The forex market had a relatively slow second half of April, but recent price action hints at a more eventful start to May.
In today’s Weekly Forex Forecast, I share the key levels and potential trade setups I’m watching on the DXY, EURUSD, GBPUSD, USDCHF, and XAUUSD.
Let’s get started!
US Dollar Index (DXY) Forecast
The DXY is currently battling the 100.20 key level, with buyers pushing hard to confirm a bullish reversal. A rally like this would be a much-needed relief rally, considering sellers have been in control since January.
Whether we get some relief for the DXY depends on what happens at 100.20. If the US dollar can reclaim this area on the high time frames, a push to 101.80 could be next.
One reason I like 101.80 as resistance and a potential target is the April 10th imbalance. The velocity of that move left some liquidity on the table, which could serve as a magnet.
With that said, it all hinges on 101.20. The level remains key resistance as long as the DXY trades below it on a daily closing basis.
Even if we do see some relief from the USD, be careful not to get too bullish. Even a retest of 101.80 wouldn’t be enough to reverse the downtrend.
EURUSD Forecast
Just like the DXY is battling the 101.20 key level, the EURUSD is challenging 1.1280 on Thursday. That’s the high from July 2023, and below that we have multiple highs from August and September of last year at 1.1200.
There’s also an ascending trend line that lines up with EURUSD 1.1200, adding some confluence there.
If you saw my EURUSD video earlier in the week, you know I was anticipating a pullback into 1.1280 and possibly 1.1200. Given the sell-side imbalance in the region, it seemed likely.
What happens at 1.1200 (if tested) could determine the next few weeks. 1.1200 will undoubtedly attract buyers, but a failure there would open up downside targets like 1.1100 and possibly 1.0940.
On the other hand, the euro has been in an aggressive uptrend since March, so trying to buck the trend without a clear signal is ill-advised.
GBPUSD Forecast
GBPUSD is showing signs of fatigue after barely sweeping the 1.3434 high from last September.
If the pound confirms a reversal with a sustained move below 1.3200, we could see some of the sell-side imbalance come into play near 1.3050. There’s a larger imbalance below 1.3000, but one level at a time.
As mentioned with EURUSD, traders have to be careful trying to short GBPUSD without a proper signal. One such signal is seeing the DXY reclaim 100.20 to expose 100.70. But even then, it might only signal a temporary retracement.
Immediate support for GBPUSD is at the recent lows of 1.3240 and extends down to 1.3200. On the other hand, key resistance is 1.3434.
USDCHF Forecast
USDCHF is starting to pique my interest, but the pair hasn’t done enough to confirm a trade setup yet. Specifically, I’m watching to see if buyers can reclaim the 0.8330-0.8355 area on the high time frames.
That’s the area between the December 2023 low and the January 2015 low. It’s also the bottom of a range USDCHF has respected for ten years, at least until the recent breakdown.
But I’d always prefer to trade a fakeout if it sets up due to their high success rate. We’ll see if USDCHF buyers can get the job done.
If they can, it could set up a relief rally toward 0.8560, or at least the recent lows at 0.8480. And if they can’t, then 0.8355 remains key resistance, and sellers are in control. Time will tell.
Gold (XAUUSD) Forecast
To say gold has been volatile would be a massive understatement. Before April, a $50 single-day move would have made headlines; now, $50-$100 days are the norm.
That’s made for some intense moves, but the price action could be better.
I’m not a fan of high volatility like this. I’d much rather trade a slow but steady market, as it allows for more control during the trade.
If you insist on trading XAUUSD, one area to watch is the region between $3,100 and $3,150. Not only is that the early April swing high, but it’s also the top of an ascending channel from December 2023.
Whether gold bulls can hold the line there could be telling as we enter May. But as always, $3,100 is key support until proven otherwise.
