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Fundamental Analysis & Market Sentiment
I previously wrote on Sunday, Nov. 24, 2024 that the best trade opportunities for the week were likely to be:
The weekly gain of 0.32% equals 0.08% per asset. Meanwhile, last week’s key takeaways were as follows:
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, with the broad US S&P 500 Index rising to make a fresh all-time high last Friday.
The Week Ahead: Dec. 2-6, 2024
The coming week’s schedule is lighter than last week and will likely be dominated by US Non-Farm Payrolls data on Friday. Other notable events include the following:
Monthly Forecast for December 2024
I made no monthly forecast for November, as the long-term trends in the Forex market were too unclear at the time. For the month of December, I forecast that the EUR/USD currency pair will fall in value.
Weekly Forecast for Sunday, Dec. 1, 2024
This week, I forecast that the AUD/JPY and CAD/JPY currency pairs will rise in value, as they fell by such unusually large amounts last week.Last week, the Japanese yen was the strongest major currency, while the Australian dollar was the weakest. Volatility rose last week, as two-thirds 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 bearish candlestick that reversed the recent breakout to back underneath 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 fell sharply from the new two-year high that was printed the previous week, and the dollar closed not far from its low of the week. These are bearish signs, but it should be noted that 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.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 dollar might be more successful than short-term trades.
Bitcoin
Bitcoin saw a week of modest gains after it hit a record high just shy of $100,000 the previous week, before it then made a retracement deep enough to shake out many long positions. The price now seems to have resumed its climb towards the record high and the $100,000 level.The strong, long-term bullish trend is something worth paying attention to, and it has been given a tailwind by the Republican victory in the recent US elections. I thought that the $100,000 mark might be hard for the price to overcome, and this still looks likely to be a pivotal point over the coming days or even weeks.I am prepared to go long again of Bitcoin, having taken in my long trade from the $75,000 area after the price retraced to about $91,000, but I want to see a daily (New York) close above the $100,000 level before entering such a new trade.
EUR/USD
Last week, the EUR/USD currency pair printed a relatively strong bullish candlestick, rebounding from the lowest weekly close seen in almost two years which was made the previous week.The price is still below its levels from both three and six months ago, which is my preferred metric for calling a long-term bearish trend. The US Dollar Index is also in a long-term bearish trend. A final bearish filter is 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 the strength of the bullish inflection from the recent multi-year low. On the other hand, this currency pair tends to make deep retracements within even its strongest trends.I am prepared to enter a new short trade from any rejection of a resistance level below the $1.0620 mark.
USD/JPY
Last week, the USD/JPY currency pair printed a very strong bearish candlestick that was unusually large, and it closed right on its low.These are bearish signs, or at least signs of bearish momentum. The Japanese yen was the strongest of all the major currencies last week. However, this seeming bearish reversal occurred at a multi-month high price, when this pair seemed to be preparing to establish a new long-term bullish trend.There is a lot of volatility in the Japanese yen and there has been for many months, making yen pairs and crosses very interesting for day traders.I cannot predict the long-term direction here, but I can predict that anyone who is good at short-term trading and who needs volatility to profit would do well to be interested in this currency pair — and perhaps some of the other yen crosses, too.
USD/CHF
I previously expected that the USD/CHF currency pair would have potential support at the $0.8805 level.The H1 price chart below shows how the price action rejected this support level with an hourly inside bar, which was followed a doji candlestick, marked by the upward arrow. This rejection occurred right at the end of the London session last Wednesday, which can often be a great time for reversals in the US dollar.This trade gave a maximum profit of approximately 1.5 to 1. This currency pair has been strongly positively correlated with the EUR/USD currency pair lately.
S&P 500 Index
Last week saw the S&P 500 Index rise again to reach a new record high, and it closed the week quite near the high, which is a bullish sign. There is no sign more bullish than the fact that the price is trading bullishly in blue sky territory.US stock markets are leading global equities, which is nothing unusual. This was boosted by Trump’s reputation for doing anything to generate economic growth and stock market growth, as well as his announcement of his intention to put strong tariffs on imports from Mexico and China.Maybe more importantly, the US stock market has been in a strong bullish trend for over one year now, so there is plenty of momentum supporting last week’s bullish move. I see the S&P 500 Index as a buy.
USD/BRL
Last week saw the USD/BRL currency pair rise strongly to make a new all-time high price, before it gave back some of its gains to close just below the previous record high made in 2020. In other words, the Brazilian real is in trouble and is reaching record lows. The only note of caution for bulls here would be the fact that the price was unable to close above the 2020 high.Many brokers do not offer the Brazilian real to trade, and the very high overnight swap rates that come with being long of the real as a CFD can be a deterrent to trading this key emerging currency. However, anyone with Brazilian real holdings might want to think about getting out or at least hedging the currency risk.Brazil has taken quite an anti-American position in recent months, throwing its lot in fully with the BRICS countries and implying an alternative to the US dollar. That may be contributing to the weakness of the real.
USD/INR
Last week saw the USD/INR currency pair rise to make a new all-time high price, and it closed near the high of the week, painting a very bullish technical picture as it trades in blue sky territory. This has happened for each of the last few weeks.The Indian rupee is relatively weak and is reaching record lows. Many similarly brokers do not offer the Indian rupee to trade, and the very high overnight swap rates that come with being long of the rupee as a CFD can be a deterrent to trading this key emerging currency. However, anyone with Indian rupee holdings might want to think about getting out or at least hedging the currency risk.The relative weakness of the Indian rupee is interesting because India’s economic metrics remain quite positive. This is likely partly due to relatively high inflation and interest rates, as well as the fear that India is so dependent upon manufacturing raw materials that it could be prone to very high levels of inflation if commodity prices spiral out of control again.
Bottom Line
I see the best trading opportunities this week as the following:
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