What does the DXY close above 104.50 mean for the forex market next week?
Watch today’s forex forecast for the details, including how I’m trading the DXY, EURUSD, GBPUSD, USDCAD, and XAUUSD.
US Dollar Index (DXY) Forecast
Between the US presidential election and FOMC, the US dollar had an eventful week.
We saw the DXY take out 104.50 following the US election, but the October 2023 trend line stopped bulls in their tracks.
Currently, the DXY is battling the 104.50 level to determine whether the USD pushes toward that October 2023 trend line again or tests 103.20.
As mentioned all week, trading the US dollar was risky, and still is risky to some degree.
It usually takes a few days for markets to calm down following events like a US election, and the DXY volatility around 104.50 is a textbook example.
This week’s close relative to 104.50 should be telling for next week’s price action.
EURUSD Forecast
EURUSD is in a similar situation to the DXY with regard to its October 2023 trend line, which it broke earlier in the week.
However, Thursday’s FOMC-driven reclaim made things a little more complicated for the euro.
Like the DXY, this week’s close should be telling for next week’s direction.
A EURUSD weekly close below 1.0780 keeps the area intact as resistance, and keeps the focus on 1.0670 and 1.0615.
On the other hand, a weekly close above 1.0780 flips the level back to support.
GBPUSD Forecast
GBPUSD remains range bound between 1.2850 support and 1.3050 resistance.
As long as that holds, I favor trading the range.
If the DXY pulls back to 103.20, we could finally see GBPUSD take out some recent highs above 1.3050.
Alternatively, a sustained break below 1.2850 on the daily time frame would flip the level to resistance and expose the 1.2700 lows.
USDCAD Forecast
USDCAD is trying its best to hold onto the two-year breakout I discussed last weekend.
After chopping around the 1.3870 level from this week’s volatility, the pair is holding above the level as we move into the weekly close.
If USDCAD can hold convincingly above 1.3870 into this week’s close, it will be the third weekly close above that mark.
As discussed in previous videos, if USDCAD can hold this breakout, I expect the rally to be aggressive.
The pair has spent the last two years ranging below 1.3870, so there’s a lot of pent up energy.
Key resistance comes in at 1.4260.
XAUUSD (Gold) Forecast
Gold has had an incredible rally all year, but no uptrend is without pullbacks.
XAUUSD recently broke below its recent lows at $2,713, along with the August trend line.
This hints at a potential pullback from gold toward the next set of lows at $2,600.
That’s also the intersection of the February trend line, which hasn’t been tested since early August.
However, traders should be careful trying to short gold, given the aggressive uptrend all year.
Instead, waiting for dips into support to go long might be the better option.
