Forex Week Ahead: Choppy Trading Due to Geopolitical Tensions

NEW YORK, N.Y. – Traders might see some seesawing performances and unstable prices as the first full week of 2020 commences. There are several key events happening next week, with the announcement of the US’ Non-Farm Payrolls serving as the climax.

The market sentiment is currently dominated by the burgeoning tensions between the US and Iran. The US air strike that killed one of Iran’s top military leaders resulted in stocks dropping and safe haven assets rising.

The previous week saw the US dollar index with bullish pin candlesticks. However, the currency’s price is lower than its previous levels three and six months ago. This indicates a longer bearish trend, especially as the price is lower than the 12,310-key resistance level.

While there are bearish signs, the short-term bullish movement makes it hard to predict where the USD will go next week.

Gold/USD had its highest close in almost six years last week. The metal was already getting stronger, but it received more help when tensions in the Middle East became prominent again. Right now, the only thing bulls have to be concerned about is a possible resistant inflection price at $1,557.31. However, the price of gold appears to be headed to a long-term bullish run.

The price of the Australian dollar was seesawing last week due to it being risk sensitive. The killing of an Iranian general will likely see the AUD/USD to swing in the 0.70 level though and generate major resistance. But the 50-week EMA underneath is providing some support, so the coming week could see the currency in choppy waters.

The pound tried to rally last week, but the short trading week saw the currency being pulled back from its 1.320 level. It eventually ended trading lower than the 1.3100 handle. Britain’s weak domestic data will keep the pound on the defensive.

The GBP/USD pair outlook for next week will depend on UK Prime Minister Boris Johnson’s meeting with EC President Von Der Leyen. The UK is slated to leave the European Union at the end of January, and investors are keen to know more details about the transition period. This could mean more meaningless trading as the pair strives to look for direction.

The euro was also swinging back and forth last week, as there was a lot of volatility around the EUR/USD pair. With the pair showing a neutral candlestick in its 50-week EMA, traders appear to be unsure of how to handle the currency. But analysts are saying that if it breaks past the weekly candlestick, then it could head towards the 1.14 handle.