Forex Weekly Forecast: USD Outlook, EUR/USD, Nasdaq & Crypto

Fundamental Backdrop and Market Sentiment

I wrote on 27th September that the best trades for the week would be:

1. Long of the S&P 500 Index following a daily close above 7803. This did not set up.

2. Short of the EUR/USD currency pair following a daily close below 1.1358. This set up on Tuesday and gave a weekly return of 0.78%.

3. Long of Soybeans. Soybean futures fell by 3.11%.

4. Long of Ethereum. Ethereum was unchanged over the week.

The total loss of 2.33% averages 0.58% per asset.

A summary of last week’s most important data in the market:

1. US Core PCE Price Index – this came in lower than expected, at a month-on-month increase of only 0.2% compared to the expected increase of 0.3%. Dovish for the USD.

2. US Average Hourly Earnings – this came in considerably lower than expected, at a month-on-month increase of only 0.1% compared to the expected increase of 0.3%. Dovish for the USD.

3. US Final GDP – higher than expected at 2.2% instead of the expected 1.5%. Somewhat hawkish for the USD.

4. US Non-Farm Employment Change – notably lower than expected. Dovish for the USD.

5. RBA Cash Rate & Rate Statement – the RBA hiked 0.25%, but the dovish language left it as a dovish hike for the AUD.

6. Australia CPI (Inflation) – this was expected to rise from an annualized rate of 3.5% to 4.1% but rose only to 4.0%, so this was just fractionally dovish.

7. US Unemployment Rate – unexpectedly rose a fraction, from 4.1% to 4.2%. Dovish for the USD.