U.S. equities set a new record-high value
The risk-appetite was noticed in the financial markets for 10 weeks in a row as major U.S. stock indices kept climbing this past week. The initial trade agreement between the two leading world’s economies - China and the U.S. - was signed, increasing optimistic sentiment among global investors. Positive economic reports supported equities as well. As a result, the S&P 500 benchmark surged another 28.5 points (+0.91%) and closed the trading week at 3174.5 points, the highest level in history. Tech-heavy NASDAQ 100 added +92.6 points (+1.10%) to its value of 8493.7, renewing the last record. The Dow Jones Industrial Average climbed only +0.53%, finishing the week at 28161.0 points (+148.5).
Overseas stock indices gained strength as well, especially in Japan as the Nikkei 225 benchmark soared +2.85% on the back of global trade agreements. Political updates and parliament elections sent the British FTSE 100 index soaring +1.97% to the highest weekly close rate in 12 weeks. German DAX 30 and French CAC 40 gained +0.88% and +0.80%, respectively.
The U.S. dollar kept sliding
The world’s reserve currency kept sliding versus its major peers, following the risk-on trading sentiment in the foreign exchange market. The British Pound was the strongest currency among majors as GBP/USD surged 195 pips (+1.48%) and closed the week at 1.3334, the highest rate since June 2018. Accordingly, sterling’s cross-rates were the most lucrative pairs to trade this past week.
Other major currencies had quite a modest but stable gains versus the greenback. EUR/USD added +0.55% and tested the psychological mark of 1.1200 for the first time since August. AUD/USD and NZD/USD were trading on the upside (+0.50% and +0.44%, respectively), but slowed the recent growth pace down. Another strong currency was the Swiss Franc as USD/CHF dropped -0.64%. The Canadian dollar was moving quite slowly as USD/CAD slid -0.66%.
The only exception to this trend was the Japanese yen as the safe-have currency weakened, reflecting the overall risk appetite. USD/JPY gained +77 pips (+0.71), recovering almost all of the losses noted in the previous week. The pair went back above a crucial technical level of 109 yen per dollar, which might signal further strength. Emerging markets currencies were strong with Mexican Peso leading the gains (USD/MXN -1.44%).
Precious metals and oil gained strength
Most of the precious metals including gold, silver and platinum were trading with the bullish bias, despite a sell-off in U.S. equities. The most notable growth was registered for Palladium, which kept the impressive long-term uptrend, renewing all-time high price of $1980 per ounce (+2.77%). Both WTI Crude and Brent Oil prices were moving north, reflecting global trade optimism and output cuts by global producers. However, gains were limited by $59.76 and $64.90 per barrel.
GBP/USD weekly technical forecast: Bullish
The British pound surged to the highest rate (1.3515) never seen since May 2018. GBP/USD tried the water at the level of large-volume offers right after exit poll results were published after the British parliament elections. The pair met a strong resistance around the weekly top and bounced back down to 1.3334 on Friday. Despite the rebound, which was nothing but a technical retracement on the back of profit-taking flows, Sterling should continue the bullish rally, according to the technical analysis.
Since the daily timeframe shows nothing but a strong uptrend, a long-term outlook would help traders to determine possible resistance levels. The weekly chart below shows several essential factors driving the GBP/USD currency pair. First, the uptrend has just begun as the leading span of the Ichimoku Cloud trend indicator performed the bullish crossover only two weeks ago. The Base Line has to cross the Cloud from below in order to complete the bullish reversal formation. The upper band of the cloud represents the nearest support, coming at 1.2925 currently, however, such a depth might not be reached for quite a long time, given the recent momentum. Second, there is no technical resistance level before the horizontal line at 1.4236, which represents the highest weekly close rate charted in April 2018. The bulls would not stop before that magnetic level. Third, the Relative Strength Index with a period of 13 weeks is still below the overbought level, leaving more room for the bulls to go north.
Considering all of the factors above, the buy-lows trading strategy looks attractive for GBP/USD in the week ahead. Daily pivot points include 1.3300 and 1.3250. So those traders who missed the opportunity to buy Sterling earlier, should wait for bearish whipsaws and join the party. However, given the strong open on Monday, Sterling could keep surging as the retracement was already in place last Friday. Therefore, the buy-and-hold strategy might also be lucrative, especially if the bullish rally accelerated and local resistance levels were breached.
USD/JPY Weekly technical forecast: Bullish
Generally, the technical sentiment is in favour of the bulls in the long run. However, USD/JPY has to complete several achievements before the long-term bullish reversal will be completed. The main concern is that Ichimoku’s leading span still did not perform the bullish crossover. The exchange rate bounced back down to the Conversion Line in the previous week but recovered almost all of the previous losses. The most crucial technical threshold to monitor is the upper band of the cloud currently coming at 109.69 yen per dollar. If the bulls were able to break the rate through it, then the road to 112.00 will be open.
Other signs are positive though. 13-weeks RSI is well above the middle level, the previous bounce was limited by the line of 50%, which points to mainly bullish momentum. Both Conversion and Base lines crossed each other, setting the correct order to proceed with the uptrend. Therefore, the breakout strategy could be the most attractive for the upcoming week. Traders could consider setting postponed buy-orders above 109.70/75 with an additional entry in the case of a short-term bearish whipsaw. USD/JPY could easily get another 80-100 pips this week, so targets should be placed at around 110.40/50.