By Furqan Fakar
Wait EUR/USD – MT is Bear Normal
Technical Overview: Price is trading near resistance and is approaching a descending trendline. It is best to wait to see if the price can break above the descending trendline to continue higher towards 1.24 or if it will be rejected and trade lower towards 1.1712.
Fundamental Overview: Optimism in the Euro economy and falling US yield has fuelled the current bull run. However, the Eurozone is exposed to further economic risk as vaccine rollouts remain slow. Germany’s economic institute lowered the 2021 GDP growth forecast to 3.7% from 4.7%. Germany’s Chancellor Angela Merkel has also mentioned that lockdowns and curfew are necessary to break the third wave of the Pandemic.
Positive data out of the US, with retail sales beating estimates, signifies a strong recovery in the US economy. This may create demand for the dollar in the long run. US Bond yields and the ECB’s interest rate decision will be my main focus in the week ahead.
Wait USD/JPY – MT is Bull Normal
Technical Overview: The pair is now trading within the consolidation area. I will wait for a breakout above 109.20 to confirm the continuation of the bull market type.
Fundamental Overview: Japan is struggling to recover from the pandemic. The Bank of Japan’s Kuroda mentioned that “the pace of Japan’s economic recovery is likely to be modest as caution over the pandemic remains”. It is also expected that Japan’s core consumer prices will decline over time.
With the US’s stronger economic recovery, the recent bear run may be capped. In the week ahead, we are expecting weak CPI data coming out from Japan. This may lead to a rally in the dollar.
Wait GBP/USD – MT is Sideways Normal
Technical Overview: Price has failed to break below the minor support level. Considering this, with the market currently trading above the support level at 1.38 yet within an area of consolidation, it is best to wait for a breakout to confirm the overall trend.
Fundamental Overview: The Bank of England has announced that Chief Economist Haldane will step down after June’s meeting. Tensions with the Northern Ireland and Scottish elections will also weigh on the pound. With political uncertainty looming in the UK, this may lead to a strong sell-off capping the recent gains made due to the overall dollar weakness last week.
In the week ahead, my attention will be on the UK unemployment rate and CPI. Any data that misses estimates may lead to a sell-off,adding to the political uncertainty in the UK.
Wait AUD/USD – MT is Sideways Normal
Technical Overview: Price remains range-bound following the conclusion of a strong bull market. Will wait for the market to breakout for the area of consolidation to provide more confirmation of the overall market structure. A break below the key support level at 0.76 may signify a trend reversal.
Fundamental Overview: The appreciation of the AUD was supported by strong data from Australia with the employment rate beating estimates. Australia has been one of the countries that is recovering strongly from the pandemic.
With expected strength in the dollar and the AUD, the pair may continue to consolidate.. We have the RBA minutes in the week ahead that may provide us with more information on the direction of the pair.