Greg’s Weekly Analysis W/C 19th March 2018

Fundamentals: We can very clearly see that the USD strengthened significantly against a weaker AUD, this was attributed to the US data releases namely the CPI inflation reading which came in mixed at best, but then later on retail sales and the consumer price index managed to lift the USD ahead of its’ policy meeting next week, which will also serve as the fundamental highlight of the USD next week. On the AUD side we also have the RBA meeting minutes on Tuesday which sure to decide the fate of the currency along with unemployment numbers which declined on the last reading pointing to slower jobs growth. Nonetheless we believe that the FED and the USD will have the deciding factor of price direction with the FOMC minutes and a possible rate hike which has largely been priced in, that said investor will look closely to the language used by the new FED Chair Powell and monitor the dot plot ahead, if the FED sounds hawkish and stays with its 3-4 rate hikes for the year we should see USD strengthen but the slightest dovish comments could weaken the USD for new lows.

Technicals: The Australian dollar rejected the 0.79000 price which quickly became resistance and confirmed a lower high formation on the daily timeframe. After a candle pattern rejection price heavily sold off breaking below the 50 ema to advance almost for a new low to the 0.7700 level on the last day of the trading week. Daily or intra-day retraces next week can be considered as shorting opportunities.

Fundamentals: The euro bulls are coming in terms with reality as the EUR price evened itself out by pulling back and heading to a more realistic view of the Eurozones fundamentals. ECB Mari Draghis dovish statements for the 3rd time in a row played their role as well the USD strengthening. The euro area also faced a slight slowdown in the first quarter of 2018 thus PMI reading will be closely watched next week along with the ZEW German economic sentiment as well as the Ifo’s business climate which is expected to post a lower number. The data could provide a temporary retrace from the lows which will be met with sellers driving the market lower based on USD optimism.

Technicals: The euro tried to rally from the 1.2300 support but was met with rejection in the middle of the week and price sold off for 3 days in a row, forming lower highs on daily timeframes and strong weekly pinbar candle formations rejecting the 1.2400. This being the 3rd pinbar formation on the weekly timeframe it does raise questions about whether market participants will sell next week or a sideways movement occurs. Technical clues and price action confirmation will have to be closely watched in order to enter sell positions.

Fundamentals: Wage growth plays an important role in the UK economy and this data is closely monitored by the BoE along with unemployment numbers and inflation. Volatility is to be expected on the pair and form GBP side due to Tuesdays inflation figures which many investors view as the leading data point for BoE to become more hawkish. Possible improvement in the retail sales along with CPI numbers will paint a more clearer picture whether the BoE will address a positive policy shift and adopt a hawkish rhetoric. If these numbers beat expectation it will bring forward and cement the May BoE meeting as possibility to hike rates. The EU and UK transition deal agreement at next weeks summit will play an important role. If on Thursday the BoE does not adopt a more hawkish stance, sudden weakening of the GBP is not ruled out.

Technicals: The pound formed a rising wedge on the daily timeframe but deceleration occurred at the 1.4000 indicating a potential resistance in place. Due to the nature of the price formation it’s difficult to know whether price will end up lower due to the lower high formation or the 1.3800 will act as support, along with the 50 ema and price will rally. In this case the 1.38000 plays an important role, if rejected there’s a high probability for rallies and if it breaks below the 1.3800 support then shorting will the action to take.

Fundamentals: The Canadian dollar has been weakening massively against the USD with the policies put forward by US Pres. Trump taking a toll on the loonie. The mentioning of NAFTA by officials has the ability to drive price action, that said BoC Gov Poloz’s dovish remarks further weakened the CAD taking the pair to new highs. The CPI data on Friday might not carry the same weight as before and could become a non-event especially if the USD takes over based on the FED and FOMC meeting minutes with a very possible rate hike occurrence.

Technicals: We’ve been waiting on a value pullback on the pair and price pulled back to the 1.2800 not clearly enough for a high reward to risk trades but despite that market participants bought the pair and a new high has been established as of this weeks’ end. Pullbacks should be viewed as buying opportunities even on intra-day if price confirms accordingly.

Fundamentals: GDP data disappointed on the NZ economy coming in below estimates therefore not providing enough clue whether the RBNZ stays put or venture into hawkish territory possibly raising rates later in the year. The RBNZ monetary policy meeting will commence on Thursday and we could see some volatility in the pair if the RBNZ becomes more hawkish, that said the spotlight most likely will be stolen by the USD anyway.

Technicals: Very similar price action behaviour to its bigger cousin the AUD, the NZD rejected the highs of the 0.73500 price level as highlighted in our previous analysis and sold off below its daily 50 ema. If retraces occur and price remains below the 0.73000 we can plan to enter for new sells joining the bears.

Fundamentals: The pair has on ongoing battle between buyers and sellers and despite the USD being fundamentally stronger, market participants are favouring yen due to safe haven from equities as well as based on US policy uncertainty which should be clearer after Wednesdays FOMC meeting. Inflation figures out of Japan could give strength to the yen if the CPI rate edges up to 1% as expected however BoE Gov Kuroda reiterated recently that the Central bank is no rush to exit or tighten its current stimulus and will most likely keep its language giving the yen more chance to trade based on sentiment than data. If the FOMC is hawkish enough it could easily drive the yen to the lows and pair would see considerable upside.

Technicals: The Japanese currency and pair had a few rough weeks now with price having enough volatility but without that volatility forming anything sustainable or conclusive. Buyers are trying to keep the 106.00 as support and sellers take every advantage of a slight rally to sell it back. If next week price doesn’t rise above the 107.00 or below the 105.50 we might see this start of a range for longer time.

After suffering another sell off the second half of the week price tried to erase some its losses and it slightly succeeded. With a daily lower high as well as support at the 7100 it’s anyone’s guess which way will the FTSE confirm, the reason has to do with the nature and correlation of the GBP which is in the same dilemma, that said we’ll be looking for buys if the pair breaks and closes above the 7200 or sells if it closes below the 7100.

The DAX managed to recover all of it’s losses from the quick sell off and price sees resistance at 11250. If price can break above that market participants will flock to buy the index. Selling into the rebounding bullish momentum needs better confirmation.

The DOW closed the week on a positive note but it is down in relation to the previous week and even below the 50 ema which crosses price in a slightly strange way not indicating enough confluence. If price remains above the 24400 or rejects it we’ll be looking for long exposure.

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