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July 5, 2022

Strong Forex Setups This Week

Frank Cabibi

Risk-off pairs jumped to start the week off as risky assets are giving back the majority of the gains made last week. Central banks are working to find that sweet spot between hawkish and dovishness to boost their currencies without hurting the job market too much. However, the 'soft landing' approach is getting further out of reach as these strong forex setups appear.

Falling Demand

As prices around the world rise, consumers are discouraged to spend money on things other than necessities. Even oil demand is falling regardless of the supply shortages and the war in Ukraine.

strong forex setups
US personal spending

Personal spending dropped to the lowest point this year largely due to the uncontrollably high CPI rates each month. Slower economic growth and spending is carving a dent in the US economy, but this pattern is seen in other countries as well.

Recession Fears

Economists fear that the recession could continue to get worse if this pattern continues. Consumer debt is also on the rise. This is closely intertwined with spending behavior as the US debt balance is at a new high.

strong forex setups
US debt balance

Because we've seen a steady pattern in both these issues, there is still no light at the end of the tunnel. 70% of the US's GDP is from consumer spending so if it continues to fall, the recession could likely get worse over time.

And this is not limited to the US. Higher consumer debt is increasing in other countries like Canada, Europe, and Australia while consumer confidence is falling on a global scale.

Strong Forex Setups

CAD/JPY

strong forex setups

CAD-yen looks like it's starting to lose strength on the 1D as oil falls over 2% today. The global recession hints toward a declining demand for oil while global suppliers are trying to agree on an increased supply in barrels per day in July. The pair is coming down to support in 102.980s where there is also a rising trend line that price has hit twice in the medium term.

EUR/CHF

strong forex setups

EUR/CHF came back up to resistance on the 1D timeframe before falling lower. Doubts over Europe returning to the 2% inflation target is more present now that the ECB only plans to hike by 25 basis points in July. If price closes below the 0.99455 level in today's session, we could expect lower lows in the future as momentum is still sharply down.

USD/CAD

strong forex setups

The USD finds strength above riskier assets and takes this pair up to the top of a trend line and a triple top. Investors eye Friday's NFP report while expectations are much lower than last month's actual. Price could break higher as the third test on highs suggests hard bullish momentum especially from today's heavy green candle. If price can close above this channel, the next major level of resistance lies around 1.32000.

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