Greg’s Weekly Analysis W/C 7th May 2018

AUD/USD
Fundamentals: A few fundamental figures will impact the pair from the Australian side next week, including housing finance and confidence indexes by WestPAC and NAB. However, the retail sales figures could add to the Aussie gaining as the positive trade data managed to halt price and find the lows of support. If retail sales figures are positive alongside a weaker or indecisive USD, then the rebound is feasible.

Technicals: The pair extended its gains throughout the trading week but found support at round number of the 0.7500, we could see a rally form this area if price remains above this level. Intraday buyers will take advantage of the upside rally while medium to long term traders will wait to see whether the pair end up in a lower high on the higher timeframes and rejects once again in line with other short positions.

EUR/USD
Fundamentals: The Euro sell off and weakness has come forward as we have been expecting it to occur for several weeks. Sellers drove the market largely based on USD strength. Based on the recent NFP numbers the next inflation reading will be crucial to maintaining the strength of the Eurozone currency. The ECB is yet to come out with any clear reason of why anyone should buy the currency at this point. If anything, the ECB might even be happy with the weakness because in case they scale back on QE exchange prices have normalized and a strong currency would not hurt future inflation figures.

Technicals: Since the massive fall the Euro tried putting up a fight against the bears but with no success. The price level rejection between 1.1900- 1.2000 could be the first clue of a retrace. However, how many buyers will the pair attract remains to be seen so we’ll be waiting for a lower high confirmation to continue the current bearish momentum which is about to turn into a trend.

GBP/USD
Fundamentals: The BoE rate decision will be the main event next week and there’s a major divide between market participants and even within the BoE. Inflation expectations have eased erasing the need to raise rates quickly and probability of a rate hike dropped more than 60% based on the latest inflation number and BoE Gov Carney speech which reiterated that there’s no rush in rate hikes, thus hinting that this meeting might not offer a change in rates. Since the pound weakened we could expect a upside reversal in case of a rate hike due to the market pricing out the hike, however, even with 1 hike the pound will not be able to fight against the USD in the coming weeks and months.

Technicals: The pair made a new low and we don’t have any clues of rebound or support as of yet, even if we had, buyers are facing considerable risk as every technical confluence for maintaining bullish momentum has been contradicted and broken. A retrace to the 1.3800 price level would present the highest value for further possible sells.

USD/CAD
Fundamentals: Bank of Canada Gov Stephen Poloz struck hawkish tones multiple times and rate hike expectations remain on the table in the summer interest rate decision meetings. GDP growth out of the Canadian economy managed to put up a fight against the USD making the pair untradeable and offering traders a strong vs strong currency. We need to wait to see which will the first currency to give up its strength and plan buys or sells based on that. If Friday’employment numbers are supporting the economy we could see strength in the loonie. The question, however, remains whether it will be able to rally against a strong USD that posted a 3.9% unemployment rate which many consider full employment as well as headline NFP beat expectations.

Technicals: One thing market participants agree on is that the 1.28500 price level is the line in the sand. If price breaks above it will continue the uptrend and if it pulls back a higher low formation is possible. Since indecision was present throughout the week, we’ll be waiting for the pullback before committing to buy positions.

NZD/USD
Fundamentals: The RBNZ will hold its first monetary policy meeting under a new Central Bank Governor. That said, the market largely expects for rates to stay the same and for the bank to maintain its neutral stance. Inflation has been running below the bank’s target and if there is any language or hint that the target might be revised lower the currency will most likely lose from its current already low value against the USD.

Technicals: The NZD has fallen as well and it seems to react slightly to the 0.7000 price level, since the sell off is extended. If multiple time frames confirm price and candle formations, we could be looking at a buy positions due to sound reward to risk to the upside before possible rejection of the 38% or 50% Fib levels.

USD/JPY
Fundamentals: We will see household spending out of Japan next week. However, the BoJ meeting will take more importance,-. Market participants are fully aware of the Japanese economy’s failure to post inflation numbers heading to the 2% target that the central bank has set. If further easing is required or the BoJ sounds dovish on their outlook the Yen is poised to weaken as it could become the weakest G10 currency with only safe haven inflows giving it a boost.

Technicals: Similar to the CAD the JPY 110.00 level has been rejected and buyers who want to go long on the pair will most likely wait for a deeper pullback before jumping the gun just 100 pips below the recent highs, utilising the buying low and selling high principal.

FTSE
As expected the FTSE added to its gains with slight intra-day profit taking and as we can see the GBP weakness mainly propelled the index to reach new high. If we check GBPUSD sell off then we will see that the FTSE gains are an opposite reversal of what happened with the pound, because of this we will have to use the pound to wait for support which could lead to FTSE resisting the highs of the 7600 following a value pullback.

DAX
Similar scenario but with less volume the DAX held onto its 12400 price level formed a daily higher low and was unstoppable since partly due to Euro single currency weakness. The level between the 12900 and 13000 could present resistance and selling pressure.

DOW
With USD strengthening the Wall Street DOW index found it hard to rally and has been moving mainly sideways. If the DXY strengthens further we can expected this to happen in the future but with further weakness we should see the highs of the index once again.

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