Weekly Outlook: 2014, July 20 - 27

US Dollar Index forecast for the week of July 21, 2014, Technical Analysis

The US Dollar Index as you can see initially fell during the week, testing the 80 handle. However, the bounce from there since the market back above the 80.50 level. It is a bullish candle, but we believe that the 81 handle above is going to be resistive, so quite frankly it’s difficult to get overly excited one way or the other. This is not a long-term traders market at the moment, and as a result we will sit on the sidelines. We do believe that the market is going higher, it’s just that shorter-term charts will probably be needed to navigate the contract.

Silver forecast for the week of July 21, 2014, Technical Analysis

The silver markets fell during the course of the week, as the market formed a red candle for the first time in over a month. That being the case, the market looks like it could pull back a little bit, but would find significant support at the $20 handle. If we get a supportive candle in that general vicinity, we are comfortable buying this market. On the other hand, if we break above the $22 level, we would be buyers there as well. Selling is not an option at this point in time.

Gold forecast for the week of July 21, 2014, Technical Analysis

Gold markets fell during the course of the week, testing the $1300 level. This market bounce from there, but the candle was in exactly supportive enough to get us too excited about buying. We certainly wouldn’t sell though, as the market certainly has support underneath that level as well. With that being the case, we think that the gold market is essentially going to be flat in the short-term, with maybe just the slightest of upward momentum. With that, we are necessarily interested in trading this from a long-term perspective.

NZD/USD forecast for the week of July 21, 2014, Technical Analysis

The NZD/USD pair fell hard during the course of the week, breaking below the 0.87 handle. There is a significant amount of support below though, so we are not necessarily excited about shorting at this point. In fact, we think that the massive amount of support below should come into play, and we would be buyers of a supportive candle, as we see the 0.85 level as the beginning of massive support. On the other hand, if we get above the 0.88 level, we believe that this market that goes to the 0.90 handle.

USD/CAD forecast for the week of July 21, 2014, Technical Analysis

The USD/CAD pair tried to rally during the course of the week, but as you can see the 1.08 level continue to be rather resistive, and as a result the market turned back around and formed a massive shooting star. The shooting star of course signifies that the sellers step back in, and as a result we feel that the market could pullback from this area. There is a nice uptrend line just below though, so we are not willing to start selling right away.

If we do break down below the uptrend line though, there is a significant amount of support at the 1.06 level, and that could keep the market somewhat afloat. It is not until we break down below the 1.06 level that we feel that the market can be sold. If we break down below 1.06, we think that the market will probably head to the 1.02 level, and possibly even all the way down to the parity level. The parity level is an area that we have been that a couple of times now, so it doesn’t bear the same psychological significance that it used to.

On the other hand, if we pullback and find support at the uptrend line, we feel that the market should go much higher. It will be enough to build up pressure in order to break out to the upside. Breaking down to the upside is something that we do think that this market will probably do given enough time, but we have to get above the 1.08 level on at least a daily close in order to feel comfortable without some type of supportive candle below. If we break the top of that shooting star for the week, that of course would be a very positive sign as it not only would break resistance horizontally, but would also break the top of that very negative shooting star.

And we get above the 1.08 level, ran into the 1.10 level first, and then possibly the 1.12 level. Remember, the uptrend line is a long-term uptrend line, so it should still bear quite a bit of weight.

USD/JPY forecast for the week of July 21, 2014, Technical Analysis

The USD/JPY pair went back and forth during the course of the week, forming a very neutral candle. With that being the case, we feel that the market should continue to meander just above the 101 level, and as a result will remain in this fairly tight range. Because of this, the market is more of a short-term type of market, and as a result we do not see much in the way of a longer-term opportunity, although we do think ultimately the market does break out to the upside and head towards the 105 level.

GBP/USD forecast for the week of July 21, 2014, Technical Analysis

The GBP/USD pair went back and forth during the course of the week, showing the 1.70 level to be supportive yet again. Ultimately, we did not have that larger range, but we do recognize that the market is still positive as long as we are above the aforementioned 1.70 handle. A supportive candle could get us to start buying, just as a break of the top of the range for the previous week would. We believe that the market should go to the 1.75 handle given enough time, and that is our longer-term target.

EUR/USD forecast for the week of July 21, 2014, Technical Analysis

The EUR/USD pair fell during the course of the week after initially trying to rally. However, we remain above the 1.35 handle, and therefore we feel that the market is still simply going to consolidate in this relatively tight range. Because of that, we don’t necessarily like the idea of being involved in this market from a longer-term perspective, and with this, we are positive, but only for the very short-term. If we break down below the 1.35 level however, this market could go down to the 1.33 level.

EUR/USD weekly outlook: July 21 - 25

The broadly weaker euro fell to its lowest level in five months against the safe haven dollar and Japanese yen on Friday before recovering some of these losses late in the session.
EUR/USD touched lows of 1.3491, the weakest since February 6 before pulling back to 1.3525 late Friday. For the week, the pair was down 0.56%.

The drop in the euro came amid increased demand for safe haven assets following the shooting down of a Malaysia Airlines jet in eastern Ukraine on Thursday.

Moscow has denied involvement in the crash, which came a day after the U.S. announced a fresh round of sanctions against Russia for supporting separatists in east Ukraine.

Markets were also unsettled as Israel expanded its ground offensive in Gaza.

The euro came under additional pressure after the Bank of Italy cut its growth forecast for this year to 0.2% from 0.7% on Friday and warned that risks to the economy remained to the downside. The announcement underlined concerns over the faltering economic recovery in the currency bloc.

Earlier in the week European Central Bank President Mario Draghi said that large scale asset purchases are “squarely” within the bank’s mandate. The remarks were the latest indication that the central bank is open to further monetary easing measures to stave off the risk of deflation in the euro area.

Demand for the dollar continued to be underpinned after Federal Reserve Chair Janet Yellen indicated earlier in the week that interest rates may rise sooner if the economy continues to improve.

Elsewhere, EUR/JPY hit lows of 136.72, the lowest since February 5 and was last at 137.07. The pair lost 0.59% for the week.

In the week ahead, the U.S. is to release what will be closely watched data on consumer prices, home sales and manufacturing orders. Investors will also be awaiting surveys on private sector activity in the euro zone.

Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets. The guide skips Wednesday as there are no relevant events on this day.

Monday, July 21

• In the euro zone, Germany’s Bundesbank is to publish its monthly report.

Tuesday, July 22

• The U.S. is to release reports on consumer price inflation and existing home sales.

Thursday, July 24

• The euro zone is to publish preliminary data on manufacturing and service sector activity, while Germany and France are to publish individual reports on private sector growth.
• Meanwhile, Spain is to release its latest employment report.
• The U.S. is to produce data on unemployment claims, manufacturing activity and new home sales.

Friday, July 25

• In the euro zone, Germany is to publish the Gfk report on consumer climate and the Ifo report on business climate.
• The U.S. is to round up the week with data on durable goods orders.

GBP/USD weekly outlook: July 21 - 25

The pound fell to three-week lows against the dollar on Friday amid concerns over escalating geopolitical tensions between Russia and the West before recovering slightly late in the session.

GBP/USD touched lows of 1.0737, the weakest since June 30 before pulling back to 1.0786 late Friday, ending the day down 0.08%. For the week, the pair lost 0.20%. It was the second straight week of losses after the pair hit an almost six-year high of 1.7190 on July 15.

Cable is likely to find support at around the 1.7000 level and resistance at 1.7150.

The drop in the pound came amid increased demand for save haven assets following the shooting down of a Malaysia Airlines jet in eastern Ukraine. Moscow has denied involvement in the crash, which came a day after the U.S. announced a fresh round of sanctions against Russia for supporting separatists in east Ukraine.

Markets were also unsettled as Israel expanded its ground offensive in Gaza.

Demand for the dollar continued to be underpinned after Federal Reserve Chair Janet Yellen indicated earlier in the week that interest rates may rise sooner if the economy continues to improve.

The US Dollar Index, which tracks the performance of the greenback versus a basket of six other major currencies, was at 80.60 late Friday, after rising to one-month highs of 80.75 earlier in the session.

Elsewhere Friday, sterling also edged lower against the euro, with EUR/GBP touching highs of 0.7934 before easing back to 0.7914 at the close, not far from Wednesday’s 22-month low of 0.7880.

The single currency remained under pressure after the Bank of Italy cut its growth forecast for 2014 to 0.2% from 0.7% on Friday and warned that risks to the economy remained to the downside.

The announcement underlined concerns over the faltering economic recovery in the currency bloc.

Earlier in the week European Central Bank President Mario Draghi said that large scale asset purchases are “squarely” within the bank’s mandate. The remarks were the latest indication that the central bank is open to further monetary easing measures to stave off the risk of deflation in the euro area.

In the week ahead, the U.S. is to release what will be closely watched data on consumer prices, home sales and manufacturing orders. Investors will also be awaiting data on second quarter growth from the U.K.

Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets. The guide skips Monday as there are no relevant events on this day.

Tuesday, July 22

• The U.K. is to release data on public sector net borrowing.
• The U.S. is to release reports on consumer price inflation and existing home sales.

Wednesday, July 23

• The Bank of England is to publish the minutes of its latest policy meeting, which contain valuable insights into economic conditions from the bank’s perspective. Later in the day, BoE Governor Mark Carney is to speak.

Thursday, July 24

• The U.K. is to release data on retail sales, the government measure of consumer spending, which accounts for the majority of overall economic activity.
• The U.S. is to produce data on unemployment claims, manufacturing activity and new home sales.

Friday, July 25

• The U.K. is to release preliminary data on second quarter gross domestic product, the broadest indicator of economic activity and the leading measure of the economy’s health.
• The U.S. is to round up the week with data on durable goods orders.