Forex Forecast August 2020 | EUR USD JPY GBP Analysis

by birtanpublished on October 3, 2020

I think we're all aware of the massive volatility we've seen in markets over the past few months and foreign exchange is no exception this is a chart of the us dollar index uh the dollar against a basket of other currencies but where are the opportunities now in the major foreign exchange pairs just to highlight some of this volatility over the last few months we saw the us dollar was trading as low as 95 that the basket the us dollar against the basket of currencies rallied up as the coronavirus pandemic spread to

105 and we've seen really since then the story has been one of of us dollar weakness and clearly this has benefited other markets euro us dollar is a great example going from as low as around well below 108 in march to recently trade above 118 so we've seen a thousand point rally uh in euro us dollar and i'm just wondering where are the opportunities now uh in these various foreign exchange markets so in this video we're going to go through a few markets and uh have a look and see if we can get

Some trades on let's take a look at trades at the moment so the fx trade we have at the moment we do actually have a euro dollar trade going we've got one on from the last time we looked at the euro dollar buying at 109.80 back in the 27th of may uh the market is currently uh what 117.50 so we're up just under 800 points on that trade 100 pounds or so and then the one from the sentiment analysis video did a trade on the euro then buying at 117 20 the markets won 1750. so we're up

Slightly on that but i still think there are other opportunities out there so um let me just talk about some of these markets then we'll come back and look to get our trade on hello i'm david jones from capital.com and this is a slightly longer video than normal but this time around we're going to take a look at four different currency pairs given the volatility we've seen in fx and of course other markets over the last few months so in this video we'll catch up and look to get some trades on

For euro us dollar pound us dollar dollar japanese yen and euro against the pound as usual if you're watching this if you could click on subscribe support the channel it helps us continue to push out lots of hopefully interesting and varied videos throughout the week so i'll talk a bit about all the different currencies then jump into the platform uh look at things in more detail and see if we can get a trade on let's kick things off with our euro us dollar so it's been a really volatile

Year for uh the euro it traded down to what was almost a three year low back in march then more recently we've seen this great comeback by the euro trading up to what's what's a two-year high for euro us dollar as the coronavirus pandemic spread in march we saw a very much a risk off approach by investors a flight to safe haven so we saw the us dollar strengthen uh initially as the pandemic

Spread and that of course put pressure on all sorts of other markets including the euro and the likes of gold as well but since then like other central banks we've seen a committed effort by the u.s central bank the federal reserve to uh try and protect the economy and we've seen that um via intervention and also a commitment to lower interest rates uh they're saying that rates will stay pretty much near zero uh through to 2022. this has put pressure on the us dollar so that us dollar

Strength has been reversed we've seen the us dollar a week sliding by about 10 over the last few months and that of course has helped lift up the markets such as the euro but of course like all economies the euro zone economy hasn't escaped what's gone on over the last few months the latest quarterly uh gdp gross domestic product uh for the euro zone economy strode showed it shrunk uh by 12 and it was i think fairly weak you know even before this this pandemic really started to spread

But many people believe because of the early actions taken in the eurozone uh in terms of of locking down uh countries that that actually the eurozone is better placed than a lot of major economies around the world to bounce back strongly so that could be one thing that has helped push the euro higher anyway let's take a look at the euro chart and see where the opportunity might be and whether there's a trade to do so let's uh let's kick things off with this euro dollar chart so

So in march traded down to this multi-year low but you can see the size of the turnaround since then trading up towards around about 119. so back to levels not really seen we've got to go all the way back back here on the chart to may 2018. and clearly it is you know somewhat overextended uh in this in the short term given the run but i do wonder if um if we do see a bit more strength medium term euro dollar we do have those two trays running at the moment let's just zoom in on what's been happening so

Far this year so here's our trend in euro us dollar off those lows um this trend line's done a good job you know when we look at trend lines in these videos we're always looking to see how many times uh the level gets touched great job then really accelerated uh off in may we've got good support left around the 112 area for euro us dollar so um i'd like to be a buyer i'd like to be a buyer on a dip but i'm looking at the rsi down here we do have a bit of

What's known as bearish divergence going on where the price has pushed higher but the rsi is falling so it does suggest perhaps we could see a bit more weakness short term uh for euro us dollar um from here the macd down here again sort of rolled over has given a sell signal in the last couple of days so again adding perhaps to the bearish argument up at these levels um so what i'd like to do i don't want to go short because that that trend from march is

Still up but i think what i might do i'm going to put an order in to buy if the price dips as low as 114. so really to the top of this recent range i'm already long euro us dollar anyway from previous videos but i'm happy to add if the price drops down to 114 and perhaps a stop loss down at at one eleven fifty let's just set that trade up so my order's ready i wanna buy eleven thousand if the price does pull back to where it was

Mid july uh and if that already gets filled buying at 114 uh put a stop loss in at one eleven fifty and that's for our usual risk of a couple of hundred pounds let's place that order so that'll just sit there uh within the platform and if it does drift down to those levels we'll get filled um but let's uh let me go back talk about another market and see if there's a another trade to do so let's talk about powering against the us dollar of course the pandemic spreads

Investors go risk off like the euro we saw the pound driven down but that hit a much bigger low uh the pound in march traded near 114 uh against the dollar that was its worst levels since since the mid 80s so pretty much a 35 year 30 35 year low for pound against the dollar but of course since then the story has been of us dollar weakness lifting other assets and we've seen the pound rally pretty strongly off those levels

It's bounced back about 15 uh since the march lows trading back up to where it was um sort of february march of this year so bouncing back to levels from higher in the from earlier in the year of course the uk economy is expected to take a major hit uh from the coronavirus we're expecting figures out later this week wednesday of this week that will show uh the uk economy shrank by 20 or even slightly more uh in the latest quarter so it'll be interesting to see what the market's reaction is to that

When that news comes out this week if it has shrunk by more than 20 this will be that the biggest hit uh by a major economy a so-called g7 economy you know suggesting that the uk has not handled uh the the lockdowns etc as quickly as other as other countries have so a bigger hit for the uk and of course on top of this um the uk still has the brexit uh uncertainty to deal with you know with some sort of a deal

The government saying should be signed with the european uh union by the end of this year but uh time is ticking on that clock and focus is definitely shifting to brexit again now let's take a look at the chart for the pound against dollar and see if there's an opportunity so here's pound against the us dollar you can see um massive volatility uh since march going from 132 down to 114 so losing 1 800 points or so um and i do wonder is

It gonna struggle a bit up at these levels i think we we need to see um this 132 level broken so 132 has been quite the ceiling uh right from the beginning of the year for pounding against the dollar and just in the last week we saw it trade as high as 1.3185 if we pick up on the trend for pounding against the dollar since the march lows clearly that's still going and i think this one gets perhaps a bit more interesting if we see it if it does sell off to this whole sort of you know 126 128

Zone so for me in the short term i think we could see a bit of pound us dollar from up here if i was going short i'd want my stop probably up above 132 somewhere so in terms of risk reward that looks like a good level perhaps we'll see it squeeze site slightly and go back to that trend line so we'll pick it up again if it does sell off um sort of down to 128 but for now i'm quite happy to sit this one out and see how it sort of resolves itself

Up at what has been pretty major resistance in the past let's talk about dolly yen now if you look at the last four years um actually it's been pretty sideways for dolly yen you know we've seen clearly you know spikes along the way rallies uh downtrends but the market's trading pretty much where it was in 2016. japan did fall into recession uh in march again hardly a headline event this year i think for for most countries

Around the world but fell into recession in march the first time uh it's been affected by recession since 2015. we're expecting an update on the gdp growth uh the state of the the japanese economy we're expecting that in the middle of august and uh pretty similar to the uk i suppose we're expecting it to have shrunk by about 20 in the latest quarter so another hit expected for the japanese economy but of course that doesn't mean the yell the yen is a is a sell you know we have seen continued weakness in the u.s dollar uh

Lately dropping from from its highs in march dropping by about 10 the us dollar index and um with the fed's commitment to ongoing uh zero interest rate when it comes to monetary policy so perhaps with dolly yen from here um there's an argument we could see further sort of sideways trading a bit of a tug of war between these two currencies but there could still be an opportunity let's take a look at the dolly yen chart and see if

There's a trade and here's the dollar yen chart i've gone all the way back really to um june 2016 that's that sort of area just to show you how how the trading has been in dollar yen and i do wonder are we set for a resurgence uh in the us dollar after having a really tough time the last three or four months or so um but you can see whenever you can see that spike in march for the dollar for dollar yen down below 102. what i want to focus on is perhaps what's been going on this

Year because whenever it pushes down to the low 100s we have seen the buyers come back in so i'm wondering if there's a trade to do right now on dolly yen let's just uh zoom things in so here's our march low on dolly yen just ahead of 101 um you can see the clearly that the strong bounce back uh for the dollar into late march then we've been drifting looking at the rsi down here we did have an oversold rsi uh when the market dollar yen drifted towards 104.

We've just had the last few days a buy signal off that macd and i do think we could see the dollar try to push a little bit higher from here so i am tempted to be a buyer and what i'm going to do i'm gonna place quite an aggressive stop-loss on this aggressive for these sort of videos anyway we normally give markets a bit more room but what i'm gonna do i'm gonna use that most recent major low so really just ahead of 104 from late july as uh as my stop-loss

On this trade uh for dollar yen and i'm going to buy in so i'm going to have a stop loss let's say 103.50 on dollar yen so a couple of hundred two 250 points uh away but where it was at the end of july and i'm really going to look to see if we can challenge these old june highs so can we get like a 400 point move from these sort of levels but but clearly i think if we break below 104 actually there's no point in me being in the trade anymore but i do wonder if we

Have seen a recent short-term extreme for the us dollar let's get the trade on okay so i've set up i'm buying 11 000 usd where the market's trading now so 106. against the yen i'm putting a stop loss in at 103.50 so i'm using that previous low as an extreme because if we start trading below there i think my idea is wrong but i'm really looking to see if we can run back up towards 110. let's put that trade in so i've opened

The position buying at 106.07 let's take a look in the portfolio so here's my dolly yen trade so i bought uh just now 11 000. 106.07 put a stop loss in at 103.50 slightly below that and uh of course i've got my real time uh running p l on that daily entry we'll see we'll see how things turn out i do still have the euro and us dollar trades up here i have moved the stop loss up on the bigger winner uh to 116 but i do think we could see something

About a dollar come back from these levels and finally uh euro against the pound so we're going to take the us dollar out of the equation here if we look at the last four years there was a surge in the euro after the june 2016 uh brexit vote but once that had calmed down we have seen again fairly broad sideways range for four years now for euro against the pound as mentioned when we were looking at pound us dollar um there's still this cloud of of actually signing a deal

With the european union uh for the uk before the year's end the uk government has committed to that so but there is still a lot of uncertainty about what trade with the eu is going to look like after that so that i think is definitely something hanging over the pound but the euro zone had been struggling with a weaker economy before the coronavirus pandemic spread you know we did see last year in 2019 some surprise bearish news on a couple of occasions for the german

Economy for example you know often seen as the driver uh of the eurozone so it was looking a bit shaky even coming into 2020 but on the flip side the eurozone has been um broadly lauded you know for the actions it took uh to lock down its economies as as the virus spread so many people think that actually the eurozone is one of the better placed areas around the world to try and uh benefit from a stronger and quicker bounce back in its economy

So you'd expect that could lift euro against the pound but despite all this the range has not changed we're still we're at the top of the range so it is interesting uh up here but again i wonder well are we just going to see a bit more to and fro between these two currencies let's take a look and see if we can get a trade on for euro sterling so here's the the move higher on the june 2016 uh brexit vote and you can see how it's been almost

Broadly sideways since the summer of 2016. we have the odd run higher we did have a run up to 95 for euro sterling as the parent fell to its lowest levels against the us dollar it's come off since then and we're sort of pretty much stuck somewhere in the rain so really for euro dollar i'd be tempted to do nothing at the moment you know i think if we get us a move up into like 93 94 it looks like a selling opportunity

Playing the range if we get a sell-off back to sort of 83 84 that sort of area looks like a buying opportunity but at the moment with the trading around 90 we're pretty much slap bang in the middle of the range so for me there's no real trade to do and i have a feeling that sort of sideways um almost indecisiveness might continue until we get a bit more of a clearer direction on brexit so i much prefer the dolly n trade out that we did because of an obvious level and thinking that

The uh that the dollar could strengthen from here for euro sterling with it stuck in the middle of the range there's a i think it's time for me to sit with my hands and not take a trade on this one that's it for our look at these full markets uh we will come back to them and see how those ideas worked out but from me david jones and capital.com we'll leave things there good luck with your trading for more trading videos just like this please subscribe to our channel

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