Major Currencies Overview
First up, here’s a rundown of how the major pairs performed in the past week:
The Greenback was once again the king of the hill as it was able to rake in more risk-off flows related to the COVID-19 outbreak.
Can the dollar continue to stand its ground? The Fed announced a surprise weekend rate cut while the central bank’s updated economic projections are still due on Wednesday. Read more.
The Loonie was bogged down by weaker crude oil prices earlier in the week but managed to recoup some losses as other counter currencies took a turn for the worse.
Canada’s manufacturing sales and CPI figures could be worth watching, but it’d be best to keep close tabs on OPEC commentary and major swings in overall sentiment. Read more.
EUR & CHF
The franc was able to outshine the euro in terms of its safe-haven appeal as the latter was dragged lower by ECB stimulus efforts and worsening headlines from Italy.
The SNB will be making its policy decision this week, and many believe that the central bank is under pressure to cut rates or intervene in the markets to keep franc gains in check. Read more.
A combination of downbeat U.K. data, a rate cut from the BOE, and Brexit-related concerns dragged sterling lower against most of its peers throughout the week.
Only the jobs report is up for release next, so it’s likely that the spotlight would stay on market sentiment based on COVID-19 updates. Read more.
Despite the surge in risk-off flows, the lower-yielding yen had quite a choppy ride as traders priced in the possibility of BOJ easing.
The central bank could follow in the footsteps of the Fed, BOE, ECB, and RBNZ when it comes to easing monetary policy, on top of the fiscal stimulus efforts already announced. Read more.
The Aussie was still at the very bottom of the forex pile as the Land Down Under could be the most badly-hit economy from this COVID-19 fallout. Oh, and did I mention that gold prices tanked, too?
Top-tier Chinese data is up for release early in the week and this should provide some clues on the damage to Australia, its top trading buddy. Employment data is up for release as well. Read more.
The Kiwi also closed out the week as a net loser while traders dumped higher-yielding commodity currencies as risk aversion extended its stay in the markets.
The RBNZ announced a surprise rate cut over the weekend before its actual scheduled policy decision. New Zealand’s quarterly GDP reading is also up for release soon. Read more.
Charts to Watch:
First up is this simple trend setup on the short-term chart of USD/JPY. The pair is starting to form an ascending channel on its 1-hour time frame and might be due for a dip to the bottom soon.
The handy-dandy Fib tool shows that this lines up with the 61.8% Fibonacci retracement level around 105.15, which also happens to be close to the dynamic support at the moving averages.
Price seems to have found support at the mid-channel area of interest, but stochastic seems to be suggesting that a larger pullback might be in the works.
Reversal alert! EUR/USD could be done with its slide as the pair forms a double bottom pattern on the 1-hour chart. Price has yet to test the neckline before confirming that an uptrend might follow.
The chart formation spans around 170 pips, so the resulting climb could be of at least the same size. However, the moving averages look ready to make a bearish crossover while stochastic is starting to turn south, so price could keep following suit.
Here’s one for the swing traders out there!Cable has formed lower highs and found support around the 1.2100 mark, creating a descending triangle on its daily time frame. Price is inching closer to testing the triangle bottom and might be due for a bounce off the floor.
Stochastic is heading south to signal that sellers have the upper hand, but the oscillator is closing in on the oversold region to reflect exhaustion. The 100 SMA is still below the 200 SMA, though, so there’s a chance that support could break.