5 Things To Watch Next Week + ChartBook

All Eyes On The EUR/USD Following Break-Out Attempt

EUR/USD, 4-Hour Chart Analysis

The Euro hit its highest level since mid-October against the struggling USD this week, with the most traded forex pair topping the 1.15 level leaving a long-standing trading range behind. While the dovish shift by the Fed, and the broad risk rally helped the common currency, and lot of analysts point to the ballooning US deficits as a long-term risk for the Greenback, from a technical perspective the pair is still clearly bearish.

The pair retraced most of its break-out gains, and it’s now back near the top of the previously dominant trading range, and the lack of follow-through after the move is a warning sign for bulls. The outcome of the current setup will be crucial for the whole forex segment, and although we wouldn’t conclude that the rally is over, the bearish long-term forces and the weak momentum all increase the chances of a bearish outcome.

Also, while economic numbers started to deteriorate in the US too, the sharp slowdown in the Eurozone is much more apparent, taking the collapse in industrial production as an example, and given the deep troubles in the European banking system, the outlook for the common currency is gloomy.

Major US Indices Testing Key Resistance Zones

Dow 30 Index, 4-Hour Chart Analysis

The counter-trend moves in risk assets, and in particular, the short squeeze in US stocks came a long way since the Christmas lows, and thanks to the sharp dovish shift in the Fed’s rhetoric, the Volatility Index (VIX) dipped below the 20 level for the first time in over a month.  Now, the short-term rally is stretched, and with the October lows, together with the lows from last spring are now ahead as strong resistance, bears might soon be back in control on Wall Street.

The earnings season is about to kick off in earnest next week, and financials will dominate the weekly releases, with JP Morgan (JPM), Bank of America (BAC), Wells Fargo (WFC), Citigroup (C), and Goldman Sachs (GS) all releasing their reports. That will likely increase the day-to-day volatility in stocks, but given the muted forecasts and the profit warnings following the recent turmoil in financial markets, we could be in for some positive surprises.

Pound Headed for Turmoil Again as Key Brexit Vote Looms

GBP/USD, 4-Hour Chart Analysis

It seems that British Prime Minister is going all in on a the draft Brexit plan with the EU, as she warned members of the Parliament that there won’t be a new agreement, and if they fail to accept the plan on Tuesday, a no-deal Brexit could follow or the process could be delayed or halted.

While at this point it’s impossible to predict the outcome of the political turmoil, The Pound managed to gain ground compared to its major peers last week, thanks to the broad risk rally, and the rumors regarding and extended deadline for the Brexit process. Should the Tuesday, vote fail, Theresa May might resign, especially in light of her recent rhetoric, and wild swings will likely continue in the currency.

Gold Looking To Extend Rally

Gold Futures, 4-Hour Chart Analysis

Gold has been in a strong uptrend amid the bearish months in global risk assets and the key safe-haven commodity reached the $1300 level for the first time since June, before entering a consolidation phase as expected.

The precious metal cleared the overbought short-term momentum readings in the past two weeks, as risk assets rebounded, and we might soon enter the next upswing, even though a spike below the $1280 level is in the cards. The next major resistance zone above $1300 is found between $1350 and $1360, and we expect a test of that one in the coming months, given the long-term fundamental tailwind.

G20 Meeting, PPI Report, and Central Bankers On Tap

Besides the crucial Brexit vote on Tuesday, the G20 meeting for finance ministers and central bankers in Tokio will be in focus next week, and it will be very interesting to see how the financial leaders will react to the turmoil in financial markets. We expect a lot of talk about caution and coordinated action, and should the key central bankers join the Fed’s dovish shift, significant moves could be ahead for currencies.

With regards to “real” economic news, the US Producer Price Index (PPI) will closely watched on Tuesday, the British CPI and PPI numbers will come out on Wednesday,  the US Philly Fed index is scheduled for Friday, while British Retail Sales, the Canadian CPI report and the Prelim US Michigan Consumer Sentiment will likely make waves on Friday.

ChartBook

Major Stock Indices

S&P 500 Futures, 4-Hour Chart Analysis

Nasdaq 100 Futures, 4-Hour Chart Analysis

Dow 30 Futures, 4-Hour Chart Analysis

VIX (US Volatility Index), 4-Hour Chart Analysis

FTSE 100 Index CFD, 4-Hour Chart Analysis

EuroStoxx50 Index CFD, 4-Hour Chart Analysis

Nikkei 225 Futures, 4-Hour Chart Analysis

Shanghai Composite Index CFD, 4-Hour Chart Analysis

EEM (Emerging Markets ETF), 4-Hour Chart Analysis

Forex

USD/JPY, 4-Hour Chart Analysis

EUR/GBP, 4-Hour Chart Analysis

AUD/USD, 4-Hour Chart Analysis

Commodities

WTI Crude Oil, 4-Hour Chart Analysis

Copper Futures, 4-Hour Chart Analysis

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Author:
Trader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.