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Greg’s Weekly Analysis W/C 30th April 2018

AUD/USD
Fundamentals: The Australian dollar has weakened heavily against its US counterpart and the GDP numbers expected out of the Australia failed to come between the central bank’s target. With inflation at all time lows without any uptick we can be almost certain that the RBA policy will have no surprises and rates will remain the same. However, traders will react based on how the monetary statement addresses these numbers. If it’s upbeat the central bank will not be concerned, keeping it’s fairly positive outlook then we might have a rally. However, if they turn overly dovish the weakness has ways to go especially against a strong USD.

Technicals: The pair broke the path of least resistance/ support by simply plummeting through established support price as well as trendline that looked promising on several multiple timeframes including the weekly. With this shift in place and new weekly low formation, we need to be flexible to recognize the changing market condition into a downtrend reversal, from now onward, rebounds that are met with lower high formation will be viewed as possible shorting opportunities.

EUR/USD
Fundamentals: We will see a buyers week for the Euro due to Flash GDP figure releases as well as April inflation numbers. The narrative of a slow down has been a theme surrounding the Euro zone for the last 2-3 weeks and if these data points fail to prove it wrong the EUR is poised to fall further. From the USD side we will see a busy week with the FED’s decision. However, we expect no change and no statement at this point, but the Core PCE inflation number the FEDs preferred measure of inflation could see a pick up closing in on the 2% target. This would translate into clear strength as well positive or at least in line expectation from ISM manufacturing and PMI numbers.

Technicals: The Euro broke its narrow range to the downside and by weeks end prices were down below the 1.21000 with this downside reversal in mind a retest of the previous support, turning resistance will offer the best value selling price. We need to wait for price action confirmation around that area before deciding to scale into the Euro on a larger scale.

GBP/USD
Fundamentals: With inflation clearly peaking and slowing down as well as poor GDP figures, it is no surprise to see the pound weaken from its highs. Manufacturing, construction and services PMIs will be out next week and they could temporarily strengthen the single currency but ultimately we would be looking for further weakness in line with the USD rebound, despite PMI numbers having the potential to lift the pound. If the USD remains bid based on the NFP jobs numbers as well as the FED meeting who are keeping their positive narrative, the pair will only incur a lift that will be viewed as a better price to sell from.

Technicals: The pound sold off heavily as well and, unfortunately, despite waiting for a lower high formation of the 1.4100 for sells, price never touched the retesting area as it continued lower. The current 1.3800 could provide temporary support but we should only view the support as a means to spot a rebound which we can sell from. Any price rejection at or below the 1.4100 will keep the downside momentum running.

USD/CAD
Fundamentals: We could see the Canadian Dollar weaken due to the USD being bid. That said, we might get a temporary strength from the CAD in case GDP numbers next week show expansion as well as trade figures and Ivey PMI numbers if posting better than expected data. It could increase the expectation of a rate hike from the CAD Central Bank, with this in mind we would have 2 strong currencies and central banks that are tightening monetary policy and a range emerging on the pair can not be ruled out. However, if there’s any hint from the BoC that despite positive data the bank is not looking to tighten further, the US and the FED would take over to drive prices almost immediately.

Technicals: The Canadian pair extended on its gains and rallied ahead despite hitting resistance, the 1.29000 price level seems to have stopped price for now and if sellers agree on this target as well as possible profit taking area before the next leg up, we could see a sharp decline to value from which we would take advantage by going long as soon as confirmation aligns.

NZD/USD
Fundamentals: Similar to its bigger cousin the pair massively sold off and sellers will be looking at next week’s job figures to decide whether the NZD should have a temporary rebound. Even if we get positive numbers, it will merely serve as a short term rebound before the pair will turn bearish aiming for further new lows.

Technicals: The NZD accelerated heavily to the downside and despite no pullbacks the pair was attractive for sellers who, due to the over extended price action, will look to take some profit initiating a lower high on multiple timeframe which if it provides enough value, will fuel the current bearish sell off and reversal.

USD/JPY
Fundamentals: The much awaited divergence between the 2 central banks is starting to get more and more clear and market participants seem to have traded the last 2 weeks in line with fundamental data and Central bank stance. The BoJ statement from Gov Kuroda didn’t offer anything new, if anything it could easily weaken the JPY if the central bank decided to abandon or adjust their inflation target, seeing as inflation stubbornly remains at lows. At the same time a tightening FED as well possibly positive PCE inflation data as well as NFP report could easily over extend the current rally and any slight pullbacks should be viewed as better price to position for the long side.

Technicals: Despite no evident price action formations or even confirmation the pair quietly rallied in the background after it cleared the 107.00 price level along with the 50 EMA, moving forward the only thing we can wait for is a higher low formation to take advantage of the possible highs that buyers want to achieve, possibly driving prices to the 112.300 level.

FTSE
Equities and stocks have seen inverse correlation depending on whether their home currency is affected and on what scale regarding the 10 YR Treasury Yield Curve which rallied to a 3% high as well the USD. That said the FTSE rallied to some serious new highs on the back of a weak GBP and despite anticipating further highs the current run might end up in a bit of a profit taking before we head onto the 7600 price level.

DAX
The DAX on the other hand has an odd behaviour given that the weak EUR didn’t really manage to lift the index to clear new highs, resistance is visible from the 12600 level but it shouldn’t be strong enough to reverse prices to the downside. Until we remain above the 12400 joining buyers is the plan.

DOW
The DOW sold off just slightly to reject the 2400 price level and considering the USD index breakout and new high formation, we can see the index being quite resilient to it despite showing us the inverse correlation between the two. If the 23500 prices are here to stay to provide support we can plan for buy positions.

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