A look at the FX majors and what’s moving markets
The markets are still feeling the effects of the Corona virus and volatility is high.
Background
The markets are still feeling the effects of the Corona virus and volatility is high. Stocks have made a tentative recovery from their multi year lows. This would normally result JPY and CHF being weak as they hold their safe haven status. This has not been the case and we continue to see buying in those currencies. Will correlation come back in?
However, the USD is now being sold into in what could be a sustained moved to the downside. The USD basket (DXY) is currently trading at 99.50. Support is not seen until 97.70.
A lot to look out for this week with Central Bank meetings, unemployment and one eye still firmly fixed on oil.
Looking forward
29th April:
Australian CPI (Consumer Price Index). Exp. +0.2% QoQ. Higher than expected should be bullish for the Australian dollar.
US GDP (Gross Domestic Product) QoQ Exp. -4.0%. Better than expected should be bullish for the US dollar.
Crude Oil inventories. Exp +10.600M. Higher than expected normally results in weaker oil and a weaker Canadian dollar.
FOMC Statement. FED Interest rate decision and press conference. Much anticipated economic release. Traders look to gauge the direction of the USD.
30th April:
German unemployment. Exp. 76K.
Eurozone CPI (Consumer Price Index). Exp. +0.1% YoY. Higher than expected should be bullish for the Euro.
ECB interest rate decision and policy statement. Much anticipated economic release. Traders look to gauge the direction of the Euro.
US Initial Jobless Claims: Expecting 3500k Last 4427. Much watched economic release gauging US employment.
Canadian GDP (Gross Domestic Product) MoM Exp. 0.1%. Better than expected should be bullish for the Canadian dollar.
1st May:
Labour Day.
UK Manufacturing PMI for April: Exp 32.8. A gauge of the heath of UK manufacturing. Better than expected is normally bullish for GBP.
US ISM Manufacturing. For April: Exp 36.9. A gauge of the heath of US manufacturing. Better than expected is normally bullish for USD.
EUR/USD price analysis
Market highlights from the past week
22nd April: The dollar was mixed with limited net gains as the Euro lost ground with EUR/USD near 1.0800 before a slight recovery.
23rd April: The Euro briefly gained ground on hopes of a very substantial Eurogroup fiscal support deal, but then faded again with EUR/USD below 1.0800.
24th April: The Euro remained on the defensive for most of Friday amid a lack of confidence in the outlook with a firm dollar tone. EUR/USD dipped to 4-week lows near 1.0720.
27th April: The Euro was unable to make further headway as the US currency recovered slightly and EUR/USD settled just above 1.0800.
Weekly: Mixed trading for the last 6 weeks. Last week’s candle could be considered as a bullish Hammer formation offering a mild bullish bias.
Daily: A full AB=CD formation target was located at 1.0718. The 78.6% pullback level of the 1.0636-1.1148 move is located at 1.0745. The whole move lower from 1.1147 was mixed and volatile, common in corrective formations. Buyers emerged at 1.0727 and posted a bullish Engulfing Candle, positive for sentiment.
Elliott wave enthusiasts might consider the pair to now be in the 3rd wave to the upside. If that is the case, then we look to focus on new 2020 highs. The 261.8% extension is seen at 1.2000.
Support: 1.0830, 1.0745 and 1.0718
Resistance: 1.0947, 1.1483 and 1.2000
GBP/USD price analysis
Market highlights from the past week
22nd April: There was little impact from the latest inflation data with the core CPI rate at 1.6% from 1.7% previously and in line with consensus forecasts.
23rd April: Sterling was initially resilient despite the weak PMI data, although it was unable to hold its best levels amid fundamental concerns.
24th April: Sterling was resilient on Friday despite negative comments from EU chief negotiator Barnier with solid risk appetite supportive.
27th April: Sterling failed to hold its best levels and there were fears that lockdown easing would be delayed, but was broadly resilient.
Weekly: Mixed trading for the last 4 weeks. The RSI (relative strength index) is close to 50 highlighting that we are non-trending. Resistance is located at 1.2562.
Daily: 5 positive days in succession. Possibly forming a bearish Head and Shoulders pattern. The 78.6% pullback form the 1.2647-1.2247 move is located at 1.2562.
Support: 1.2410, 1.2296 trend line support or neckline, 1.1885 projected measured move.
Resistance: 1.2562 78.6% pullback o the 1.2647-1.2247 move, 1.2749 and 1.2781.
USD/CHF price analysis
Market highlights from the past week
22nd April: A steadier tone surrounding risk appetite helped curb defensive Swiss franc demand during Wednesday.
23rd April: Comments from German Chancellor Merkel helped lift the Euro in US trading on Thursday with EUR/CHF advancing to the 1.0530 area.
24th April: USD/CHF hit marginal 4-week highs at the 0.9800 level before a retreat to the 0.9730 area as the US currency lost ground 27th April.
27th April: The latest National Bank weekly data recorded an increase in sight deposits to CHF650.7bn from CHF637.2bn the previous week, the largest weekly increase since January 2015 when the central bank abandoned the Euro peg.
Weekly: We have posted Inside Soldiers for the last 4 weeks. This highlight investor indecision.
Daily: Rallies into the 0.9800 area continue to find sellers. This could be seen as a Double Top formation. A move below 0.9710 would confirm this. The base of the channel is seen at 0.9410
Support: 0.9705, 0.9592 swing low, 0.9410 channel base.
Resistance: 0.9800, 0.9901 and 1.0000
What is your sentiment on EUR/JPY?
USD/JPY price analysis
Market highlights from the past week
22nd April: According to source reports the Bank of Japan is likely to ease monetary policy next week, although the overall market impact was limited.
23rd April: According to source reports, the Bank of Japan will consider suspending any upper limit to bond buying at next week’s policy meeting.
24th April: The Bank of Japan announced it will buy corporate bonds, but the yen was resilient with USD/JPY.
27th April: Risk appetite held firm on Monday amid hopes that countries were making progress towards easing lockdown measures.
Weekly: Continued downward moment form 109.39. Previous support of 107.69 has now been clearly broken.
Daily: A full AB=CD formation takes the pair down to 105.63. This is close to the 61.8% pullback level of 105.20 (from the 101.18-111.72 move).
Support: 106.45 50% pullback, 105.62 and 105.20.
Resistance: 107.62, 108.18 and 108.51.
USD/CAD price analysis
Market highlights from the past week
22nd April: The Bank of Canada is expecting the headline rate to decline to zero in the short term
23rd April: Commodity currencies made net gains as risk appetite improved before drifting lower on Friday amid a firmer US dollar.
24th April: The Canadian dollar was unable to take advantage of a firmer tone in oil prices with USD/CAD recovering to 1.4100 after earlier lows near 1.4020.
27th April: Oil prices remained under pressure with sharp losses, hampering the Canadian dollar.
Weekly: Choppy trading for the last 5 weeks. All price action has been confined to the week 16th March range. These candles are known as Inside Bars and highlight indecision.
Daily: Moving lower within a bearish Chanel formation. Trend line support is located at 1.3532. The 61.8% pullback level sits inside there at 1.3607 (from the 1.2952-1.4667 move).
Resistance: 1.4154 channel top, 1.4350 and 1.4667.
Support: 1.3810 50% pullback, 1.3773 and 1.3607.
AUD/USD price analysis
Market highlights from the past week
22nd April: The Australian PMI manufacturing index edged lower for April with the services sector declining extremely sharply to a record low of 19.6 from 38.5 previously.
23rd April: Commodity currencies made net gains as risk appetite improved before drifting lower on Friday amid a firmer US dollar.
24th April: The Australian dollar remained on the defensive for much of Friday with AUD/USD retreating to below 0.6350.
27th April: The Australian dollar made net gains despite fading from its best levels.
Weekly: Making a strong recovery from the 0.5506 base. Resistance is seen at 0.6775.
Daily: Looks to be forming an Ending wedge pattern but with plenty of scope for a further move to the upside. We have a 78.6% pullback level located at 0.6705. A full AB=CD pattern is seen at 0.6680.
Support: 0.6385 higher low, 0.6213 and 0.5506.
Resistance: 0.6639 higher highs, 0.6705 and 0.6775.
EUR/GBP price analysis
Market highlights from the past week
22nd April: Overall confidence in the Euro remained fragile, especially with the ECB under pressure to increase bond buying in order to alleviate upward pressure on Italian bond yields.
23rd April: Sterling was initially resilient despite the weak PMI data, although it was unable to hold its best levels amid fundamental concerns.
24th April: Sterling was resilient on Friday despite negative comments from EU chief negotiator Barnier with solid risk appetite supportive.
27th April: Sterling failed to hold its best levels and there were fears that lockdown easing would be delayed, but was broadly resilient.
Weekly: Last week’s bullish price action resulted in breaking the sequence of 4 negative weeks. Previous resistance at 0.8682 (from week 22nd April) becomes support.
Daily: Possibly forming a Double Bottom pattern. A break of the swing high at 0.8863 is needed to confirm. The measured move target would then be 0.9044.
Resistance: 0.8857, 0.8863 and 0.9044.
Support: 0.8710, 0.8680 and 0.8600.
EUR/JPY price analysis
Market highlights from the past week
22nd April: Japan’s flash manufacturing PMI index retreated slightly to 43.7 from 44.8 the previous month while the services-sector index declined to a fresh record low of 22.8 from 33.8 previously
23rd April: The Federal Reserve confirmed that it will announce increased access to the pay check protection program liquidity facility and the House of Representatives passed the latest $484bn economic support package
24th April: CFTC data registered a further increase in long yen positions, limiting the scope for further Japanese currency gains, especially if risk appetite holds firm 27th April:
27th April: Global equities made further headway, although there was a slightly more cautious tone in Asia on Tuesday
Weekly: Previous support is located at 115.86. Dips below here continue to attract buyers.
Daily: Choppy and mixed trading. All wave formations to the downside can be seen in three waves. This normally highlights that the move is corrective. The trend of lower highs is seen at 116.44. A break is needed to turn the cross mildly bullish.
Resistance: 116.95, 118.47 and 120.87
Support: 115.86, 114.85 swing low, 114.00
FURTHER READING: AUD/JPY Price Analysis: The wedge formation offers a downward bias
FURTHER READING: AUD/USD Price Analysis: Completes an AB-CD formation
