Greg’s Weekly Analysis W/C 26th February 2018

AUDUSD:
Fundamentals: The Australian monetary policy meeting did not offer anything ground breaking as the RBA policy makers agreed on the same outlook as previously . The cash rate was left at 1.5% citing housing risk while having good unemployment rate with lacking inflation along with favouring a lower exchange rate due to exports mainly with china. The FED minutes showed that policy makers remain bullish and 3 rate hikes are on track for this year with March being the first live meeting. The USD rallied dragging down major G10 currencies. Next week the ISM PMIs will be closely watched by market participants along with Fed Chair Powell testifying however we don’t expect this to rattle the USD too much and derail it’s upside course.

Technicals: As anticipated the scenario f a daily lower high formation and further decline occurred on the pair. With price being below the 50 ema and the 0.79000 becoming the 50% resistance level if price remains below these levels we can further sell the pair expecting a new daily low.

EURUSD:
Fundamentals: Manufacturing and Services PMI numbers showed a decline for the first time in week in the eurozone, this payed into the current weakness of the euro along with a rebounding USD. With inflation out of the eurozone trending lower the flash inflation data will the focus along with ECB Pres Draghi’s speech. The ECB is not likely to hint or address an end to its stimulus program due to the weakening inflation numbers. Thursdays unemployment rate will be released as well but if inflation expectations remain muted there’s nothing to keep the euro at the current high levels.

Technicals: The double bottom confirmed on the pair and the 1.2500 along with the long term higher timeframe trendline confirmed price action for a tumble. Prices stand at the 1.2300 level and if they remain below the 1.24000 forming daily lower highs we can expect further sell offs.

GBPUSD:
Fundamentals: Average hourly index held onto its 2.5% in the UK which tells a positive story along with inflation being above the BoE 2% target, this in effect strengthens investor expectation for a possible rate hike from the BoE and even a rate hike path if inflation shoots further ahead possibly making the pound the 2nd strongest currency fundamentally after the USD. Risks regarding Brexit are alive but if the focus remains on the performance of the economy the pound could rally against stronger counterparts, against the USD it might have a hard time if the DXY keeps its strength. Other than the UK manufacturing and construction PMI releases. PM May will outline a way forward for Brexit in her speech which could have short term effect on the GBP.

Technicals: With prices below the 1.4000 bearish price action seemed imminent however seller ran out of stem quite fast and by the end of the week a higher low emerge on multiple timeframes trying to break above the 1.4000 resistance, whether this occurs or not it’s difficult to anticipate but selling the pair will not be feasible until price closes be low the 1.3900.

USDCAD:
Fundamentals: The Canadian dollar has been weakening mainly due to the economic growth slowdown in the final quarter of 2017, that said interest rate outlook could still be on the upside if fourth quarter GDP improves beyond the consensus which put the loonie on the rallying side, a weak reading will most likely make the single currency weak especially in correlation with a rebounding USD.

Technicals: The CAD sold off or much of the week and the 1.25000 support was holding and even went on to rally before the 1.27000 resistance was rejected by the end of the week. Going long will remain feasible until price is above the 1.2500. We could see a decline based on the rejection however it bears greater risk due to going against the bullish momentum.

NZDUSD:
Fundamentals: Monthly trade number will be out from the New Zealand next week however the more important figure investors will wait for are the fourth quarter GDP performance data, if improvement is shown we could have a strong NZD that fights the USD resulting mostly in a range at the top. If figures don’t show improvement than the USD will take over.

Technicals: With the USD rallying the NZ Dollar tumbled as well despite making a slight new high at the 0.74000 price level. If the bearish price action continues in the form of 4H and 1H lower highs we can sell on retraces targeting new lower lows.

USDJPY:
Fundamentals: Plenty of data points out from Japan next week including the retail sales numbers on Wednesday which are expected to record a 2.1% growth. Capital expenditure will be out and closely watched as well since it is a major component of GDP calculations. The BOJ will monitor the unemployment numbers as well due to the countries labour shortage to gauge wage earnings. Depending on how these impact the Japanese Yen in relation to a the USD we could see increased volatility.

Technicals: Much the rest of the G10 currencies the Yen sold off against the USD but it was quickly stopped in its rallying momentum when bears took control just below the 108.00. With price closing with a possible higher low formation on the daily but also confirming a lower high due to the sell off, it makes it difficult to decipher where the pair is going to end up next, for this reason adopting a wait and see mode is a must, the clue what we want to see is if price makes it above the 107.00 and closes on multiple timeframes, if that happens buyers will flock to the pair.

FTSE:
After having a bit of a ranging price action and not clearly breaking above for a new high the FTSE was on track for gains as the market closed, this means that there is a high chance we’ll see the upside on market open and buying the index remains feasible.

DAX:
Very similar price action on the DAX however the index managed to form and reach a new daily high by the end of the week which points us to bullish rally and momentum waiting to happen, any pullback on intra-day should be considered on opportunity to buy as long as it confirms with a higher low and candle pattern.

DOW:
The DOW was on track for a weekly and daily high as equity markets have recovered with reasonable pace, with the index price being above the 25000 buyers will look for clue to continue to recovery up to the highs.

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