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

Fundamentals: The Australian dollar weakened against the USDollar however the main reason for the weakness is not just the USD strengthening, as we could see that USD in fact moved sideways or even sold off throughout the week. The fact that the Australian currency weakened against an undecisive USD gives a picture of the AUD weakness which merely occurred due to the RBA Monetary policy meeting minutes which showed that the central bank is uncertain and not rushing into adjusting current rates, as well as the weakening employment numbers. On the other hand the FOMC raised interest rates once again and kept the dot plot at 3 rate hikes for the year, a hawkish move by any standards but due to the market pricing it in as well as the expectation of addressing 4 possible hikes kept the USD back and the DXY sold off instead of rallying. US and China Trade war fears pushed the USD further down and they might not fade right away next week. Consumer confidence and PCE inflation figures could easily reverse the USD to the upside giving way to new lows on the pair but data would have to improve considerable, if that’s not the case next week, the AUD could rally on the back of a weaker greenback.

Technicals: Since the 0.7900 resistance level held on strongly, the Australian dollar declined making daily new low just below the 0.7700. Looking at multiple timeframes the pair might’ve found some support but it isn’t string enough to be considered for a long opportunity just yet. If the pair manages to stay above the 0.7700 in the first 2 days of next week price action it could easily rally but if it breaks below that level then the sellers will further be in control.

Fundamentals: With not a lot of data coming out next week the EUR could at the mercy of the USD and could benefit as the tumbling USD gave way for small rallies on the pair. That said with no major figures to support it, the EUR could see the downside once again especially if the inflation figures out of the US improve and trade war fears fade. The eurozone economic sentiment release on Tuesday could move the euro but it is not expected by market participants to be a leading number. Flash CPI out of German however could provide a boost is the consumer price index improves from the current 1.2% to 1.6%.

Technicals: We had some high hopes for the EUR pair and despite day traders taking a couple short positions, the pair by no means confirmed a clear bearish signal that would’ve resulted in daily or weekly lows. Now that price is trying to find value it is inconclusive whether we head for a new low or new high judging by the week’s price action. We will look for the 1.2400 to provide resistance once more but if we see a break above that resistance level and trendline the odds will tilt towards the buyer’s side.

Fundamentals: The inflation figure on the UK economy tumbled from 3% down to 2.7% which is an indication that the BoE expectation of inflation peaking and heading lower therefore erasing the necessity for rate hikes was sound but the average hourly earnings posted an improvement of 0.1%, with these mixed data points we would think that the pound moved sideways, in fact it rallied to the political announcement of UK and EU reaching to an agreement about the transition deal and setting the date to the first quarter of 2019 for UK departure, after several months of indecision this provided some clarity to market participants but it might not last too long if more hurdles pop up along the way. Fourth quarter GDP growth figures will be released on Thursday, no change is expected however the included business spending is included in the in the report and investors will assess how well the UK economy is holding up in the midst of an upbeat BoE and Brexit uncertainty. If a surprise weak reading regarding business investment occurs, the sterling buyers might reverse their position.

Technicals: We were waiting for a high probability pullback to value before committing to allocate funds in favour of the pound. The pullback did occur but it was merely reflected on the intra-day timeframes, that said day traders jumped on the opportunity and since then we could see some consistent rallies after each intra-day pullback. The pair is approaching resistance at the 1.4200 – 1.42500 price area. If multiple timeframes will signal a sell off we could be seeing a sharp tumble in the price, however profit target will have to be tight as the 1.4000 could become support easily.

Fundamentals: After weakening significantly against the USD the Canadian dollar found some strength and pulled back with the hopes of finding value and while technical indicate further upside on the pair the fundamentals might disagree looking ahead. CPI m/m as well Core retail sales improved on the Canadian economy and the Median CPI y/y posted 2.1% from the previous 1.9%. Optimism regarding the renegotiation of NAFTA drove the CAD as well and next week on Thursday monthly GDP numbers will pave the way whether the pair will pull further back based on the positive GDP forecast. That said if the US PCE inflation and GDP numbers will further disappoint USD bulls while the CAD data improves there’s no telling how big the fall could be but the 1.26000 price level is not out of the question.

Technicals: The pullback on the CAD pair is long overdue and it looks like price had to rally to the highs of the 1.31000 price level before falling significantly. The ideal price from where we could contemplate buying the pair again is the 1.27000 with this in mind we have to look back and see how the pair is rarely giving us ideal or close to textbook signals so it is safe to say that if price rejects the lows with candle or price pattern formation anywhere between the 1.2800 and 1.2700 price range, we should be ready to take advantage of the opportunity.

Fundamentals: The NZDollar didn’t have a massive reaction to the RBNZ Rate Statement mainly because the central bank has been receiving muted attention in the midst of other central bank’s actions. The RBNZ held interest rates at record lows citing that it doesn’t look to raise them anytime soon as economic growth is losing momentum and inflation remains subdued below the banks 2% target. Inflation is expected to weaken further in the near term and monetary policy will remain accommodative for a considerable period with market participants not expecting a rate increase before end of 2019.

Technicals: The NZDollar is in midst of showing some clear price action after it gave mix signals in form of double bottoms as well as daily lower lows. By the end of the week price broke below the daily 50 ema after retracing from a new low, this is usually a powerful selling signal if the ema is rejected in with candle pattern formations. In this regard next week if price remains and rejects anywhere below the 0.73000 we’ll be looking for sell positions.

Fundamentals: The Japanese yen is heavily associated with safe haven characteristic and it was no different this week when the US Pres imposed tariffs on China with China responding and essentially triggering a trade war. Investor pulled their assets out of stocks and diversified for now in to the Japanese yen and commodities like gold. In the last couple weeks we could hear the BoJ reiterating that they are far off from tightening or even scaling back on their massive stimulus program, the statements were hoped to make an impact and weaken the yen but it did the opposite as the trading week commenced. Next week retail sales out of Japan are due out followed by unemployment rate which stands at 2.4% the lowest in nearly 3 decades but lacking wage growth and inflation is yet to show. Industrial production is out on Thursday and could provide volatility to the yen but political risk on and off sentiment is likely to prevail.

Technicals: The Yen pair was a difficult one to trade throughout the week and that is due to the clear signals that it gave which ultimately ended up failing. The 106.00 was established as support and price action even formed a daily inverse head and shoulders pattern which was then confirmed by intra-day higher highs. The price action is a great example that even when probability is high for one thing to happen sometimes the price will take the other side. Since the price pattern didn’t work out the pair fell massively only to find itself below the 105.00 forming daily and weekly lows. Since the downtrend is over extended there’s not much traders can do other than wait for support to be established or for a retraces that confirms a lower high for further sells.

Equity and stocks markets throughout the world fell from Thursday onwards due to trade war fears between the US and China and tech stock tumbled as they were led by the Facebook scandal in which more than 50 million accounts had their information given away without knowledge of the matter.

The Eurostocks alongside Asian once fell to new lows with increased volatility as capital outflows from investor prompted declines, finding support near these lows is certainly feasible but waiting for technical confirmation is a must.

The DOW and S&P quickly tumbled in this risk off environment and the DJI (DOW JONES INDUSTRIAL) fell to new daily lows, the 23500 is definitely and attractive support to look for in case price rejects the lows and reverses to the upside.

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