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Fundamental Analysis & Market Sentiment

I previously wrote on Sunday, July 6, 2025 that the best trades for the week would be the following:

1. Long of the EUR/USD currency pair. This ended the week lower by 0.70%.
2. Long of the Nasdaq 100 Index. This ended the week higher by 0.12%.
3. Long of the S&P 500 Index. This ended the week higher by 0.11%.
4. Long of silver in US dollar terms following a daily (New York) close above $37.13. This did not set up until the end of the week.
5. Long of Dollar Tree stock following a daily (New York) close above $109. This did not set up until the end of the week.

The overall loss of 0.47% equals a loss of 0.09% per asset.

The news last week was dominated by continuing speculation as to the amounts of President Trump’s new tariffs which would be imposed on various countries, after the hard deadline was pushed back to August. President Trump announced the following last week on tariffs:

1. A 50% tariff on all copper imports – this sent copper futures soaring to new record highs, which will have been of interest to trend and momentum traders.
2. A 50% tariff on Brazilian imports – this has been exacerbated by Brazil’s strong positions within BRICs and against key aspects of American foreign policy.
3. An additional 10% tariff on all nations deemed to align with BRICs.

These measures likely gave a boost to the US dollar, which had an uncharacteristically strong trading period last week, and hit the Brazilian real. However, overall, these items were unable to stop the two major US equity indices, the broad S&P 500 Index and the tech-focused Nasdaq 100 Index, from reaching new record highs, albeit on slowing momentum.

Other market drivers last week related to certain high-impact data releases include the following:

1. RBA Cash Rate & Rate Statement – the RBA was expected to cut rates by 0.25%, but surprisingly left its Cash Rate unchanged, saying that the time was not quite right to cut due to inflation. This led markets to strongly expect a rate cut in August, but it was a hawkish tilt and resulted in the Aussie being the best performer of the major currencies last week.
2. RBNZ Official Cash Rate & Rate Statement – the RBNZ was expected to hold rates, and it did.
3. UK GDP – this was expected to show a tick higher, but instead there was a tick lower, generating more pessimism about the current state of the UK economy.
4. US Unemployment Claims – this was very slightly better than expected.
5. Canadian Unemployment Rate – this was expected to rise slightly to 7.1%, but instead it fell to 6.9%. Note how much higher than Canadian unemployment rate is compared to the US rate.

Over the weekend, President Trump decreed that Mexico and the European Union will face 30% tariffs on their exports to the US, effective Aug. 1. This will likely see stock markets open lower this week, and will probably boost the dollar while sinking the euro and the Mexican peso.

The Week Ahead: July 14-18, 2025

The coming week has a relatively light program of high-impact data releases scheduled, but the CPI (inflation) releases will be important, especially the US data, which has become established as a central driver of the US dollar and therefore the entire Forex market.

This week’s important data points, in order of likely significance, are as follows:

1. US CPI (inflation)
2. US PPI
3. US Retail Sales
4. UK CPI (inflation)
5. Canadian CPI (inflation)
6. US Unemployment Claims
7. Australian Unemployment Rate

Monthly Forecast for July 2025

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For the month of July 2025, I forecasted that the EUR/USD currency pair would increase in value. The performance of this forecast so far is as follows:

Weekly Forecast for Sunday, July 13, 2025

As there was an unusually large upwards price movement in the AUD/JPY Forex currency cross last week, I forecast that it will fall in value over the coming week.

The Australian dollar was the strongest major currency last week, while the Japanese yen was the weakest. Volatility increased strongly over this period, as 41% of the most important Forex currency pairs and crosses changed in value by more than 1%. Next week’s volatility is likely to remain the same, or possibly increase.

Key Support/Resistance Levels for Popular Pairs

Technical Analysis - US Dollar Index

Last week, the US Dollar Index printed a strong upwards candlestick which engulfed the real body of the previous week’s candlestick and closed near the top of its weekly range. These are bullish signs, but there are two bearish signs which are probably stronger to keep in mind:

1. There is clearly a strong and continuing long-term bearish trend in the US dollar.
2. The high of last week’s range remained below the key resistance level I have drawn in the price chart below.

Markets are still expecting the Fed to make three more rate cuts this year, despite the Fed’s slightly hawkish recent rhetoric, and this is likely to send the dollar to new long-term low prices once the tariff talk dies away and reaches a natural conclusion.

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Nasdaq 100 Index

The Nasdaq 100 Index barely changed last week, despite briefly trading at a new all-time high price. The weekly candlestick was a small, uncertain doji, which tends to signify indecision, while the small range is also bearish as it signifies declining momentum.

Although there are good arguments for trend traders to remain long here, I think we are seeing signs of a bearish retracement which is about to happen, probably linked to new tariffs President Trump has just announced that will be imposed on the European Union and Mexico – and there are likely to be more over this coming week, too.

I do not like trading US stock indices short, but a long trade could be possible here if we get a daily close above the current record high at 22,945.

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S&P 500 Index

The S&P 500 Index performed very similarly to the Nasdaq 100 Index last week. Everything I wrote above about that tech index also applies here to the S&P 500 Index. The only point I must add is that this broader Index will likely be harder hit by new tariffs than the Nasdaq 100 Index. However, if the Index goes on to make another record New York close high, I will enter a new long trade.

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EUR/USD

The EUR/USD currency pair printed a downward candlestick last week which looks very similar to the US Dollar Index weekly candlestick. There is a long-term bullish trend in this currency pair, which has historically trended very reliably.

However, the US just announced over the weekend that it will be imposing a new 30% tariff on all imports from the European Union, and this is likely to send prices lower over the coming week, at least throughout the first part of the week.

I would not want to enter a new trade, except in the unlikely event that we see a daily (New York) close above $1.1806.

(Click on image to enlarge)

AUD/JPY

The AUD/JPY currency cross printed a strongly bullish candlestick with an unusually large range and a real body. This cross was the top performer in the Forex market last week, with the Aussie getting a boost from rising stock markets and from the Reserve Bank of Australia passing on a widely expected rate cut last week. The Japanese yen is weak as markets still don’t see the Bank of Japan as ready to begin a serious course of rate hikes.

As the price looks somewhat overextended, and in honor of “buy the rumour, sell the fact” following the RBA’s passing on a rate cut, I think we are most likely to see the price fall here over the coming week, so a short trade with a small position size could be useful.

Another bearish factor is that the price ended the week sitting right on a resistance level which it was unable to break.

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USD/MXN

The USD/MXN currency pair printed a small rising candlestick but with a large upper wick. It is truly more of a bearish than bullish candlestick. The fact that the low of the week’s range was basically confluent with the key support level shown in the price chart below at $15.5776 suggests that all we have seen here is a little temporary support, which will soon break down to a new 10-month low price.

Over the weekend, President Trump announced that a new 30% tariff will apply to all imports from Mexico into the US. This is bound to send the Mexican peso lower and help bring the US dollar higher. Therefore, I think a short trade here could be a good idea.

I will wait for a daily (New York) close below $15.5776 before entering a new short trade here.

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XAG/USD

Silver, in US dollar terms, was holding up better than gold during the week. Despite making a bearish retracement, the price remained within touching distance of the high. This kept my faith in the long-term bullish trend and allowed me to hold on to my long position in silver.

My fair was rewarded at the end of last week when the price made a very strong bullish breakout, reaching as high as $38.50 per ounce, which was the highest price seen in over 13 years, so we really do have the price flying in blue sky territory right now.

Another bullish sign was that the price ended the week close to the high at $38.50. The price chart below shows this trend is extremely well established and has run since the start of 2023.

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Palladium

Palladium is one of the rarer precious metals. It has been rising on high volatility but exponentially, and along with silver it rose very strongly last Friday to break to a new long-term high price.

Palladium futures are expensive for most retail investors, and the metal is not offered by many CFD brokers. However, an affordable physical ETF is available as PALL, and I will be looking to enter a trend trade long here when the market opens on Monday.

(Click on image to enlarge)

Copper

Copper had seen a broadly rising price for some time which qualified as a bullish trend, but it was President Trump’s declaration last week that all imports of copper into the US would be subject to a 50% tariff that sent the price shooting into the stratosphere. These high prices in copper have never been seen before – they are all-time highs, which is rare to see in a commodity.

The remaining question is how much more momentum can this news bring us on the long side. The tariff will boost the price, but by how much more?

As a trend trader, I already entered a long position here. Friday saw a bearish retracement, so a careful course of action might be entering a new long trade following a new all-time high New York closing price above $5.6855.

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Bottom Line

I see the best trades this week as the following:

1. Long of the EUR/USD currency pair following a daily close above $1.1806.
2. Long of the Nasdaq 100 Index following a daily close above 22,945.
3. Long of the S&P 500 Index following a daily close above 6,283.6.
4. Long of copper futures following a daily close above $5.6855.
5. Long of silver in US dollar terms.
6. Long of palladium in US dollar terms.
7. Short of the AUD/JPY currency cross.

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