Navigating the Forex Seas: A Week Ahead Analysis for Savvy Traders
By Julie Fernandez, Senior Financial Analyst at Triangle Profits
Date: 22.11.2023
Introduction
As we approach the end of November, forex markets are presenting a fascinating landscape, shaped by recent economic events and policy decisions. Let’s dive into what the next week holds for two of the most closely watched currency pairs: the US Dollar Index (DXY) and EUR/USD.
1. The US Dollar’s Steady Recovery Post FOMC Minutes
The US Dollar has shown resilience following the Federal Reserve’s November FOMC meeting minutes. Contrary to expectations, the minutes turned out to be a non-event, mainly due to the recent US inflation data which led to a broad sell-off in the Dollar.
Key Takeaways:
- The Federal Reserve maintains a data-based decision-making approach, with further policy tightening expected if progress towards the inflation goal remains inadequate.
- Core services ex housing inflation remains a concern, with the first rate cut anticipated in May 2024.
- Upcoming data releases, including Durable Goods Orders and Michigan Sentiment, are unlikely to cause significant fluctuations in the Dollar’s value.
2. EUR/USD: A Dance Around the 1.0900 Mark
EUR/USD has been fluctuating around the 1.0900 level, after reaching a multi-month peak. The pair’s behavior indicates a potential for a long-awaited retracement.
Observations:
- Support is established by simple moving averages, especially following the break of the 200-day SMA.
- Retail trader data reveals a higher number of traders are net long compared to last week, suggesting a growing bullish sentiment.
3. EUR/GBP: A Sudden Shift in Dynamics
EUR/GBP saw a notable reversal, shedding its recent gains. This shift can be attributed to a stronger Sterling and a slightly weaker Euro.
Insights:
- The pair is currently trading below the 20-day SMA, moving towards the 50- and 200-day SMAs.
- A potential ‘golden cross’ formation on the horizon could support a bullish turnaround for EUR/GBP.
Conclusion
The upcoming week in the forex market will be crucial for traders, with the US Dollar showing signs of recovery and the Euro displaying a mix of volatility and potential upside movements. As always, staying informed and prepared for shifts in market dynamics is key to successful trading.
Stay tuned to Triangle Profits for more insights and updates on forex markets.
