Forex Forecast September 2020 | EUR USD JPY GBP Analysis

by birtanpublished on October 2, 2020

We've had plenty of volatility in foreign exchange markets already at the beginning of september for example we saw the euro push out to 120 its best level in more than two years and it's sharply reversed off i'll talk about the reasons why in this video but we're going to look at the euro plus three other foreign exchange pairs and see where the opportunities are here's the move in the euro us dollar uh so far this month pushing out you can see really briefly this is a 30 minute chart

We're looking at really briefly to uh what one hour one hour two year two year plus highs above 120 and reversed very quickly because of a comment made by a member of the european central bank we're also going to look at other markets as well i think it is really interesting the moment i've talked about the dollar index so after gaining ground uh for a good couple of years the dollar index the dollar against a basket of different currencies has uh has been under pressure since

March it's lost um what more than 10 in value but what's interesting i talked about this in the gold and the silver videos are we building a base down here at these two-year lows so are we at a major turning point for fx markets so we'll look at all of this during this video i'll talk about these four different fx pairs we'll jump back onto the chart and see what the trades could be let's look at the trades we have at the moment on fx so we have a dollar yen trade running uh

From the 10th of august i think that was the last time we looked at these fx pairs that was a trade designed to take advantage of um a turnaround in the us dollar it's ahead slightly so far it's only up 30 pounds or so then we've got these couple of euro trades one that's been running since the 27th of may uh that's made about six times our risk that's turned out to be a great trade and one also from the end of july um that's up um just over 90 pounds so we'll look at all of these

Look at some new trades and um see what we can do hello i'm david jones from capital.com and i thought we should do an update on four uh foreign exchange pairs so in this video we'll take a look at euro dollar paying against the dollar dollar yen and euro against the pound i think it's a really interesting time in fx markets we've started the week with quite a bit of volatility there's still a question is the us dollar gonna make it start making a base it's currently around

Two year lows so i think there's a lot to watch out for during september so as usual in this video i'll talk about what's driving it then we'll go back onto the charts uh look at things in more detail and set some trades up and play some new trades you can see we do have a couple of trades running uh already in the fx market if you're watching this and you haven't subscribed if you could click on subscribe it helps us grow the channel plus of course this friday uh from 1 15 uk time

We're doing a live broadcast so that'll be done by me over the non-farm payroll so i think we could see quite a bit of volatility if you're subscribed and have that alarm bell thing clicked for notifications um it will let you know when uh when we're about to start so you can watch it live in real time but let's get into it let's kick things off so let's start things off with uh euro us dollar so in common with other markets really volatile year for the euro against the dollar

It was pretty weak and it hit a three-year low in march as of course investors took this uh risk-off attitude as concerns about the coronavirus pandemic really started to bite since then though we've seen a real turnaround and just at the beginning of september we saw the euro hit its best levels against the u.s dollar uh in two years so a volatile year as i say an action really by the the central bank in the us the federal reserve we know

About that commitment to low interest rates uh for the next couple of years that has continually piled on pressure uh on the u.s dollar and has lifted other currencies and the euro has been one of the best performers so i think we've seen continued dollar weakness the euro getting a boost some have also thought that the handling by uh the eurozone of its approach to the coronavirus locking down fairly quickly introducing restrictions all of that

Left it better placed to deal with the after effects of the pandemic and get its economy back up to speed when compared to to other major world economies so i think again that helped the euro sentiment over the last few months but just in the last day or so we have had some comments and this is what's really saying spooked markets when it comes to the euro so the european central bank member mr philip lane put a comment out there i think in an online meeting

That some have taken as seeing um the ecb the central bank being a bit concerned about the euro strength up at these levels as it was approaching 120. so this this did spook markets sharp reversal in the euro as we'll see but is this still um an opportunity i think it could well be let's get back on the chart so let's take a look at euro us dollar before we get into it let's look at market sentiments look what clients are doing

On our platform when it comes to euro us dollar i've talked about this tool in the past but looking over here on the right hand side you can see it so out of clients who've got a trade on with euro us dollar 74 of buyers 26 uh our sellers it's perhaps not too surprising given the run that we've seen in um the euro since uh well since those march lows we've seen the market go from 107 trading up to 120 so um yeah more than a 10 move in euro us dollar three quarters of people who got a

Position with us are still along is that the right thing to do let's take a look at the chart in a bit more detail so just to zoom things out on euro us dollar this is where we are so that moved to 120 that was pretty much the highest since may of 2018. so it's a two-year plus high in the euro against the dollar but what's important what i think is important is um what's been going on since march so let's um just zoom in on the trade uh since march of this year and see where the opportunity is

So here's this uptrend that's been going on since the march lows did a good job we had three or four touches and then it's really since um since may mid-may we've seen um the euro really pick up against the us dollar punching out what's interesting is we do get these breakouts we've had these breakouts throughout um august where it pushes to a new high breaks through the previous high but we don't get the follow-through we don't suddenly see this market

Take off and interestingly we've seen a similar thing again you know reversed sharply after those comments by the um the ecb member so i wonder is there opportunity here i still think we could see another push higher for euro us dollar so i quite like this weakness we're going to have a look at the short-term chart in a second but looking at the rsi down here what are we getting from the rsi well when overbought on the way up as is often the case as i often say in strong trending

Markets we'll get an extreme on on the rsi or similar overbought oversold readings but the market can carry on we did have quite a bit of bearish divergence where the market was pushing out to fresh highs the rsi was falling eventually this has played out and we have seen the market sell off but i i'm still inclined to be a buyer for euro us dollar i think we've got obvious places to set stops are we seeing a knee jerk reaction by the market let's zoom in on um what's been going on perhaps over

The last couple of months or so break this down to an hourly chart so we've got the chart going back um to the last week of july we're looking at an hourly chart now you could say it's been broadly sideways but the broader trend is still like we're still pushing out to these new highs even though we don't get uh any follow through through there and even though i think we could see in the that the final quarter of this year the us dollar come back into favor

You'd expect to see a bit more to and fro no market turns around uh immediately so i do wonder if we'll get another push higher for euro us dollar so what i want to do i want to think about being a buyer lots of places to set stop losses for me the closest i'd want them below the 21st of august lows about 117.50 after that we've got good support coming in uh mid august lows around 117 and again back here at 117 so i think that's going to be the level i'm going to go for i'm going to go

For uh let's say a 1 16 70 as a stop loss and be a buyer now where it's trading now around about 118 24. let's set that trade up so my buyer here i'm expecting these old lows to hold and looking for the market to squeeze up to at least 120 and maybe even further i think if you can break 120 uh again we could well see more buyers come into this market so so i'm going to buy 22 000 of euro us dollar where the market is trading now around 1

18 25 i'm going to put a stop loss in at 1 16 70. so my stop loss is about 150 odd points away that's not a ridiculous amount of stop i don't think given the um the volatility we've seen over the last few days and for our risk of about 250 pounds i've bumped up the risk in recent videos because the account has grown so we're taking still less than a couple of percent of risk based on our account balance but i've bumped that risk up let's send the trade through

So we're filled we ended up buying at 118 26 and a bit so i'm looking for this old support at 117 to hold i think if we do break below there the risk is perhaps for a deeper selloff we'll see a loss of momentum but it's going to be a really interesting one to watch over the next few days let's talk about pound us dollar massive volatility again this year so again we saw the panic into march risky assets getting hit the pound

Trading down to its lowest levels for more than 30 years so a pound would only buy a dollar 14 at those lows in march since then though a really strong comeback so we've seen this market um bounce back by 18 off those lows and actually over the last week or so it's hit its best levels for the year so far so that is a pretty impressive turnaround from a 30-year plus low to highs for 2020. of course the uk economy has taken a significant hit because of the coronavirus it's been the worst affected

In the eurozone in the most recent quarter it showed the uk economy contracted by more than 20 so clearly you know a serious recession here in the uk on top of that we still have the brexit uncertainty uh to do to deal with where a deal in theory has to be done uh by the end of this year so i think this is coming back in and perhaps clouding the issue as to the future of the pound only this week we've had the european union's chief negotiator saying he's

Worried and disappointed by the uk government's stance on negotiations and not willing to change their position so a war of words not much progress let's see what this means for the parent against the dollar so here's my powering against the dollar chart we've got a much more mixed picture here when it comes to market sentiment we're split pretty much 50 50 uh near enough um half of people who have a trade on think it's gonna

Go up half the think it's gonna go down um so that does make me think that that because markets will often confound sentiment perhaps we are gonna see uh a squeeze higher again it doesn't appear that everyone completely believes the bullish story on pounding against the dollar and of course with the euro we had 75 of people long so i could be tempted to be a buyer of um the pound against the dollar as well we've got this trend off these march loads came in uh from

114 been trending higher that trend is sitting around 128. uh at the moment the market's currently trading 132.75 i'm not going to do the same trade i did on the euro i might try and be a little bit more patient uh on this one because up at these levels we do have quite a big resistance coming in from december of last year so it was after the the uk general election apparently against the dollar pumped punched up to about 135

Uh and then gave up those gains pretty quickly and of course fell off a cliff uh during during march looking at the rsi down here pretty similar actually to euro us dollar bearish divergence over the last uh few weeks or so and finally the market's given up some of those gains so i'm not as bullish on pounding as the dollar because i think 135 is a problem but i recognize this trend is still in place so um let's just zoom in a bit more on the trend on this chart so we have good support coming in uh the fourth of august lows about 129.80

On powering against the dollar that trend line's coming in about 128. so what i'm going to do i'm going to place an order to buy if we push back towards 130 so back down to these levels where it was sitting for the middle of august i'm going to put an order to buy at 130 50 and to keep it easy for me i'll put my stop loss 120 750 the other side of that trend line let's set that up okay so i'm ready to go the market's trading at 130 285 at the moment i want to buy 11 000 if the market drops

To 130 50. and we could see a bit more volatility in the pound because of brexit discussions etc you know i don't think it's too unreasonable to have that order a couple of hundred points away it may take a while to get filled if that order gets filled put a stop at one twenty seven fifty uh and that's for our risk our new risk again of uh 250 pounds let's um place that limit order in

So the limit orders placed uh sitting there at 1.3050 and i think it's going to be really interesting how these trends play out in the likes of the euro and the pound but for me the trend is still up i have to treat this as a correction i'm looking to buy in to any further weakness so dolly yen had been broadly sideways for the last four years um some big swings but no real trend overall in march japan fell into recession for the first time

Since 2015 of course at the time of recording it's hardly alone in that as hits to gdp around the world have affected all the major economies but thrown into the mix for japan is um some political uncertainty we've heard that the prime minister of course mr shinzo abe is set to resign he's going to stay in until his successor is found but there is again i think a lack of clarity as to what who the new leader of japan will be and what this will mean

For japan's future and i think you know we know markets hate uncertainty so perhaps that's something that is swirling around dolly yen at the moment we saw a massive hit to japanese um gdp in the last quarter it was down 27 i think that's that's a record uh for the quarter so that's something else i think that's piling the pressure on the yen and there's also this question about the us dollar has the us dollar slide gone far enough are we going to see it start to build a base here it's a really

Interesting one to watch we've already got one trade on let's jump back on and see if there's another opportunity so dolly yen a bit more of a split um between buyers and sellers but not a drastic one from a market sentiment point of view 60 of people have been long dolly yen i'm long dolly yen we have that trade running at the moment um buying in i think it was back in early august around 106 and you can see the market has pretty much flip-flopped around

Uh since we had that that move uh in early august so a bit of a split on market sentiment let's maybe um to look at it quite the short term here let's look at what's been going on since um late july that low in late july let's flip this to an hourly so this is where we are that was this this move here late august that was when the uh resignation of the prime minister he was going to step aside uh was announced really sharp sell-off uh in the dollar

There dolly yen and then have you seen the market bounce back so for me i'm quite happy with that trade at the moment we're in from uh 106. lots of support for dolly yen coming in ahead of 105. so from a short-term point of view if we saw a sell-off towards those those lows i still be inclined uh to be a buyer again we really have to clear these hurdles at 107. so that dolly yen trade was a play on us dollar strength for me buying into a dollar yen at the moment i don't

Really want to add another trade to dollar yen it hasn't changed that drastically since the last trade since it since i bought in at 106 last time around so for me we should see it hopefully we can see it squeeze higher to 107 from here but it needs to break 107 to really get a move on and perhaps that's the sign that the dollar strength is coming back in but for now i'm happy to stay put with my existing long on dolly yen let's leave it there so finally let's talk about um

Euro sterling it's had no real direction for the last few years we have had though this massive range is trading so a major range both of these economies have their own difficulties to deal with of course here in the uk we have that um ongoing uncertainty over brexit a phrase we could have used i think at any point over the last four years it's still uncertain a deal in theory has to be done by the end of this year with the eu but um there appears to be no progress so far

Before we had the coronavirus pandemic that hit economies around the world the eurozone was already struggling uh with uh you know a stuttering economy i think if we went back to 2019 we had plenty of gloomy news for for the german economy uh for example so it wasn't in the the healthiest of states uh going into the concerns around the virus but on the other hand the european union was quicker in its reaction to what was happening with the virus i think quicker than the uk quicker to

Impose uh lockdowns so some would think well maybe it's in a better position to bounce back but actually none of this has really changed that range i think it's still going to go sideways until we get some sort of resolution i'm not expecting anything drastic before the end of the year in terms of moves but there are still opportunities let's take a look at the charts so here's the euro sterling trade again a quick look at market sentiment definite split on market sentiment here

So of those who've got a trade on 22 percent of sellers 78 of buyers so bullish on the euro um they've been the wrong side of the market you can see over um well over the past month or so we've seen um euro weakness and pound strength after that that great run from the euro that we had in early feb um let's just take things out and look at things in a bit more detail so if i go back we've got the brexit vote all the way back here in 2016 clearly

Euro strength but since then broadly speaking we have just this sideways trend for a euro against the parents so it did manage to break out to fresh highs breaking out of this zone uh in march but that euro strength got rained in versus the pound somewhat and somewhat sideways since then so for probably what's more relevant on euro sterling is what's been happening since february of this year let's take a look so you can see it's been it's been pretty boring actually

Uh since april on euro sterling it's pushed up since april to about almost 92 drifted back to where we are now at 89. i suppose you could make the argument for being a buyer of the euro here you know we've got the old support left from june 88.50 so perhaps in the short term we'll see a bit more euro strength pushing up uh back towards that 92 area plenty of day-to-day volatility obviously because what's happening with brexit or rather what's not happening with

Brexit but i have to say i don't see much major happening with euro sterling over the next couple of months i think it's great in terms of really short-term trading picking up on levels like that old support but it wouldn't surprise me if we looked at this again in a month's time it was still trading around 90. so i've got my dollar yen trade on i've got my existing euro trades on let's take a look at all of those so there's my dollar n trade slightly in profit i've

Got those euro positions that have done really well uh for us so far in the euro i might bump the stop loss up on those slightly just to tighten it up but it is about um a couple of hundred points from where the mark is trading now and i'm quite happy um just to just to sit this one out for euro sterling we've got a bit of euro quite a bit of euro exposure anyway we've got that pound trade sitting waiting to happen so for me i think that's it and um we'll come back and see if things have

Changed on the euro against the pound in a couple of weeks time that's it for our update on these four fx pairs so 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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