Forex Weekly Forecast & FX Analysis December 30 - January 3
EUR/USD: Bullish breakout
The most popular currency pair had quite a bullish price action this past week. Although the daily chart was not clear in terms of the trend’s direction until Friday, while the hourly timeframe was rather volatile, the four-hourly chart setup is the most informative and profitable in terms of binary options trading. The screenshot below shows that the MACD trend indicator and Williams Alligator tool worked perfectly showing the trend and providing signals. Initially, the alligator was bearish but MACD lines crossed each other in the negative territory, signalling a possible reversal of the trend. A confirmation of the signal to start buying call options came in when MACD lines went above zero, while Alligator’s lines crossed and switched to the bullish eating mode.
At the time of writing, EUR/USD reached the 1.1200 mark, which might delay the bulls for a while in case if they lack the momentum and power to keep buying call options. Therefore, a bearish rebound and consolidation at around 1.1175 are possible. After that, binary options traders should keep an eye on technicals to start buying call options again as the uptrend is strong and sustainable, it should not reverse just like that. The mid-term target and resistance are placed at 1.1250, the next round-figure handle to stop buying call options and consider a counter-trend action.
NZD/USD: Bullish
The New Zealand dollar was the strongest currency versus the greenback among majors this past week. The four-hourly chart setup below shows that the Average Directional Index is bullish throughout the whole of December, and the uptrend is stable. There was a temporary slowdown in the price action caused by the lack of momentum and the histogram had lost some of its recent power. However, the correction period is over and the Kiwi has a brilliant perspective to continue the uptrend in the week ahead.
It is recommended to keep buying call options for NZD/USD with 4-hours expiry until the pair will reach 0.7000 level, which is quite a tough nut to crack for the bulls as there are lots of postponed orders to buy put options around that level. On the other hand, it’s almost 300 pips left to go there, which is quite a large distance for such a slow pair as NZD/USD. Therefore, binary options traders have enough time to benefit from the one-way price action.
AUD/USD: Bullish
The Australian dollar had a similar price action recently, but there is a technical concern. The main problem is that the four-hourly timeframe shows that the pair is getting extremely overbought, according to the technical analysis. Williams %R and Stochastic RSI oscillators have preliminary signs of a reversal price action or at least a rebound. Both indicators have lines headed south at very extreme levels, so traders should monitor the overbought threshold in the scope of a possible breakout. If indicators' lines crossed that line from above, a deeper bearish retracement would start as the put-option buyers will get a strong signal to enter the market. On the other hand, if indicators bounced off the overbought level and remained above it, that would be a strong signal to renew the trading cycle of buying call options. Wait and see so far.
GBP/USD: Neutral
The British pound failed to proceed with the impressive bullish rally started in October. The bulls could not overcome strong resistance at 1.3500 as the put-options were in demand around there. The daily chart below shows that the long upper shadow on the candlestick reflects the reversal price action and signals the beginning of the bearish correction. The bearish rebound lasted 5 days in a row, and GBP/USD dropped more than 500 pips since the peak. Ichimoku Cloud trend indicator had a bearish crossover of its lines during that time, and that was a signal that the retracement might be even deeper.
On the other hand, last week’s action showed that the bears were exhausted slightly lower than the round-figure mark of 1.3000 dollars per pound. The exchange rate failed to test the Ichimoku Cloud’s upper band, and a Doji-Star candle was noticed. All that means that the downside retracement is over and the uptrend could be renewed as soon as this upcoming week. What’s more, the leading span did not perform the bearish crossover yet, even though the positive spread narrowed to the lowest value since the uptrend began.
Sterling bounced up to 1.3100, and it’s testing the Ichimoku’s Conversion line at the time of writing. If breached, the upside pressure will return to the market. Otherwise, GBP/USD would be vulnerable to a deeper slide towards the cloud. The breakthrough trading strategy could be lucrative in case if the bulls were able to breach both resistance curves. Buying put options is too early though.
