I wrote on 9th February that the best trade opportunities for the week were likely to be:
- Long of Gold in USD terms (also known as XAU/USD) following a daily close of spot Gold above $2,867.25. The price fell by 1.57% over the week after this trade set up at Monday’s close.
- Long of Corn futures (CORN etf can also be used) following a daily close of the next ZC future at or above 498. This did not set up.
- Long of Coffee futures (COFF etf can also be used) following a daily close of the next KC future at or above 403.95. The price fell by 3.75% over the week after this trade set up at Monday’s close.
The weekly loss of 5.32% equals 1.77% per asset. However, my weekly forecast of rising Yen crosses was more than enough to make up for these losses and put the week into profit.
Last week saw several data releases affecting the Forex market:
- US CPI (inflation) – this came in slightly higher than expected, at an annualized rate of 3.0%, while only 2.9% was expected. The month-on-month increase was higher than expected. This gave a bit of a hawkish tilt on the US Dollar, although the greenback still lost value over the week.
- Fed Chair Powell testifies before US Congress – the testimony was a bit hawkish while being optimistic on inflation, but Powell made it clear that the Fed is in “no hurry” to cut rates. It is now expected that there will be no further rate cuts in the USA over 2025.
- US Retail Sales – this was much worse than expected, showing a month-on-month decline of 0.9% while a decline of only 0.2% was seen as likely. This suggests that the US consumer may be starting to slow down more significantly.
- US PPI – this was a fraction higher than expected, showing a month-on-month increase of 0.4% while 0.3% was expected. This aligns with the slightly higher than expected inflation rate.
- UK GDP – this was better than expected, with a month-on-month increase of 0.4% after an increase of 0.1% was seen as likely.
- Swiss CPI (inflation) – as expected.
- New Zealand Inflation Expectations – 2.06%, lower than the previous expected rate of 2.12%.
- US Unemployment Claims – this was almost exactly as expected.
Last week’s key takeaways were:
- A more hawkish tilt on rates can be expected from the US Federal Reserve, as inflation ticks fractionally higher and stubbornly refuses to fall to its target at 2%. This leads to the expectation that the Fed will leave rates unchanged for the remainder of 2025. This was backed up by US PPI data.
- Despite the hawkish tilt on US monetary policy, and the long-term bullish trend, the greenback declined over the week, while illustrates a kind of weakness in the USD right now.
- Stock markets advanced as the “Trump trade” made progress over the week, with the US technology-based NASDAQ 100 Index closing at a record high, with the broader S&P 500 Index trading near its record high which was reached only a few weeks ago.
- The Japanese Yen saw strong movement over the week, first losing considerable value on more dovish comments from the Bank of Japan about the future path of rate hikes, but the Yen later regained some of its earlier losses.
- There has been muted tariff threats between the USA and the EU, but US tariffs have moved out of focus for now.
- The Trump administration has concerned talks with begin with Russia over Ukraine, which triggered a boost in risk-on sentiment, which is a dominant theme right now.
Essentially, we see a more risk-on environment in markets now, with a notable development being the weakening US Dollar. It seems that any flow into safe havens is going to the Japanese Yen and maybe Gold.
A few commodities have been performing strongly and breaking to new record highs, while a few others are also advancing in value.
The coming week has a lighter schedule of releases, so we are likely to see a lower level of activity and volatility in the Forex market.
The coming week’s important data points, in order of likely importance, are:
- US FOMC Meeting Minutes
- UK CPI (inflation)
- Canadian CPI (inflation)
- Australian Wage Price Index
- Reserve Bank of Australia Policy Meeting
- Reserve Bank of New Zealand Policy Meeting
- UK Retail Sales
- US, French & German Flash PMI Services & Manufacturing
- US Unemployment Claims
- Canadian Retail Sales
Monday is a public holiday in the USA and Canada.
For February 2025, I forecasted that the EUR/USD currency pair would decline in value. The performance so far is shown below.
Last week, I forecasted that the following currency pairs would rise in value over the week:
This was a good and profitable call.
This week, I forecast that the following currency crosses will fall in value over the coming week:
The Australian Dollar was the strongest major currency last week, while the Japanese Yen was the weakest, putting the AUD/JPY currency cross and other Yen crosses in focus. Volatility decreased last week as expected, with 41% of the most important Forex currency pairs and crosses changing in value by more than 1%. It is likely to decline again over the coming week.
You can trade these forecasts in a real or demo Forex brokerage account.
Last week, the US Dollar Index again moved lower and invalidated the long-term bullish trend, after making a bearish reversal two weeks ago near the resistance level at 110.00. The most bearish sign is that on Thursday the price finally broke below the nearest former support level at 106.85.
It seems clear that the dominant price action is bearish, while the long term trend is mixed: the price is below its level of 3 months ago but above its level of 6 months ago. However, it looks increasingly as if this trend is over, despite new US tariffs and a more hawkish Fed which is still grappling with inflation which stubbornly remains above its 2% target.
The Dollar is likely to continue falling over the coming week, although this is still technically countertrend so I would not rely on this forecast.
After making a new record high a few weeks ago, and then making a deep bearish retracement, the broad benchmark S&P 500 US stock index rose firmly last week, to close not far from its record high. The weekly candlestick closed quite near its high, and the highest daily close which remains to be beaten is 6118.71. The price ended last week just a few points below that.
The recent increase in risk appetite has pushed this Index higher and it looks close to a bullish breakout. I am very comfortable being long of the US stock market right now, so I think this looks like a buy if we get a daily close above 6118.71.
The linear regression analysis applied to the daily price chart below shows that the current bullish trend has been driving this market for almost 2 years, which is a relatively mature bull market.
The price barely made a new record high on Friday after a recent bullish trend sent it higher. The price closed right on the high of its range. These are bullish signs. The NASDAQ 100 Index is leading the S&P 500 as technology stocks usually do. These are all bullish signs.
I am very comfortable being long of the US stock market right now, so I think this looks like a buy now, as we have already had a record high daily close, plus the price traded Friday at a record high price.
Buying the NASDAQ 100 Index in strong bull markets has been an excellent trading strategy since this Index was created in 1985.
The GBP/USD currency pair printed a large bullish weekly candlestick, reaching its highest price since December 2024.
The British Pound was one of the strongest major currencies, partly because British economic data recently came in much higher than expected. This reduced expectations of forthcoming Bank of England rate cuts which in turn boosted the Pound.
On the other side, the US Dollar was the weakest major currency last week, so this allowed the buoyant Pound to push the price considerably higher.
Despite the relatively bullish picture here, the price is not trading in blue sky and I am not sure this analysis is very actionable, so I will not be trading this currency pair over the coming week.
Gold advanced last week to reach a new all-time high last Tuesday above $2,942 per ounce. However, later in the week on Friday, the price gave back much of its earlier gain to close not far from the week’s open, which should be a factor of some caution to bulls. On the weekly chart, last week’s price action looks close to a weekly bearish pin bar.
This trend may see a relatively slow rise, but we can see how steadily and strongly Gold gained over the past year, so this looks likely to be a solid trend.
I am far from sure that Gold will reach $3,000 per ounce over the coming week, but this target is certainly in sight now.
Gold seems to be doing well in the current market environment, where both risy and some safe-haven assets are performing well – Gold plays a role as both.
As we saw a stronger bearish element creep in at the end of last week, I’d like to see a new record high daily closing price before entering any new long trade – above $2,926.
The price chart below shows that Coffee futures have been breaking out to long-term high prices over a period of more than 6 months, with recent week’s price rises being relatively strong. We saw a new record high made last Tuesday, but the price action seen then has been choppy and volatile.
Taking long trades when major commodities break out to new 6-month highs has historically been a very profitable trading strategy, which is the main reason that I want to look for a long trade here.
Due to the choppiness, I want to see a closing price above 425.10 before entering a new long trade. The recent higher volatility and swings up and down near the highs are a sign that the bullish trend may be coming to an end.
Unfortunately, Coffee futures are quite expensive and usually just too large for retail traders, but there is an ETF called COFF which can be used to participate in increases in the price of Coffee. However, note that this ETF does not always cleanly mirror the price action of coffee futures, so if you are using the ETF, be careful.
Corn futures have been breaking to new highs recently, with the price of Corn trading at a new multi-month high price on Friday. The price action last week is the most bullish of any of the three major commodities which have recently made significant new high prices.
Many analysts question the bullish trend here, seeing the jump in corn prices as an essentially seasonal development, and sure to end soon. This may be true, but I think when trading commodities it is better to be guided by the price than by your own preferred fundamental supply and demand scenario logic.
I think Corn is a buy only if it makes a new daily high closing price, and this does look quite likely to happen as Friday’s close was just a whisker off that.
I will be prepared to enter a new long trade only if we see Corn futures make a new 6-month high closing price at the end of any day over the coming week, above 498.
I see the best trading opportunities this week as:
- Long of the NASDAQ 100 Index.
- Long of the S&P 500 Index following a daily close above 6118.71.
- Long of Gold in USD terms (also known as XAU/USD) following a daily close of spot Gold above $2,926.
- Long of Corn futures (CORN etf can also be used) following a daily close of the next ZC future at or above 498.
- Long of Coffee futures (COFF etf can also be used) following a daily close of the next C future at or above 425.10.
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