Two important forex buy signals for next week
We could observe two significant technical events last week which gave forex buy signals. The first was the strong break-out of the euro above the 1.21 level. The second was the conformation of gold’s flag formation. Both of them are very bullish and give traders a good buying opportunity over the next couple of days.
The strength of the European economy gives way to sustained euro strength
We got used to the fact over the past year that Eurozone countries produce good economic data. Last Thursday the European Central Bank’s monetary committee also found in its account of the monetary policy meeting that the growth is becoming self-sustaining and the absorption of the economic slack should eventually lead to upward wage and price pressures. This caused the euro to rise against the dollar and other currencies. On the next day Angela Merkel and her negotiating partners solved the German political turmoil when they announced a coalition agreement. Following that the euro broke above its previous high of 1.21 and closed the week near 1.22. The next level which could slow down the rise of the euro is above 1.24 at the 161.8 Fibonacci retracement level. (see the chart)
Gold also gives a good forex buy signal
As a result of the softer dollar, which makes the precious metal cheaper for holders of other currencies, and cheap money which lets people buy almost everything on the market, gold also started to rise. After a couple of days of correction, a flag formation was confirmed on the chart. This indicates that the price could go above 1400 dollars during the next couple of weeks. (see the chart) On the top of that, the Chinese New Year could also increase the demand on the physical market in January.