This week in the FX and stock markets is likely to have less volatility, given the lack of significant data releases, such as the Canadian CPI (inflation) and US Core PCE Price Index.
Additionally, it is the final week before the Christmas vacation, which could increase activity.
The markets have been rather quiet in the last week, with a mild risk-off atmosphere as investors consider the possibility of an oncoming global recession.
In addition, four significant central banks increased interest rates last week, while three others slowed their rate increases.
Most stock markets throughout the world concluded the week lower. The Australian Dollar was the weakest major currency last week on the Forex market, with the Euro showing the biggest strength.
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U.S. Dollar Index
The U.S. Dollar Index produced a bullish hammer candlestick, although the weekly performance still indicated a slight decline. However, the previous support level of 102.94 has once more served as a strong barrier. The chart conveys conflicting information.
DXY 5day
Technically, the long-term bullish trend in the US dollar is gone since the current price has reached a new low for the past six months.
The US dollar appears to be moving in a bullish trend in the short term, but this could change quickly because it is based more on market emotion than technical analysis.
Therefore, it could be a good idea to hold off on making any trades involving the short side of the US Dollar until US Dollar strength starts to decline.
GBP/USD
The pound-to-dollar exchange rate fell from six-month highs last week as risky assets tanked as a result of dismal economic data and hawkish central banks.
But the pound could gain this week if the upcoming Christmas season causes the speculative market to temporarily reduce its own risk.
GBP/USD 5 days
Following a single move on Thursday, cable (GBP/USD) gave up all of its weekly gains and is currently trading slightly below this week’s open.
Almost three major figures (high to low) were lost in Sterling as a result of the vote split at the BoE MPC meeting on Thursday.
However, it stabilized above both the 20- and 200-day moving averages.
These might offer some temporary support for the pair down to 1.2100, but if a confirmed break below here occurs, the next sectors to watch are 1.1940 and 1.1907.
Although the medium-term technical view continues to favor a positive mood, sterling may continue to climb as we approach the Christmas holiday. However, the 1.2447 high from this week is not expected to be touched for some time.
EUR/USD
The EUR/USD currency pair printed a pattern resembling a hammer candlestick last week, but it wasn’t very bearish; in fact, this form of an out-of-position pin bar predicts that the price will increase during the week.
EUR/USD 5 days
The ECB’s rate hike and solid pledge that there will be additional increases through 2023 propelled the Euro to its highest level among all major currencies last week.
Over the last two days of the week, the price dropped noticeably from its recent multi-month high, but it is anticipated to rebound strongly if the recent strength of the US Dollar weakens along with an increase in risk sentiment.
USD/CAD
The USD/CAD currency pair produced a bullish candlestick with a wide range last week, closing close to its high. Due to continued weakness in crude oil, which Canada is a significant exporter of, the Canadian Dollar is suffering.
The Canadian Dollar, which stands out as one of the weakest global currencies, cannot be fully explained by this, though.
Only trading the CAD short over the week may be a smart move. However, the US Dollar might not be the greatest long counterparty. A better wager might be to use the Euro.
XAG/USD
Silver posted a Doji candlestick last week, closing at its highest level since April of this year. Although there is bullish momentum, the Doji may be the beginning of the bullish trend’s demise.
Another important development and a probable setback for bulls looking for the price to rise to the big round number at $25 is the fact that the price action printed new resistance at $24.15 in the price chart.
Even if the majority of commodities are not doing well on the market right now, Silver is a noticeable exception. Although the price of Gold has been growing recently, it is not performing as bullishly as Silver.
Thus, it may be a reason to doubt that the price of Silver will move much higher over the short term. This is another reason bulls could be good to exercise a little caution.
Data Release Week Ahead
We are likely to see a quieter market than last week due to significantly less data due, but there are several key releases that should spark some action. It is also the last week before the Christmas holiday, which can possibly enhance the amount of activity.
This week following few but major data releases are scheduled, as follows:
- Bank of Japan Monetary Policy Rate and Statement
- Canadian CPI (inflation)
- US Core PCE Price Index
- Canadian GDP
- US CB Consumer Confidence
Read the following in the Forex Education Section
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- A 2023 Beginners Guide To Buying And Selling Currencies
- Can You Make Money Trading Forex In 2022 and 2023: Here Are The Facts
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