By Furqan Fakar
Wait EUR/USD – MT is Sideways Volatile
Technical Overview: Price attempted a breakout, as expected, above the secondary resistance level at 1.2170 which subsequently failed. With price trading back within the area of consolidation, it is best to stay away from the currency pair until we have a clear picture on the overall market direction.
Fundamental Overview: The EUR gains at the early start of the week were supported by strong data out of Europe and broad USD weakness. However, with both the European Central Bank (ECB) and the Federal Reserves (FED) maintaining dovish monetary policy, the single currency failed to hold onto its gains and ended the week lower.
The ECB has continued to be accommodative, mentioning that “it still has some room to cut interest rates”. Fed Powell has also highlighted that the FED will keep rates low and print money as much as needed.
With both the ECB and the FED being dovish, it is best to stay out of the currency pair until we have a clear fundamental direction. The key highlights coming into next week will be ECB’s Christine Lagarde speech and the US Non-farm payroll.
Wait USD/JPY – MT is Bull Normal
Technical Overview: As the price is nearing our target level of 106.8, we will now wait for the market to break above and form support before continuing to buy the market. Any rejection of the key resistance level may invite sellers and the pair may retest the key support level of 104.2.
Fundamental Overview: With the rise of the US bond yields and continued overall weakness in the Yen, the pair has edged higher. The bull run may continue to be supported coming into the week ahead. Bank of Japan (BOJ) expected the consumer prices to remain negative and mentioned that the recovery in Japan will take longer.
My attention in the week ahead will be on the pandemic situation in Japan, and US non-farm payroll.
Wait GBP/USD – MT is Bull Volatile
Technical Overview: After reaching our target level of 1.42, it was strongly rejected. This is suggestive of a deeper pullback. It is best to wait for a new level of support to be formed to continue buying the pair.
Fundamental Overview: Continued optimism in the EU-UK trade deal boosted the pound at the start of the week. Despite an increase in the jobless rate, the market was unfazed with confirmation that there is no expectation of negative rates. Prime Minister Boris Johnson has also announced that the reopening of the economy will commence starting from March 8.
However, with the increase in the US bond yields, most of the gains made were lost and the pound ended the week lower. Coming into the week ahead, we are not expecting any key data out of the UK. The main driver for cable will be the data coming out from the US.
Wait AUD/USD – MT is Bull Volatile
Technical Overview: Price has reached our target level of 0.80 and was strongly rejected. With the current strong bearish momentum, it is best to wait for a level of support to be formed before continuing to buy the market. If the price continues to trade below the support level at 0.77, we can expect a deeper retracement and price to retest the level of support at 0.74.
Fundamental Overview: The gains for the AUD were capped due to the increase in US bond yields and the dovish remarks made by the Reserve Bank of Australia (RBA). The RBA mentioned that the currency appreciation is “Still a worry” and the RBA will be buying bonds.
Coming into the week ahead, we are anticipating the RBA to keep rates unchanged. Our attention will be on the statements made by the RBA. Any signs of dovish comments can potentially lead to a start of a bearish phase for the AUD.