The difference between success and failure in Forex trading will most likely depend primarily on which currency pairs you choose to trade each week and in which direction, not on the exact trading methods you might use to determine entries and breakouts. commercial outlets.

At the start of the trading week, it is a good idea to have an overview of what is developing in the market as a whole and how these developments are affected by macroeconomic fundamentals and market sentiment.

Overall picture 16^and January 2022

As the new calendar year has begun, markets are deteriorating from December’s broad-based uptrend in stocks and other risky assets. Last week, most global stock markets fell, especially in the United States, while the US dollar also sold off as a currency and not as part of a currency class, which is significant.

Last week was dominated by US Treasury yields rising to new long-term highs, US inflation data which showed annualized inflation at a new 39-year high of 7%, and remarks by Federal Reserve Chairman Jerome Powell that the Fed can move very quickly to shrink its balance sheet. Friday also saw very poor US retail sales data, much worse than expected. While some of these factors could logically be seen as indicating a stronger US Dollar, the market has clearly changed its mind on the Greenback, which has been selling as the weakest currency in the Forex market for some time.

Stock markets are mostly down and the Japanese Yen was one of the main gainers of the week. This is a typical bearish combination for the stock market and suggests that now is probably not the best time to buy stocks, until this sentiment improves.

One asset that is performing in an unusual way given the souring in risk sentiment is WTI Crude Oil, which continued to rise strongly over the past week and close slightly below its multi-year high.

The omicron coronavirus variant continues to spread extremely, very rapidly, driving new cases to record highs. However, it appears that the risk of severe disease is now considerably lower due to the nature of the variant and widespread vaccination, so it does not appear to hurt the sense of risk much although it has triggered further restrictions in many countries, especially in Europe.

I wrote in my previous post last week that the best trades of the week were likely to be long the USD/JPY currency pair after a daily close (New York) above 116.29 or short BTC/USD after a daily close (New York) below $38,728. It was a good call as I was right to wait for specified breakouts before entering which never came and therefore prevented what would have been losing trades.

Fundamental analysis and market sentiment

Last week’s takeaways were:

• The Federal Reserve Chairman said the Fed could shrink its balance sheet sooner than expected, which was an unexpected hawkish tilt in US monetary policy.
• US CPI (Inflation) Data Slightly Above Expectations, to a monthly increase of 0.5% while an increase of only 0.4% was expected. This led to a further increase in the annualized headline inflation rate to 7.0%, the highest rate seen since 1982.
• Very lackluster US retail sales data showing month-on-month retail sales fell 1.9% while the figure was expected to remain unchanged from the previous month.
• Global data continues to show that the rapid spread The omicron coronavirus variant is 70% less likely than previous strains to cause serious illness requiring hospitalization. This means that despite the massive spread of the contagion, market sentiment is not much affected as economies appear to be able to continue operating without large-scale disruption.
• The omicron coronavirus variant continues to spread very rapidly around the world. Several European countries and Canada have imposed movement restrictions and new cases are reaching all-time highs by far, with more than three million new confirmed cases currently being reported worldwide every day.

The coming week should see a similar level of volatility as last week, with Market direction could be determined on Monday and Tuesday when Chinese GDP data and Bank of Japan outlook report are released. The only other truly major data releases due this week are UK and Canadian CPI (Inflation) data to be released on Wednesday.

Last week, the global number of new confirmed cases of coronavirus reached its highest level ever, with more than 3.3 million new daily infections confirmed on Thursday. About 59.7% of the world’s population has now received at least one vaccine.

The highest increases in new confirmed coronavirus cases are currently occurring in Albania, Algeria, Argentina, Australia, Austria, Bahrain, Barbados, Bosnia, Bulgaria, Chile, Colombia, Croatia, Cuba, Ecuador, Estonia, Finland, France, Germany, Guatemala, India, Israel, Italy, Jamaica, Japan, Kazakhstan, Latvia, Liechtenstein, Luxembourg, Mali, Mexico, Moldova, Mongolia, Morocco, Nepal, Netherlands, North Macedonia, Norway, Oman, Pakistan, Panama, Peru, Philippines, Portugal, Qatar, Romania, Saudi Arabia, Serbia, Singapore, Slovenia, Spain, Sweden, Switzerland, Tunisia, United Arab Emirates, United States, Uruguay and Uzbekistan.

Technical analysis

US dollar index

The weekly prize chart below shows the US dollar index printed a bearish candlestick last week, after previously rejecting the resistance level identified at 12257 four weeks ago. While it is clear that there is a short-term downtrend in the US Dollar, the weekly candlestick has a long lower wick rejecting the support level at 12117, although it has convincingly broken below the former support level above 12150. Although this decline is not enough to invalidate the long-term trend (the price is still well above its levels of 3 and 6 months ago), we may have now seen a major drop reversal.

Overall, it seems clear that we have a mixed picture for the USD, long-term bullish, medium-term bearish and near-term undecided at 12117 support. The best I can say is that a sustained drop below 12117 over the coming week could be a decisive bearish sign for the dollar in the short and medium term.

WTI crude oil

WTI Crude Oil had its highest weekly close in 7 years last week, printing a very strongly bullish wide candlestick that closed off its high. These are bullish signs, as are a few other commodities reaching long-term highs in a high dollar inflation environment. However, we saw higher prices a few weeks ago, so there may be a bearish failure below $85.39 that has yet to be reached. I think WTI Crude Oil may be an interesting buy once if we see a daily close (New York) above $85.39.

BTC/USD

Bitcoin printed a small bullish candlestick last week suggesting that the price may have found support at around $40,000. This may be important as it can be seen from the price chart below that the $40,000 area was also favorable the last time there was a multi-week selloff in Bitcoin., so we may have seen some long-term buying here, which could mean a change in trend and see Bitcoin start to take off again. This could be the completion of a bullish double bottom candlestick pattern,

Bitcoin bulls were encouraged last week to buy options when the price firmed around $40,000. However, the current weekly candlestick is small and not particularly strong, so it may be prudent for bulls to wait and see if the nearest resistance level at $45,668 is broken higher before entering long-term trades in Bitcoin’s favor.

Conclusion

I see the best opportunities in financial markets this week like likely long WTI Crude Oil after a daily close (New York) above $85.39 or long BTC/USD after a daily close (New York) above $45,668.