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Greg’s Weekly Analysis W/C 8th April 2018

AUD/USD
Fundamentals: The RBA remained neutral on their latest monetary meeting and had adopted a firm wait and see approach without signalling what is next move could be. For 2 years rates have been stuck at 1.5 years and thought of a cut in the next 15 months would make investors sell the commodity currency despite it showing positive intent. Future RBA meeting and statements will be closely watched, however US side has been more relevant especially now with renewed political tension between US and China. There no sign of these tension to ease in the coming week all while the US is publishing inflation figures and minutes of the the March policy meeting.

Technicals: We knew that since the Aussie came down below the 0.77000 taking sells carries more risk due to the sell being overextended, taking sells remains feasible on a larger pullback. That said a different scenario is emerging on the higher timeframes which depending on how next weeks price action starts could be a bullish one. A clear daily and weekly higher low formation is not ruled out in which case the pair would see levels above the 0.7800.

EUR/USD
Fundamentals: The ECB minutes will be the highlight of the eurozone and is likely to provide reasonable volatility, again market participants will closely watch whether ECB Pres Mario Draghi will address the timing of the ECB’s exit from its stimulus and depending on the language used investor could interpret it as risk off if they don’t hear a hawkish enough statement and further cementing the reason for a growing eurozone. On Thursday German exports and trade numbers will be at the forefront of next week’s calendar.

Technicals: The Euro started out promising especially for the sellers and despite price tumbling to daily lows and even making a new daily and swing low, on the last day of the trading week buyers stepped in driving prices just above 1.22500. Shorting the pair remains feasible until price confirms and closes above the 1.23500 however given the current situation we could see some indecision and sideways action.

GBP/USD
Fundamentals: Rate hike expectations are seeing new possibility from the UK for the month of May and with probability for a Bank of England rate hike traders wasted no time to price it in giving new highs to the pair and holding onto the value 1.4000 prices. Manufacturing PMI suffered a slowdown this week however next week Manufacturing production could add to its month on month hawkish figures as well trade data could provide long opportunities on the pair. On the USD’s side we have to gauge whether the USD rally will further strengthen based on the FOMC and inflation numbers. The inflation number plays a key role in the FED’s tightening cycle and if improved investors could be more optimistic in the outlook keeping and taking the USD into a sustained upside reversal.

Technicals: The pound pulled back to the 1.400 and almost managed to re test the daily 50 ema. With this potential higher low formation on the daily timeframe buyers could target the 1.42500 which is the top of the range and resistance. If price closes above the 1.4300 the uptrend is sure to resume but if the resistance is acted upon another decline is bound to follow.

USD/CAD
Fundamentals: The Canadian Dollar strengthened while the NAFTA talks are still up in the air we can see that the US is becoming more protectionist by imposing tariffs on China, with this in mind Canada has its own fears of a trade war with the US. The Canadian economy added more than 15k jobs from the previous reading showing relatively strong labour market but the unemployment rate has been staying at the 5.8% higher than the USs 4.1% which despite expecting a improvement missed expectation. The only real positive data out of US was the average hourly earning which have improved by 0.2% but since it is a month on month reading sustainability will play a major role than 1 reading of the figure. Investor will see inflation as well as Fed minutes next week and if the FED is hawkish as well as inflation improves, the USD could leave the CAD in the dust as it rallies much the same as it did before the value pullback.

Technicals: The pair is pulling back to the desired value area of our expectations and this could be a great opportunity if price confirm bullish price action next week. Selling off further to the 1.26500 price level is not ruled out but we have to be mindful that the pair is trading at value and the pullback could reverse to a clear bullish higher low in which case targeting the highs of the 1.31500 on a longer term trade is feasible.

NZD/USD
Fundamentals: The NZD despite showing strength against the USD for a while and trying to hold its elevated levels it simply doesn’t have the fundamental support of the RBNZ to remain strong. Much like the RBA the RBNZ adopted a neutral stance towards adjusting monetary policy stating that any action will remain data dependent, that said investors largely believe that a rate hike will occur in the by the end of 2019. While the NZD as a commodity currency has a good chance to strengthen when risk on sentiment takes over it might have a hard time if the USD sees those improved inflation numbers, nonetheless finding opportunities with NZD through crosses rather than pairing it up with a potential rallying USD could yield better results.

Technicals: We expected the NZD to make a new low and break to the downside but it was quickly apparent that it won’t be the case on this occasion. Price action maintained the 0.7200 support level and rallied just above the 0.73000 only to be heavily rejected, with this price formation in mind, we are most likely looking at a sideways and ranging market, at least until price breaks and closes above the 0.73500 or breaks and closes below 0.72000.

USD/JPY
Fundamentals: Manufacturing and services PMI have decline in the Japanese economy in the last 2 months and market participants will show their concern if economic growth is not only slowing down but reversing. A few data point such as core measures and corporate goods prices will be published however the reaction is most likely to be muted and if the US doesn’t see an improved inflation number and hawkish FED minutes the pair is more likely to trade based on sentiment and depending on political developments could see safe haven flows.

Technicals: As hectic as it was in the last couple weeks the Yen is seeing the light and the of the tunnel with this weeks price action. Price rallied from the 106.00 just after forming a higher low and even formed a daily higher high. We do some resistance coming up around the 107.50 level but if buyers confirm further upside the reward is clearly visible as bulls would target the highs of the 108.500.

FTSE
As expected equities and stock worldwide have recovered a portion of their losses despite the trade war fears lurking in the background, that said this week saw the easing of tensions while the safe haven yen experienced outflows and stocks saw a rally. If the FTSE stays below the 7100 price level buyers will most likely step in to try and test for a new high.

DAX
In a similar manner the Eurozone is seeing a recovery with price confidently closing above the 12000 level once again and there is no reason to think the buyers would not want to test the highs at the 12500.

DOW
US stocks have seen a bit of turmoil with mainly Tech stock dragging down indexe due to missed earnings or the FB data breach scandal, a slightly stronger USDollar could see stock halt their higher highs. For now prices are above the 24000 level and if they stay there is a higher probability for an upside move than downside.

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