The US dollar lost a significant level on Friday following a disappointing non-farm payroll report. What does it mean for the forex market and gold next week?
Watch today’s Weekly Forex Forecast to see how I’m trading the DXY, EURUSD, GBPUSD, USDCHF, and XAUUSD.
US Dollar Index (DXY) Forecast
The DXY closed the month of July on a bullish note. It was the first green month since December. Furthermore, the bullish July candle engulfed the month of June, which may be a sign for what’s to come.
However, Friday’s non-farm payroll (NFP) numbers have the dollar retreating to start August. We discussed the potential for a failure at 99.35 in the VIP area earlier this week.
A sustained break below 99.35 could signal a dollar pullback into next week. Several sell-side imbalances could serve as “magnets” for the DXY, including 98.46, and potentially the area between 97.74 and 97.93.
For next week, resistance for the DXY comes in at 99.35, as long as Friday closes below the level. Key support is 98.50/60, followed by a minor level at 98.14.
EURUSD Forecast
EURUSD fell below its March trend line in July. The pair also lost the 1.1450 key level heading into Friday’s NFP.
However, as noted above, Friday’s NFP was the catalyst for a dollar pullback, putting pairs like EURUSD back above levels like 1.1450. However, euro bulls ran into a wall at the 1.1585 resistance level as expected.
Going into next week, I’m anticipating some consolidation from the EURUSD between 1.1450 and 1.1585. While a retest of 1.1450 may be in the cards, the DXY dropping below 99.35 may prevent a full retest of 1.1450 from the euro.
An area of interest for next week is 1.1500 to 1.1520. The former is an 8-day composite point of control from the June range between 1.1450 and 1.1585. In other words, it’s where the euro traded most actively and with the most volume during the June range, making it a level to watch.
EURUSD developed several imbalances during the late July selloff that may become targets following Friday’s rebound. Those include 1.1616, 1.1706, and 1.1736. Of course, the euro will need to reclaim resistance levels like 1.1585 to open the door to those higher levels.
GBPUSD Forecast
GBPUSD also reclaimed a significant area following Friday’s NFP numbers. The pair dropped below the confluence of support at 1.3240 during Thursday’s session. That’s a key horizontal from April and the bottom of a descending channel from July.
Friday’s intraday reclaim of the area hints at a GBPUSD rally next week. Key resistance is 1.3380, followed by the top of the June descending channel near 1.3440.
Several buy-side imbalances may help to pull prices higher next week, including 1.3340 and two more in the 1.3390 area.
Key support for GBPUSD flips to 1.3240, with the potential for a deeper retrace into the 1.3200 region next week.
USDCHF Forecast
USDCHF broke out of a May descending channel at the end of June. The pair is pulling back following Friday’s NFP miss, but buyers will look to defend the 0.7920 region if tested.
If 0.7920 holds, the US dollar rally may continue into August. However, if it fails on the high time frames, it will open up areas like 0.7870 and potentially lower levels.
I’m not as interested in USDCHF as pairs like EURUSD or GBPUSD. Even the DXY chart is cleaner than this one, although that’s subjective and may not be true for you.
XAUUSD (Gold) Forecast
Gold is giving me exactly what I wanted to see to start August. On Thursday, before the NFP numbers came out, I told VIP members to anticipate a relief rally from XAUUSD.
The pair had reclaimed $3,285 after sweeping the July 9th unfinished auction, which is common. We also have two imbalances from July, including $3,351 and $3,404.
So far, gold has retested the $3,351 imbalance, but $3,404 remains. As discussed in recent videos, I’m interested in shorting gold in August on two conditions.
First, XAUUSD needs to stay below the May trend line on a daily closing basis. Any high-time-frame reclaim of the level will signal a more significant bullish shift for gold.
Second, I need to see a retest of the $3,404 imbalance. Not only is it a notable single print, it’s also a Fibonacci retracement of the weekly upper wick from two weeks ago.
Key support for gold is $3,285 with a sell-side imbalance at $3,305 that may be targeted early next week. But if the DXY remains vulnerable below 99.35 into next week, I’d expect a pullback into the $3,305 region to be met with buying pressure.
