Great gains in January

The year has started with wild gains on several markets. The nature of forex, however, is that traders usually start to take profits after price-runs. Using our top forex signals, you can be among the first traders who bet on a correction and make money with that. I will list three instruments where a correction may be imminent. I will also highlight the important news next week which may trigger that correction. Our top forex robots will monitor the market and will open or close positions at the right time.

1.      The euro should take a pause after its wild run against the dollar

The euro has broke above the resistance near 1.21 and also broke out from its trading range in which it was traded since last November. Following that, it temporarily breached the 161.8 Fibonacci level after the comments of the US Treasury Secretary (Steven Mnuchin), signaling that a weak dollar is acceptable for the US.  Not long after that, however, President Trump has defied him and claimed that the US government will continue to pursue a ‘strong dollar’ policy. As a result, the euro started to weaken against the dollar and came back under the 161.8 Fibonacci level at 1.243 (see the chart). Following this movement the course may easily correct back to its previous trading range and go under 1.23. After that, however, the fundamentals will still be on the euro’s side given its economic recovery and the EU core countries’ massive trade surplus and the euro could rise close to the 1.3 level.

Top forex_EUR-USD

 

 2.      The GBP is at massive resistance levels against the dollar

The British pound has also strengthened a lot against the dollar because of promising news on Brexit talks and dollar weakness. There are three reasons, however, which may trigger a correction. First, the swift runup last week. Second, the resistance near 1.42 set out by previous lows (see the chart). Third, a stock market correction (see the next paragraph) which may make investors more risk averse and make them buy the dollar as a safe asset.

Top forex_GBP-USD

 

3.      US stock markets started the year furiously, fueled by optimism and favorable earnings

The earnings season is far from over but there are already signs that a stock market correction is absolutely possible. One of them is the market’s reaction to Caterpillar’s report which has beaten expectations handily. Still, traders started to take profit after the hefty gains of the previous months. Another reason is that the S&P 500 index has risen well above its previous trading range (see the chart). For holding up a normal uptrend, the index should test back the upper boundary of its trading range between 2600-2700 points (depending on the pace of the correction). This is 6 to 10% lower than the current course. That would be a big correction which must be triggered by a significant event. If it does not happen, however, the market will start to be more and more dangerous.

Top forex_SP500

 

The following events may trigger top forex events next week

Monday

US Core Personal Consumption Expenditure Price Index, Dec (YoY)       consensus: 1.6%

Tuesday

Euro area GDP flash estimate, Q4 (YoY)                                                        consensus: 2.6%

Bank of Engaland’s Governor Carney speech

Wednesday

Euro area core inflation flash estimate, Jan (YoY)                                        consensus: 1.0%

Fed’s Monetary Policy Statement and interest rate decision (Yellen’s last)

Friday

US non-farm payroll, Jan                                                                                   consensus: 175K

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