Weekly Forex Forecast for DXY, EUR/USD, GBP/USD, USD/CAD, and AUD/USD (January 20-24, 2025)

This week has been relatively subdued for the forex market, but emerging conditions hint at potential turning points as we advance further into the month. In this analysis, I will detail my strategies for navigating the currency pairs DXY, EURUSD, GBPUSD, USDCAD, and AUDUSD as we approach the next trading week. Each of these pairs is influenced by various economic indicators and geopolitical developments, and understanding these influences is vital for traders looking to capitalize on market movements.

Forecast for the US Dollar Index (DXY)

The recent performance of the US Dollar Index (DXY) shows a continued upward trajectory, particularly after rebounding from the pivotal trend line at 108.60, which I flagged earlier this week. This trend line, important for forecasting potential price movements, has been a focal point in our VIP Discord group, where I’ve outlined several trading opportunities, especially related to USDCAD, which I will discuss further below.

As we examine the DXY, the significance of the upcoming week cannot be understated. A weekly closing price near 109.50 could yield critical insights into future movements. Should the index close above that benchmark, this would solidify last week’s breakout, illustrating a bullish momentum that could propel prices toward the 110.50 resistance zone as we near the end of January. Conversely, a drop below 109.50 might signal difficulties ahead for the DXY, suggesting a potential reversal in momentum.

Currently, my perspective remains bullish on the US dollar as long as the upward trend persists, particularly while the DXY holds above the September trend line. This continual upward motion indicates overall dollar strength, which positions traders to explore opportunities that arise from this trend.

Analysis of EURUSD

The EURUSD currency pair has exhibited a sideways trading pattern this week, remaining entrenched within the confines of the 1.0200 support and the 1.0350 resistance levels that have been frequently referenced in previous analyses. Mid-week, a retest of the 1.0350 mark provided an excellent shorting opportunity for those engaged in intraday trading; however, aside from that, the absence of volatility rendered little actionable movement for traders.

It is essential to note that the lucrative trading scenarios from October, which many traders may have capitalized on, appear to be receding. This decline in volatility can be attributed to the dollar’s performance this month. The lingering imbalance from 1.0090 in 2022 may still act as a target in the long term, but it lacks immediate viability for traders at this moment. Consequently, the EURUSD is mired in its current range, and without a definitive breakout, it is unlikely to experience significant movement in the near term.

An approach for traders might involve waiting for a clear breakdown below the support level or a breakout above resistance before committing capital to EURUSD trades.

GBPUSD Market Outlook

Similar to EURUSD, the GBPUSD pair has also experienced a quiet market environment this week. A noteworthy level that was identified for VIP members was the resistance at 1.2300. As anticipated, the currency pair faced rejection at this price point, following which it saw a significant drop of approximately 130 pips into Thursday’s session.

Looking ahead, today’s closing price near 1.2200 may provide some clues regarding upcoming price action. For those trading GBPUSD, a decisive close below 1.2200 could pave the way for a move down toward the 1.2070 level. Conversely, if the pair manages to sustain a close above 1.2200, it could indicate a continuation of the current range, suggesting limited opportunities until a more definitive movement occurs.

Traders should employ caution in trading GBPUSD, as the lack of clear direction could lead to whipsaw price action, which may negatively impact short-term trading strategies.

USDCAD Trading Perspective

The USDCAD currency pair has been caught in a range-bound territory since December, primarily as a consequence of rising oil prices that provide support to the Canadian dollar. This relationship between oil prices and the Canadian dollar is critical, as fluctuations in crude oil directly impact the Canadian economy and, consequently, its currency value.

This week afforded another trading opportunity for USDCAD, particularly stemming from support levels that were discussed in a video earlier this week. The notable aspect of this week’s price action was the retest of the September trend line support, positioned around the 1.4335 mark. On Wednesday, a dip allowed for buying at 1.4311, complementing long positions established from the previous week. Notably, I’ve secured partial profits near the established range high of 1.4450, a point shared in real-time with VIP group members.

Currently, USDCAD faces resistance at the 1.4450 range highs, as predicted. A sustained break above this level could potentially target my next objective at 1.4670. Maintaining an optimistic outlook is justified as long as USDCAD remains above its September trend line at 1.4340, indicating enduring bullish sentiment among traders.

AUDUSD Trend Analysis

The performance of AUDUSD has been characterized by a downward trend since late September, exhibiting stronger declines than many other major currency pairs. This persistent downtrend has consequently formed a descending channel, which may present viable trading opportunities as we move further into the month.

If the DXY tests the 110.50 threshold later this month, the impacts on the Australian dollar could be pronounced, potentially pushing AUDUSD toward its 2008 financial crisis low of around 0.6000. However, this week, there was a slight reclaiming of the 0.6170 level by AUDUSD bulls, although the rally has halted amid resistance presented by the September channel.

Given the current indecisiveness of AUDUSD, traders might explore setups that arise from the descending channel, particularly if the broader trend in the DXY provides the necessary motivation to spur movement in AUDUSD. The next week could prove pivotal, especially in how this pair reacts to shifting conditions in the DXY.

Conclusion

As we navigate the forex landscape in the coming week, all eyes will be on key levels in the DXY, EURUSD, GBPUSD, USDCAD, and AUDUSD. The DXY’s potential movement holds substantial weight for other currency pairs, particularly if it breaks above or below critical resistance and support levels.

Traders should remain patient and observant, waiting for confirmation before executing trades. With volatility in the market, specific pairs will present solid opportunities, while others may exhibit reduced movement. Understanding the interplay of these currencies will be key to success as we head into what appears to be a significant trading week.

FAQ Section

Q: What is the significance of the DXY in forex trading?
A: The DXY, or US Dollar Index, tracks the value of the US dollar against a basket of major currencies. It serves as a benchmark that many traders use to gauge the strength of the dollar, which subsequently influences other currency pairs.

Q: What does it mean when a currency pair is “range-bound”?
A: A currency pair is considered range-bound when it remains trapped between defined support and resistance levels, showing limited volatility and direction. Traders often look for breakout opportunities when the pair moves beyond these levels.

Q: How can geopolitical events affect forex trading?
A: Geopolitical events, such as central bank announcements, elections, and crises, can lead to swift changes in currency values as traders react to potential impacts on economies, interest rates, and overall market sentiment.

Q: Why are oil prices relevant to the Canadian dollar?
A: The Canadian economy is heavily reliant on oil exports. Therefore, rising oil prices often lead to a stronger Canadian dollar, while declining prices can weaken it, impacting trading decisions in pairs like USDCAD.

Q: What strategies can traders use for currency pairs experiencing indecisiveness?
A: Traders can use range trading strategies, waiting for confirmed breakout points from the range boundaries, or apply bouncing strategies from support and resistance levels to capture small price movements within the range.

References

  • Forex Trading Strategies by Joe Rich
  • Technical Analysis of the Financial Markets by John J. Murphy
  • Currency Trading for Dummies by Kathleen Brooks and Brian Dolan
  • The Little Book of Currency Trading by Kathy Lien
  • Market Wizards by Jack D. Schwager