The forex market has transformed what seemed like a calm Friday into quite a tumultuous scene, thanks to remarks from Fed Chair Powell.
It’s worth taking a look at some strategies for next week, especially for trading plans regarding DXY, EURUSD, GBPUSD, USDCHF, and XAUUSD.
US Dollar Index (DXY) Outlook
The DXY stayed positive for most of the week, bouncing back from the support level of 97.70 and overcoming significant resistance barriers that have held since August. This has, quite honestly, created some excellent opportunities for trading.
However, Friday wasn’t meant to be uneventful. Powell mentioned that it might be time for changes in policy, hinting that the Fed could start cutting rates in September.
These statements led to a notable volatility in the forex market, with the DXY dropping by 0.7% in just a few minutes.
If the US dollar sinks below 97.90, there could be shorting opportunities arising next week. But traders should keep in mind that the 97.70 level is likely to attract some buying interest.
A breakdown of the DXY could signal a move toward the lower end of the 2011 upward channel support, which is around 96.80. If the market loses that support area lying between 97.70 and 97.90, it might reflect the support seen in August.
EURUSD Forecast
The EURUSD pair tested significant support at 1.1587, which I’ve mentioned several times throughout the week.
This area isn’t just vital for the Euro; two notably poor lows were created at 1.1599 and 1.1590. These levels tend to act as “magnets” for price movement, and this week was no exception.
In the wake of Powell’s comments on Friday, the EURUSD surged by more than 100 pips in just half an hour. Yet, I suspect that market makers may look to target some slow longs early next week, so it might not be smart to chase this movement right now.
Next week, keep an eye on the uptrend line from August 5th, which recently offered a short opportunity between 1.1670 and 1.1587. This could pave the way for a more substantial bullish recovery next week.
There are also points to monitor at 1.1736 and an unfinished auction at 1.1810 that the pair can target later this month, but we’ll need to see stronger bullish momentum from the Euro before making any definitive moves.
GBPUSD Outlook
GBPUSD provided some clear signals for a pullback on Monday. I took the opportunity to short at 1.3538, and I’m glad to say I booked 122 pips before Powell’s announcement on Friday.
Looking ahead, if GBPUSD can re-establish levels around 1.3470 and 1.3525, we could see a path open toward 1.3580 resistance. Above that, there are multiple print options in the vicinity of 1.3700 that tend to draw attention.
Yet, buyers will first need to contend with resistance between 1.3525 and 1.3580, while key support rests at 1.3470.
USDCHF Prediction
USDCHF attempted to break out of a triangle pattern last week but faced a retreat following Powell’s remarks. The challenge of buying USDCHF for 0.8100 is compounded by weekly resistance in that area.
Next week, we could have to grapple with a failed breakout along with a significant low at 0.8030. This combination might prompt new short positions to retest next week.
Regarding support, channels formed from May to July come into play. Pinpointing a precise price intersection there is tricky, but it might be around 0.7800 or even lower, closer to the multi-decade support around 0.7720.
XAUUSD (Gold) Prediction
XAUUSD remains trapped in a range that’s persisted since April. Earlier this week, I talked about potential breakouts from falling wedges, particularly around the $3,330 support area.
On Friday, gold responded after dipping below $3,330. Personally, I hesitated to make a deal because I wanted to see XAUUSD test the $3,305 imbalance first.
Currently, it appears that gold is edging toward $3,385 resistance. If it breaks through this level, we might see a retest of $3,420.
Gold had approached that $3,420 zone back in early August, and it still looks open for trading. If we close the week around this area, the main support will shift to $3,350/60.
