Global equities keep rallying
Positive macroeconomic data supported global equities this past week. Despite the quiet and low-volume trading due to the Thanksgiving Day in the United States, major stock indices kept rallying and charted new all-time highs. So the S&P 500 benchmark added +0.77% or 24 points to its value and closed the trading week at the highest level ever - 3143.8 points. Tech-heavy NASDAQ 100 rallied +1.69% or 139.9 points, renewing the highest weekly close rate of 8416.9 points. The Dow Jones Industrial Average climbed +0.36% or 175.8 points to 28051.4 points.
Overseas indices were not so confident in terms of stable growth. Japan’s Nikkei 225 bounced off the weekly high of 23608.1 points but remained in positive territory (+0.78%) thanks to the weekend’s gap. German DAX 30 and French CAC 40 had similar performance but lower gains of +0.55% and +0.20%, respectively. British FTSE 100 index gained strength of +0.16% despite the rise of the Pound versus major currencies. Recently, both assets had an opposite correlation. A long upper shadow on the weekly candlestick underlined an uncertainty of European and Asian investors as U.S.-China trade tensions did not ease this past week.
The U.S. dollar is flat
The volume-weighted basket of six major currencies was stable versus the U.S. dollar this past week. However, several significant changes happened in exchange rates of separate currencies. For instance, the British Pound led the foreign exchange market amid supportive political news and positive Brexit expectations. Although the economic calendar was almost empty in the UK, GBP/USD gained +0.81% or 103 pips, closing Friday at 4-weeks high.
The Swiss Franc and Japanese yen were weaker versus the greenback. USD/CHF added +0.27% to the exchange rate and finished the week above the parity which never happened since May. USD/JPY rose by +0.78% or 85 pips, charting the highest weekly close rate in six months. That performance made the GBP/CHF and GBP/JPY cross-rates the most lucrative pairs in the Forex market as both assets gained +1.08% and +1.58%, accordingly.
Commodity currencies were mixed as different fundamental environment weighed. The Australian weakened versus the greenback as macroeconomic news and soft expectations regarding the upcoming rate decision of RBA did not help the Aussie. AUD/USD lost -0.34% of the exchange rate. In contrast, the New Zealand and Canadian dollar strengthened versus the U.S. dollar on positive economic expectations and risk appetite. Emerging markets currencies were mixed as well.
U.S. 10-year Treasury yields had low volatility and tight range of trading amid short week and holidays. Thus, the price of gold kept hovering in the tight range slightly above the crucial technical support of $1450 per ounce. The bears had an attempt to test the support from above but failed to push the price of the yellow metal lower as the buyers stepped in. As a result, gold finished the week and November at $1463 per ounce. The price of Silver went back above $17 per ounce in choppy trading. In contrast, the price of Palladium continued the bullish rally, added +3.7% to the price and charted the highest weekly close price at $1840 per ounce.
WTI Crude and Brent oil had a tough week in terms of the price action. Global demand concerns, low trading volume and oversupply issues caused a sell-off of the black gold. WTI Crude oil price lost -4.56% and slid back to $55 per barrel from the weekly peak of $58.50, while the price of Brent oil dropped -4.44% to $60.55 per barrel. Commodity traders have also noted a continuous spike in Coffee Futures contracts in NYMEX exchange (+20% in two months).
GBP/USD weekly technical analysis: Bullish
The British pound has almost ended the consolidation as GBP/USD breached the upper range of the sideways channel and printed the highest weekly close rate in 5 weeks (1.2937). The general formation on the daily chart below reminds a huge flag or a pennant with the nearest resistance at 1.2983 - the highest daily close charted on October 18. Sterling cross-rates such as GBP/CHF and GBP/JPY might play a role of leading indicators for the upcoming bullish rally as both currency pairs overperformed the foreign exchange market this past week. GBP/USD had only two days in the red out of the last five when the bears were trying to retaliate and reverse the price action. However, the growing demand for the Cable across the board helped the currency to gain strength versus the U.S. dollar.
The technical sentiment is bullish, according to the three indicators on the daily chart setup below. Ichimoku Cloud is in the right mode to proceed with the uptrend, the leading span has a positive surplus, the daily close rate is above both Conversion and Base Lines. The Average Directional Index has a positive surplus as well. The mainline is placed above the threshold, measuring the momentum in favour of the bulls. The True Strength Index is also in the green, the only concern is that both lines are headed south, pointing to a lowering strength of the trend. However, that might be related to the low volatility recently and once the bulls regained power, GBP/USD should renew the upside activity.
There are two choices for the trading strategy in the week ahead. The first one is the breakthrough approach aimed to set postponed buy-limit orders above the resistance level mentioned above or above the local top of 1.29527. In this case, if-done stop-loss order has to be rather tight, according to risk management rules. But a depth of 1.2843 (the lowest daily close rate recently) might be too close for the bears to trigger stop-losses. So, the danger of triggering the order, reversing and going in the right direction is comparatively high. An alternative scenario is to wait for a bearish whipsaw in the week ahead and open fresh longs at a more attractive price level in the range of 1.2877/96. In this case, a reasonable stop-loss order could be hidden below the mid-term support, which is much stronger given the recent bullish sentiment. Both options suggest a bullish rally towards 1.3100 and 1.3200 in extension.
USD/JPY Weekly technical forecast: Bullish
USD/JPY charted the highest daily and weekly close rate since May 2019 (six months!). The bullish rally reflected the overall risk appetite in the financial markets, especially equities, as the U.S. major stock indices kept rallying and charted fresh all-time highs. Besides, the pair breached a significant psychological resistance of 109.50 yen per dollar on Wednesday before the U.S. markets went to the Thanksgiving Holiday. All that opens an attractive perspective for the bulls to continue the recent uptrend and maybe even renew the year’s high above 112 yens per dollar.
The technical outlook is in favour of such a scenario. The Williams Alligator indicator is in the eating mode, which indicates the market’s intentions to proceed with the buying pressure. The buy-signal came in on Thursday when the indicator reflected the Wednesday’s rally and the Lips line crossed the Teech line from below. MACD also had a bullish crossover of its lines, while the histogram edged higher into the positive zone. The 13-days fast RSI oscillator is in bullish territory with more room to go north before the overbought conditions achieved. Therefore, the buy-and-hold trading strategy is attractive for USD/JPY in the week ahead.