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What a volatile week! Currencies were just all over the place! One day, higher-yielding currencies were up on risk appetite. Then on the next, they suddenly drop like rocks due to risk aversion. Grrr!

Fundamental Picture

Looking back, there wasn’t really a unifying theme in last week’s trading. Talks of a potential ECB rate cut sent the euro spiraling down the charts, but it seemed as though it had been quickly forgotten after Spain announced a positive bond auction.

Meanwhile, weak corporate earnings, abysmal unemployment claims data, a drop in equities, and disappointing Chinese GDP figures also sparked risk aversion a bit and allowed the dollar to trade higher.

Looking ahead, there are a few top-tier reports due to be released from the U.S. this week. I have a feeling that their outcomes will greatly affect the performance of the major currency pairs. To name a few, the U.S. existing home sales, new home sales, durable goods, and the advance U.S. GDP report are on the docket.

In my opinion, disappointing figures could spell trouble for the dollar as they could give the Fed one more reason to keep monetary policy loose for an extended period of time. But they could also turn out to be a blessing in disguise and spark risk aversion and boost the currency.

Regardless, I’ll keep a close eye on them in the coming trading days!

Potential Trades

GBP/USD: Bearish

GBP/USD 1-hour Chart

On the hourly chart, it is apparent that GBP/USD has been making lower highs. I’m anticipating this downtrend to continue and my bet is that the pair could find some resistance around the 50%-61.8% Fibonacci retracement levels and the SMAs before trading lower. It might be a good idea to keep our eyes peeled for reversal candlesticks before jumping in on a short thought.

EUR/USD: Bearish

EUR/USD 1-hour Chart

My view on EUR/USD is similar. I think the pair is headed downwards but I’m having a difficult time pinpointing an entry. Perhaps I’ll wait for price action to develop further before determining a limit short order.

That’s it for my pre-week analysis! I hope ya’ll got something out of it.



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