Forex Weekly Forecast & FX Analysis September 23 - 27

NASDAQ: Bullish

Although the tech-heavy index failed to rewrite all-time high this past week, the overall technical sentiment remained bullish. The price action was divided into two parts as initially equity investors were expecting the U.S. Federal Reserve to announce interest rate decision and publish the economic statement with projections about future monetary policy. The rate cut of 25 basis points was widely anticipated and it was already priced in. However, the bulls were hoping for more stimulus from the regulator in 2019 to lift the cost of shares and stocks. That did not happen and some sort of disappointment pushed the NASDAQ benchmark lower. The largest loss was printed on Friday when the index lost -1.10% after two indecisive trading sessions and directionless trade within a tight range. Nonetheless, NASDAQ was supported at 7787.6 points (weekly low).

The daily chart below shows that the bullish momentum remained in the long run as the index did not breach the middle line of the Bollinger Bands indicator (21-days period) from above. 13-days fast Relative Strength Index stayed above the 50 level, pointing to the positive sentiment. There might be a temporary bearish whipsaw though as the bears would not give up before testing the BB middle line support. However, the bulls are getting the background ready for a breakthrough North. It\'s recommended to go long on NASDAQ at around 7750/60 points with a target slightly above the recent top at 8029.2 points. A bullish confirmation signal might confirm the long position once the daily close price breached the upper line of the Bollinger Bands with deviation 1 (yellow background on the chart).

DXY: Bullish

The U.S. dollar experienced some losses versus the Japanese yen this past week, and the pace of growth versus Swiss Franc was not convincing. However, the greenback gained strength versus Euro, Australian and New Zealand dollars, turning the overall market’s sentiment to bullish. The price action was rather volatile given the importance of fundamental events. DXY changed the direction several times this past week but kept the sequence of lower highs and higher highs as a result.

The technical analysis points to an ascending asymmetric triangle as the chart pattern below shows. The nearest target for the bulls is the upper trendline, which already used to act as a resistance on September 2 when the year-to-date high was registered. As the chart shows, the bulls are aimed to break through that horizontal static level and rewrite this year’s record for the U.S. dollar index. When it comes to supporting levels, 3 exponential moving averages are acting as curves moving forward. The most effective EMA to support the index was the green curve having the period of 34 days as DXY bounced off that line several times in a row this past week. Therefore, a conservative approach would suggest waiting for the rate bounce back down before opening new long positions. However, the market would not be so kind as to give such depth for a new entry, and most probably, the bulls would keep lifting the greenback across the board.

USD/JPY: Neutral

The Japanese yen reflected risk-aversion flows in other asset classes such as equities and bonds. Technically speaking, the USD/JPY currency pair shifted daily and intraday outlook to positive, but the longer-term sentiment points to a strong resistance level. The weekly chart below shows that the bulls were able to lift USD/JPY from the local bottom printed in late August this year. However, the lack of momentum forced them to put the buying pressure on hold for a while. The Ichimoku Cloud trend indicator is still bearish on the long-term perspective as the leading span is negative. But the bullish retracement caused the rate to get stuck between Base Line (resistance at 108.427) and Conversion Line (support at 106.886), which points to potential consolidation in the upcoming week.

The classic scenario suggests a bounce back up to the support curve, consolidation around that level and a bullish breakthrough to at least the same high as per previous week. Therefore, it’s recommended to seek weekly lows or bearish whipsaws on the daily timeframe to start opening long positions on USD/JPY. The main condition is for U.S. equities to keep rallying as the fundamental correlation with stock indices traditionally drives the pair. If the resistance of 108.43 was breached this week, then the bulls will eye the bottom of the Ichimoku Cloud at around 109.683 and 110.00 in extension.

NZD/USD: Bearish

The New Zealand dollar was the weakest currency among majors in the foreign exchange market this past week. NZD/USD dropped -1.84% (117 pips) and charted the lowest weekly close since June 2009. Such an extremely bearish sentiment comes together with MACD enlarging its negative surplus, both lines are headed south, and there is no sign for a potential bullish divergence yet. 21-weeks RSI oscillator is rather far from the oversold zone so far, and it has not threats from a divergence as well. As the recent performance shows, the NZD/USD currency pair already had a bullish correction a couple of weeks ago, so there is nothing to expect but a bearish continuation. The descending channel (green lines) point to a possible target in terms of support levels, while the lowest rate (bearish whipsaw) in August 2015 might indicate the target for bears at 0.60875. If breached, the psychological round-figure support of 0.6000 would be in the market’s focus.

GOLD: Bullish

EUR/GBP: Downtrend

As long as the Euro was declining faster than the British Pound versus the U.S. dollar this past week, the EUR/GBP cross-rate kept sliding on the bearish side. The daily chart below is extremely bearish as the pair is in the downtrend since the peak charted on August 9. Most of the daily oscillators are extremely oversold. Nevertheless, there is still room to keep the selling pressure on EUR/GBP. The only thing is needed to continue is just a short-term retracement eve with a sign of sideways consolidation as such a scenario would give a chance for the oscillators to reload. For example, Stochastic RSI is already getting the background to shoot up as its lines crossed each other and headed North. That does not mean a deep bullish correction though as the oscillator is very sensitive the change in the momentum. Awesome oscillator confirms the previous suggestion as its histogram turned green, while the BB %B indicator might come back to the middle level of 50%. That could signal a renewal in the downtrend and intraday signals should be monitored to enter the market with fresh shorts.