By Furqan Fakar
Sell EUR/USD – MT is Bear Normal
Technical Overview: After the formation of a bearish doji and bearish engulfing candle at the secondary resistance level at 1.2170, the price has continued lower, forming a series of lower highs and lower lows. If price continues to trade below 1.20, we can expect the pair to continue lower towards the secondary support level at 1.1712.
Fundamental Overview: The recent bounce was fuelled by strong data out of the EU. However, the EU is struggling with the pandemic situation, which will continue to weigh on the single currency in the long run. The European Central Bank’s (ECB) Vasiliaukas mentioned that it is ‘Difficult to see the economy turning a corner before autumn”.
US President Biden has mentioned that he aims for the US to be Covid free by the 4th of July. Hopes for the reopening of the economy have created demand in the dollar, which is additionally supported by promising data coming out from the US. In the week ahead, my attention will be on the EUR group meeting and the US retail and Job data. Continued strong data coming out from the US will keep a lid on gains.
Buy USD/JPY – MT is Bull Normal
Technical Overview: Following a break above the key resistance level at 106.80, the pair is trading higher. Importantly, it has broken the monthly descending trendline. A support level has formed at 108.30. If price remains above this level, we can look to continue buying the pair towards our target of 111.00.
Fundamental Overview: Japan’s GDP was lower than expected signifying continued pressure from the pandemic. The Bank of Japan (BOJ) officials are concerned about the impact of a lower YEN and will monitor it closely.
My attention next week will be on Japan’s monetary policy statement and interest rate decision.
Wait GBP/USD – MT is Bull Normal
Technical Overview: The overall bull market remains intact with the pair trading above 1.38. I will wait for the market to break above 1.40 to continue buying the pair towards our target of 1.42. If the price fails to break above 1.40, this may be suggestive of a potential consolidation between 1.38 and 1.40, rather than a full blown reversal.
Fundamental Overview: There is increasing optimism in the UK economy. UK retail sales grew amid economic reopening. However, with the economy reopening and a potential increase in Covid cases, we may find that sentiment remains damp. There has also been a resurfacing of trade issues with regards to Brexit.
With the current strength in the dollar due to the increase in the US yields counterbalanced with optimism in the UK economy currently, we may see a phase of consolidation. Watch for the Bank of England’s interest rate decision where we are expecting the rates to remain put.
Wait AUD/USD – MT is Bull Normal
Technical Overview: Price failed to continue lower after a break below the support level at 0.77. Price action is suggestive of a potential consolidation phase and lacks a clear direction. Will stay away from the pair until we have enough conviction.
Fundamental Overview: Australian Prime Minister Morrison mentioned that “COVID-19 vaccination drive is on track to meet targets”. Additionally, Australia announced the start of local production of vaccines to begin by the end of the month. With Australia doing well in handling the pandemic, there could be an increased demand for the AUD.
However, gains could be capped by the relationship between the US and China. Any escalation of tension between the two countries will weigh on the AUD.