that the new Trump administration will impose tariffs on US imports.The question now is whether the price will continue to rise and make a new record high above the record high it set a couple of weeks ago. I will see the Nasdaq 100 Index as a buy once it makes a new record high closing price.
S&P 500 Index
My analysis of the S&P 500 Index is exactly the same as my analysis of the Nasdaq 100 Index above.
Bottom Line
I see the best trading opportunities this week as:
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