Wait EUR/USD – MT is Bear Normal.
Technical Overview: The longer-term bull market type is still intact. However, we have seen the price breaking below the secondary support level at 1.1712 which may signal a structural change. If the market remains below the secondary support level in the week ahead, a possible strategy would be to short the pair aiming for the previous key resistance level at 1.14
Fundamental Overview: With the rise in COVID- 19 cases throughout Europe, new lockdown restrictions have been imposed which may lead to a halt to the economic recovery in the region. Central Bank attention is on the appreciation of the EUR which puts downward pressure on prices. The ECB has also mentioned that inflation is way below ECB’s target which may signify further stimulus.
The recent strong sell-off was also fueled by strength in the dollar. Fed Powell has mentioned how the US economy has remained resilient and that the banking system has held up during the ongoing crisis. This has contributed to the risk aversion and the demand for the dollar. Worries about the return of severe lockdown restrictions in other regions have continued to boost the greenback’s status as the global reserve currency.
In the week ahead, attention will be on data coming out from EUR. Recent data has been lower than expected. Also, keep an eye on US GDP, and the presidential debate.
Wait USD/JPY – MT is Sideways Normal.
Technical Overview: After price broke below 105.0, the market quickly found support at 104.0. We can now expect a period of consolidation. Price remains below the descending trendline. A retest of which may push the market lower. Considering the strength of support in the 104-05 region it is best to wait for further evidence before continuing to short the pair.
Fundamental Overview: It is a battle of the safe-havens between the dollar and the Yen. At present, the dollar is more in demand. Though, in a risk-on environment, any possible disruption from the US election and various geo-political factors may quickly lead to a sell-off in the dollar and an increased demand in the Yen.
We can expect some escalation in the US- Sino trade tension as China will not approve the Tik-Tok – Oracle deal. US President Donald Trump continues to accuse China once again for the Covid-19 pandemic. My focus will be on the Presidential debate and any further escalation in tensions between the US and China.
Wait GBP/USD – MT is Bear Normal.
Technical Overview: We have seen the pair sell-off after reaching the key resistance level at 1.3402. Despite the strong sell-off, the longer-term bull market remains intact. Moving into the week ahead, I would like to see if the key level at 1.2603 will be able to provide the support. With 1.2603 being a support level, it will give buyers a good risk reward ratio aiming for the key resistance level at 1.3402.
Fundamental Overview: Brexit talks and Covid-19 cases have been the main market movers weighing on the Pound, on top of the returned strength in the dollar. UK’s Health Secretary Matt Hancock has mentioned that the last resort to mitigate the second wave of the coronavirus is to impose a nationwide lockdown. Though this has not been confirmed, with the case of Covid-19 continuing to be on the rise, the possibility of a lockdown still lingers.
There has been some progress in Brexit talks with EU chief negotiator Barnier determined to strike a Brexit deal. The UK is committed to a new free trade agreement with the EU and an exchange of tariff offers with the US. The market however was unfazed with the recent developments and is trading in a tighter range.
We have the Bank of England Haldane’s speech which may provide us with more conviction on the pound. As markets are more reactive to the Covid-19 situation at the moment, I will closely monitor the number of cases reported in the UK.
Wait AUD/USD. MT is Bear Normal.
Technical Overview: Price has failed to form a higher high and broke the ascending trendline suggesting a possible reversal in the market structure. As price is holding above the key support level at 0.7026, the bullish overall market structure is still intact. Considering the strength of the recent sell-off, it will be best to wait and see if the 0.70 level will provide support. A strong rejection on the key support level in the week ahead will provide buyers a good risk reward ratio aiming for the key resistance level at 0.74. The overall bull structure will be invalidated if the price breaks below 0.70.
Fundamental Overview: The recent AUD sell-off was triggered by the Reserve Bank of Australia’s (RBA) deputy governor Guy Debelle mentioning that “a weaker dollar would bode well for the Australian economy”. Weak retail sales data has contributed to the sell-off as it reflects a potential slowdown in Australia’s economy in the near future.
China’s demand for Iron-ore has eased during the country’s winter with slowing construction, which will weigh on the AUD. The US-Sino trade tensions escalation will also pressure the AUD. My attention will be on China’s manufacturing data, Australia Building Permit reading, and any further escalation on the US-Sino trade war coming into the weak ahead.
Steve Lucas is our head market analyst. He has been trading since the 80’s and sending out market analysis since 2007. He is trusted by major hedge funds and investment banks around the world to get the direction right. When you live and breath the markets like Steve does, you develop a “sixth sense” about the market. In Steve’s Corner, we get his view on what the highest probability trades will be.
This week, Steve’s favorite calls are EURUSD and USDCHF. Please see our signal report for more details.