Weekly Forex Forecast – NASDAQ 100 Index, EUR/USD, USD/JPY

The difference between success and failure in Forex / CFD trading is highly likely to depend on which assets you choose to trade each week and in which direction, and not on the methods you might use to determine trade entries and exits.

When starting the week, it is a good idea to look at the big picture of what is developing in the market as a whole and how such developments are affected by macro fundamentals, technical factors, and market sentiment.

Read on to get my weekly analysis below.

I wrote in my previous piece on 1^st January that the best trade opportunities for the week were likely to be:

1. Long of the EUR/USD currency pair. This fell by 0.88% over the week.
2. Short of the USD/JPY currency pair. This rose by 2.56% over the week.

This produced an overall loss of 3.44% which averages to a loss of 1.77% per asset.

Last week was a notable week in the markets as most of the week saw quite a strong reversal of the formerly dominant risk-off trend which had pushed down the US Dollar and boosted stock markets. This seems to have been driven more by the start of a new calendar year, which often produces choppy or reversed markets, rather than any significant data release, although the FOMC Meeting Minutes did include language that it would not rush to cut rates, which may have contributed to this price movement. This powerful counter trend movement saw a reversal at the start of Friday’s New York session, possibly given legs by the stronger than expected US non-farm payrolls and average earnings data (the latter increasing month-on-month by 0.4% compared to the 0.3% which was expected), although these would logically be expected to strengthen rather than weaken the US Dollar.

It may be that we now see December’s risk-on trend resume after Friday produced a fresh move in this direction.

There were a few other important economic data releases last week, mostly in the USA:

1. US JOLTS Job Openings – approximately as expected.
2. US ISM Services PMI – this was worse than expected.
3. US ISM Manufacturing PMI data – approximately as expected.
4. US Unemployment Claims – this was slightly better than expected.
5. Canadian Unemployment Rate – this was a little better than expected.

These factors lifted major US stock market indices to a ninth consecutive week of gains, and in the case of the tech-based NASDAQ 100 Index, another all-time high price just shy of 17000.

The coming week in the markets is likely to see an even higher level of volatility, as there will be a release of US inflation data, which is more or less the most closely watched data in the market now, especially concerning Forex. Keep in mind that the start of a new calendar year typically sees volatile, choppy markets, and surprising changes in direction, making price direction difficult to predict at this time of year.

The most important data releases over the coming week will be US CPI (inflation) on Thursday, followed by inflation-adjacent US PPI data on Friday.

Other major economic data releases this week will be:

1. Swiss CPI (inflation)
2. Australian CPI (inflation)
3. Governor of the Bank of England testifies before the UK parliament.
4. UK GDP
5. US Unemployment Claims
6. Chinese CPI (inflation)

Monday will be a public holiday in Japan.

The US Dollar Index printed a bullish candlestick last week, which closed higher. The weekly close was down on the price of 3 months ago but up on the price of 6 months ago, presenting a mixed long-term trend.

Despite the bullish candlestick, it should be noted there are several bearish factors:

1. The weekly candlestick has a long upper wick.
2. The upper wick of the weekly candlestick looks to have rejected a new key resistance level at 102.57.
3. Recent price action has invalidated the former key support level at 101.56.
4. The US Dollar gave up some of its gains at the end of last week, suggesting that short-term momentum could be with Dollar bears again.

For these reasons, I am again prepared to be short of the US Dollar again, but as it is still the first half of January, direction in markets can be very hard to predict, so I am cautious.

After rising for nine consecutive weeks to reach a new all-time high, the NASDAQ 100 Index finally printed a bearish weekly candlestick. The decline over last week felt quite strong, but looking at the price chart, we can see that there is nothing out of the ordinary about this drop. It was quite proportionate to other recent weekly falls last October. We have a bull market in US stocks, and the NASDAQ 100 Index has historically been a great investment during bull markets. I think we are seeing a normal bearish retracement, provided that the price does not get established below the support level at 15787.

I think it is still wise to look for long trade entries…