USD bears to control the first trading week of 2018?

The last trading week of 2017 was not packed with major economic events and reports. But despite that fast, the markets moved sharply across the board, posting several technical important achievements. EURUSD closed the week above significant psychological rounded mark of 1.20000. GBPUSD breached above 1.35000, spot Gold CFD prices are nearing $1300.00 per ounce, first time since early September 2017; Crude oil. WTI closed the week above $60.00 per barrel, first time in 30 month.

There are several explanations about such a weakness of the greenback. We already talked about some of them. Federal Reserve needs to much more hawkish and convince the markets before they will reverse back to bullish USD sentiment. U.S. stock are facing a period of uncertainty with more bearish emphasys in January, which also does not add support to bulls.
The upcoming week is full of important data to kick-off the start of busy 2018. Monday is traditional holiday in a lot of countries worldwide and very low volume of trading is expected with almost zero volatility. The markets players will be back to working places since Tuesday and start watching such reports as China Caixin, German, British and U.S. Manufacturing PMIs. Retail Sales from Switzerland, Germany Unemployment, British Construction PMI, U.S. ISM Manufacturing PMI reports will determine the trading sentiment on Wednesday before possible high volatility during FOMC Minutes to be released at 07:00 PM GMT. Thursday has a pack of data from Europe and UK and ADP employment change together with Crude Oil Inventories from U.S. European CPI, U.S. December Non-Farm Payrolls and Canadian unemployment on Friday will be among the main events of this upcoming week to determine trading direction for a bunch of assets on the financial markets.

It’s reasonable to expect high volatility with such a heavy economic calendar. But it feels like the bears have to have a break, renew strength and reload technical indicators whether by a pullback or sideway horizontal consolidation range. One of the first triggers to renew the wave of the greenback sell-off could be FOMC Meeting Minutes on Wednesday. So we prefer to have a wait-and-see strategy before that. Of course, we’ll be looking at some crosses for intraday trading opportunities.

U.S. Dollar Index is nearing to overbought levels. But the Bollinger Bands indicator signals a bearish continuation by closing the day below the Band. The daily chart is shown below.

 

Any retracements has to be considered as selling opportunities if the fundamental environment will keep disappointing investors and traders.

We will update the trading plan for this upcoming week and we will observe more currency pairs attractive for trading later. We are also going to host a live trading session on Friday’s U.S. NFP report, so stay tuned for updates.