Buy EUR/USD – MT is Bull Normal
Technical Overview: A spinning top has formed in an attempt to break the secondary resistance level at 1.2170. With the market being indecisive, it is best to wait for a breakout above 1.2170 to continue buying the pair targeting 1.24. Should price reject the secondary resistance level, and start trading below 1.2070, it may signify a start of a long term bearish structure.
Fundamental Overview: Gains in the Euro last week was primarily due to the strong ZEW surveys beating estimates. Investors are more confident in the Euro recovery from the pandemic and have created demand in the single currency. The European Central Bank (ECB) has left the interest rate unchanged. However, President Christine Lagarde mentioned that the Euro appreciation can be a drag on inflation and may lead to traders shorting the EUR.
Strong data has also been recorded in the US but the dollar remains weak overall. This signifies the continuation of weakness in the dollar.
Coming into the week ahead, my attention will be on newly elected US President Joe Biden’s decisions to tackle the pandemic, the FOMC, and the GDP readings for both the US and the EURO. Should the Federal Reserve be dovish on their monetary policy and a strong reading of the EURO GDP recorded, this will send the EURUSD higher.
Wait USD/JPY – MT is Bear Normal
Technical Overview: The Bear Normal market type remains intact as the price continues to trade below the descending trendline. However, with the upper and lower Bollinger bands being flat, it might signify a potential consolidation phase. It will be best to wait for a rejection from the descending trendline to continue to sell the market. If the price breaks above the key support level at 104.20, it will be an early sign of a trend reversal and the price may continue up to the key resistance level at 106.80.
Fundamental Overview: Covid-19 cases continue to rise even, with Japan declaring a state of emergency. The Bank Of Japan (BOJ) has kept rates unchanged at -0.1%. The BOJ will be “willing to take additional easing steps without hesitation as needed” as the uncertainty in the economy continues to loom. Governor Haruhiko Kuroda also said that it’s too early to consider an exit from powerful monetary stimulus.
To have more conviction on the direction of the safe haven currency pair, my focus will be on the BOJ Monetary Policy meeting minutes, Japan Retail trade data, and also the unemployment rate. With BOJ being very accommodative, any data that comes out weak may spur the BOJ to take further actions that will strongly weigh on the JPY.
Wait Buy GBP/USD – MT is Bull Normal
Technical Overview: Price continues to make a series of higher highs and higher lows as the market trades above the key resistance level of 1.34. However, as we are approaching our target level of 1.38, we can expect a deeper retracement. It is best to wait for the price to break above 1.38 to continue buying the market with a good risk-reward ratio with 1.38 being the level of support.
Fundamental Overview: Mixed data out of the UK has capped gains in the pound. The UK will continue to be under lockdown and tighter travel restrictions have been imposed to mitigate the pandemic. Despite the lockdown, the pound remains resilient to any hard sell-off. There have been talks of a possibility for the Bank of England to cut rates.
With regards to Brexit talks, the EU seeks an extension to the deadline by which the free trade agreement with the UK must be ratified. Any breakdown of trade talks between the EU and the UK may start to weigh on the pound.
The UK unemployment rate and the FED’s interest rate decision will be under the limelight in the week ahead. With the UK expecting to remain in a lockdown, weak unemployment data will easily weigh on the pound.
Buy AUD/USD – MT is Bull Normal
Technical Overview: A bullish corrective flag has been formed after fulfilling our target of 0.77. I will be waiting for the price to break above the flag before continuing to buy the market. If the price breaks below 0.77 and remains trading below that level, it will signify a reversal of the current bull trend and will invalidate the bullish corrective flag structure.
Fundamental Overview: Despite Australia’s unemployment data beating estimates, the market was unfazed. With developments of the economic recovery slowing down due to the pandemic situation, the Reserve bank of Australia remains accommodative in its monetary policy. Trade tensions between Australia and China continue to loom into this New Year and will affect Australia’s exports.
We are expecting key data to be released out of Australia. Any consistent weak data recorded will spur the RBA to take further action weighing on the AUD.