By Furqan Fakar
Sell EUR/USD – MT is Bear Normal
Technical Overview: Price continues lower as expected towards our potential area of target at 1.1712. As the price is approaching our target level, it is best to wait for the price to break below that level before continuing selling the market.
Fundamental Overview: With the market primarily focusing on the pandemic situation, despite seeing upbeat data coming from the EU compared to the US, the EUR remains under significant bearish pressure. Slower vaccination progress on the EU continent and fresh lockdown precautions due to a third Covid-19 wave will continue to weigh on the single currency.
The US has been handling the pandemic better and the Federal Reserve remains accommodative.
In the week ahead, my attention will be on the pandemic situation in Europe and key data coming out from the US with the ADP employment and NFP being in the limelight.
Buy USD/JPY – MT is Bull Normal
Technical Overview: Our buy bias overview remains intact with price breaking out of the consolidation area. With price trading above 109.20, we will continue to buy the market towards our target of 111.0.
Fundamental Overview: Supported by rising bond yields and better than expected US initial jobless claim, the dollar resumes the bullish run. The FED’s more forceful policy support and a productive roll-out of the Covid-19 vaccinations, has created a higher demand for the greenback.
We are expecting some key data out of both the US and Japan. I will be focusing on Japan’s unemployment rate. Should the unemployment numbers come in weak, we can expect continued pressure on the yen.
Sell GBP/USD – MT is Bear Normal
Technical Overview: With the price breaking below our support level at 1.38, I will be looking to short the pair. I Will wait for a rejection at 1.38 to sell the market towards the key support level at 1.34 with a good risk-reward ratio.
Fundamental Overview: There has been mixed data coming out from the UK last week. Despite a strong UK CBI manufacturing order book balance and a drop in jobless rate in the UK, the pound ended the week lower.
There has been no progress in the vaccine rollout in the UK. With the market currently focused on the pandemic situation, this may weigh on the pound in the long run.
We are expecting the release of the UK GDP in the week ahead. If the GDP falls below estimates, we will expect the pound to continue trading lower.
Wait AUD/USD – MT is Sideways Normal
Technical Overview: Price broke below 0.77 but was capped by a minor support level at 0.7583. The formation of a morning star candlestick pattern, is suggestive of a bounce. It is best to wait for more conviction before selling.
Fundamental Overview: Trade tensions and renewed covid fears in Australia may lead to a weak AUD in the long run. Treasury Secretary Steven Kennedy has also warned of a possible spike in Australia’s unemployment rate.
Australian Ambassador to China has mentioned that “Beijing is a quite unreliable and vindictive trading partner”. Following the comment, China is set to impose anti-dumping measures on Australian wine imports. China has also failed to sustain the US trade deal and has only bought a third of US goods specified in the terms. With trade tensions looming, this may also weigh on the AUD. We are watching the AUD retail sales and trade balance data. However, my attention will be on any escalations of trade tensions between the countries.