Double trigger

Greg’s Weekly Analysis W/C 16th April 2018

Fundamentals: Geopolitics are the forefront once again from the USD side with not only the China-US relation and trade tension development but to add to that investors have to asses the risk of the US military intervention in the Syria which could escalate tension with Russia making investor flock to safe haven commodities and currencies. The AUD strength was largely due to the USD sell off based on the geopolitical risks as well as a falling CPI m/m data which proves that despite the FED in its minutes keeping the status quo the market wouldn’t have it. Core Retail sales out of the US as well RBA monetary policy meeting minutes are sure to increase volatility right from the start of the week, however the RBA will most likely not change its’ current neutral stance.

Technicals: As per our expectation the AUD rallied from its new higher low and support which was clearly established on the daily and weekly timeframes, the weekly timeframe formed a bullish engulfing candle which means that any pullback next week into last week highs preferably the 50% area will be on buyers’ radar.

Fundamentals: The euro finds itself in a tough spot as buyers who are anticipating the QE exit would like to see prices higher and breaking above but despite some of the data supporting this thesis it’s just not enough to sustain prices at the highs until the Central bank ECB addresses the exit and becomes hawkish, analysts have argued the ECB Pres Draghis end term will serve as a way to hike rates before he goes even if after it they would have to hold off on any gradual increases or even have to cut the rates back. Fact is fundamental as well as technicals are still suggesting unsustain high prices which is why the euro itself could weaken in the coming weak but depending on how weak the USD becomes, we might have to find value to sell the EUR and pair it up with a stronger counterpart than the USD. Next week investors can look forward to the ZEW economic sentiment for evidence on Eurozone growth.

Technicals: Not a lot of new technical developments on the euro with the pair still finding itself in a range between 1.2400 and 1.22500, that said buyers would’ve liked to push prices higher but once again the top of the range along with the trendline held on and even formed a pinbar reversal candle signal letting market participants know that there is a turning point occurring, whether this turning point will end up in a low remains to be seen but having an eye on the euro is definitely feasible.

Fundamentals: Next week the UK and the GBP is set to be volatile, inflation, employment and retail sales are all in focus and the data points are carrying more weight due to them being the last major economic releases before the BoE policy meeting on May 10. On Tuesday the unemployment rate is expected to stay at the previous 4.3% while average earnings are forecast to rise significantly to 3% y/y. The inflation numbers will play a key role on Wednesday as the figure slid down to the 2.7% and is forecasted to hold at that level. The BoE as well as investors are still trying to decipher whether inflation is here to stay with the BoE becoming hawkish and pro rate hike, or the current high of 3.2% and the weakening to 2.7% and further low figures will deem it transitory making the BoE adopt a neutral, wait and see approach.

Technicals: The pound managed to rally up to the 1.42500 at the top of the range however buyers were stalling and sellers stepped in clearly, we can’t consider this a selling signal yet however we could be looking at a false breakout as well in case price goes above the resistance line and crashes afterwards, either way until prices remain above the 1.41500 we will adopt a bullish outlook.

Fundamentals: The CAD price action is due to the react to the 2 important factors, one of them being an agreement of the NAFTA deal and positive outlook of this made the CAD strengthen significantly against a already weakening USD, these wins could be extended and the pair could go lower if the BoC re affirms gradual rate increases or addresses the probability of them due to the latest inflation numbers beating expectations at 2.2% if that is being followed by another strong reading the BoC although expected to stay on hold could raise rates at their end of May meeting.

Technicals: The Canadian dollar pulled back even further than initially anticipated showing great fair value standing just above the 1.25000 price level. On the daily timeframe this constitutes the 61% Fibonacci pullback which translates into a higher probability for upside reversal, not only that but price stopped at this area, decelerated and by market close the intra-day were trying to make new highs, definitely one to watch as soon as markets open for upside reversal and buying opportunity.

Fundamentals: The RBNZ as well as its bigger cousin the RBA are exercising a neutral stance and Thursday quarterly inflation figures will provide a clearer picture of whether the previous inflation rise is here to stay or the anticipated drop in first quarter to 1% will stay for longer initiating a weaker NZD currency despite a weak USD. The RBNZ will most likely brush it off as being on the neutral path but investors would definitely asses the data and push back any hawkish or rate hike expectations coming from NZ economy.

Technicals: The NZD took a different turn than we could foresee with prices rallying not only to the top of the range but above it making a new high in the process, the 0.7400 looks to be set as a resistance and a false breakout that comes back below resistance for sellers to reverse the highs is not ruled out but next we have to wait for next weeks price action to to wait for trend line breaks as well as multiple timeframe confirmation.

Fundamentals: The BoJ and yen finds itself in an interesting position due to the fact of the currency is being treated as safe haven when risk off occurs in the markets but also due to inflation slightly making its way to the 1% mark despite being miles off from the 2% target. Trade figures as well as CPI data is out on Friday and it could decide investor speculation. The BoJ won’t become hawkish overnight but the yen could easily strengthen if market participants deem it positive enough to start anticipating a hawkish rethoric from the BoJ. That said a weak inflation figure will most likely weaken the Yen giving rise to the pair especially if no safe haven occurs, due to these unforeseen fundamentals we see the pair ranging at least until US risks are out of the way.

Technicals: Silently but efficiently the Yen pair rallied base don intra-day without offering clear signals on the daily and higher timeframes other than a higher low without any high probability candle formation, that said with the trendline in place, there’s no question that the trend is reversing and even if calling it reversing could be soon, this large rebound looks to be here to stay due to the clear intra-day trend development.

The FTSE rallied from the 6900-7000 as expected and not even a strong GBP could keep it back, prices are reaching resistance and the previous high at the 7300, this could offer some profit taking and sellers could take advantage to drive prices lower however until prices remain above the 7100 the FTSE has a higher probability for further rallies.

Similar story on the DAX, the 12500 level has been held onto as resistance for now but if price levels stay above the 12100 which would act as the fair value on the DAX from its recent rebound the market has a high chance of keeping the bullish momentum and even breaking to the upside.

Stock and Equities worldwide have been suffering ever since the supposed Trade war between China and US as their slapping each other with tariffs and threatening each others economy, if that wasn’t enough tech stocks have been dragging stocks down and the Facebook scandal is in it’s price with users data being breached, investor have been mostly flocking into other assets including higher interest rate currencies as well as commodities. The DOW has been trying to make some new highs above the 24500 price level without success for next week we want to see this price cleared to the upside before becoming optimistic about buying the market.

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