The 2020 trading year started, and it’s time for forecasts. Every financial firm and analyst has a set of trends and predictions to follow. 2019 finished on a high note and was better than many market participants expected. Worries of a recession never materialized, the US-China trade war intensified, and Brexit uncertainty remained, but markets took the issues in stride. The big question for 2020 is if the markets simply chose to ignore the red flags. This year has all the ingredients for a volatile trading environment, and profitability will be rewarding for traders who are well-positioned.
Gold May Hit $2,000, Silver to Surge to $40
Gold bulls have been waiting for this precious metal to take out the $2,000 level, it fell short of this mark during the aftermath of the last financial crisis. While Gold will eventually breach that mark, as the supply is finite, will conditions push it through this key psychological level in 2020? This will partially depend on how weak the US Dollar will be, as the global economy is poised to cool further. More recession signals are being reported weekly, pushing price action to the upside.
Silver has plenty of upside potential of its own and may surge past the $40 mark under extreme conditions. The $20 presents an intermediary target, which should be easily reached during the first quarter. One development traders should look out for is the support zone. Volatility is expected to remain elevated, but the support zone is moving higher. Buying the dips in Gold and Silver throughout the year is highly recommended, besides the profit potential, it will also serve as an excellent hedge for every forex portfolio.
How Serious Is A Recession Threat?
2019 confirmed a global economic slowdown, but a recession was never in sight. The global manufacturing sector entered a recession, but markets decided to ignore this development. As more reports are published that show the slowdown is ongoing, price action will eventually adjust. The recession threat in 2020 is greater than in 2019, and the service sector is showing early signs of an accelerated slowdown. Traders may be disappointed with fourth-quarter GDP figures around the globe. While a global recession may be avoided this year, individual countries are likely to slide into one, dragging down growth in 2021. It is a slow-moving development, but one that remains ignored.
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EURUSD Strength in 2020
The Eurozone economy is expected to remain under pressure in 2020 and may enter a recession as the year winds down. The ECB will remain dovish and accommodative, as evident with its quantitative easing program that was restarted on November 1st 2019 with €20 billion per month in open-ended bond purchases. Draghi may be gone, but his shadow will govern the ECB for quite some time to come. It will also keep the central bank divided and helpless, as the next major disaster is looming.
Despite the negative moving parts in the Eurozone, the EURUSD is expected to outperform. The rally will be driven by US Dollar weakness and capital rotation out of the US currency. This makes the Euro the natural selection, a trend that has been in place for nearly two decades. The majority of market participants ave priced in a weak economy in the Eurozone, a dovish central bank, and the absence of inflationary pressures. Therefore, the downside risks to the Euro remain limited.
The US Dollar is in the early phase of re-pricing, and most traders have not started to adjust for a much weaker US economy. The US Fed may feel market pressure, together with President Trump’s public scolding of his central bank, and cut interest rates this year. QE4 may be put in the table a lot faster than analysts can predict, a plethora of economic reports started to flash warning signs. The uptick in initial jobless claims is a trend to follow and may signal wider cracks in the labor market.
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Forex Profit Set-Up #1; Buy Gold - MN Time-Frame
Gold has plenty of upside potential, despite its already massive rally. After price action broker out above its horizontal support level, bullish momentum continued to expand. Its primary ascending support level has enforced the uptrend since mid-2015 and increased the floor for Gold. This commodity is now challenging its secondary descending resistance level, and a breakout will take it into the lower range of its major horizontal resistance area. The CCI has moved out of extreme overbought territory after recording a fresh high, and another surge is expected. Open your PaxForex Trading Account today, and join one of the fastest-growing communities in the forex market!
Silver has greater upside potential in percentage turns as compared to Gold. Price action remained in a narrow range following the breakout above its horizontal support area, but bullish momentum is on the rise after this precious metal moved above its primary ascending support level. Silver is now being approached by its primary descending resistance level from where a breakout is expected to take it into its horizontal resistance area. Silver is likely to follow Gold higher and can test its horizontal resistance area. The CCI reversed out of extreme overbought conditions, allowing for a fresh advance to take place. Subscribe to the PaxForex Daily Fundamental Analysis and earn over 5,000 pips per month.
The EURUSD is in the process of forming a wide rounding bottom formation, and its primary ascending support level is adding bullish pressures. This currency pair is now expected to complete a breakout above its primary descending resistance level from where momentum should take it above its horizontal resistance level. This will clear the path for more upside and may allow price action to slowly advance into its next horizontal resistance area. The CCI is moving higher in extreme overbought territory, and a pullback is expected before the rally may continue. Follow the PaxForex Daily Forex Technical Analysis and grow your balance trade-by-trade!
