In this webinar, we used price action to look at macro markets ahead of a slew of Central Bank rate decisions. Tomorrow brings the Bank of Canada, and Thursday has the ECB earlier in the day followed by the Bank of Japan later that night. Friday brings Non-Farm Payrolls, and we looked around the US Dollar to focus-in on setups in EUR/USD, USD/JPY and the like.
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Dollar Bears Come Back to Break DXY Below 90.00
The Thursday-turnaround in the US Dollar has largely reversed last week’s strength, and price action in USD appears to be trying to find some support around 89.50. This is near last week’s swing low as well as the 50% retracement over the bullish move that showed-up in the second half of February to run into last week’s high. The next big USD-driver is Non-Farm Payrolls on Friday, so there are some other items to sort through before we can begin planning around US-related drivers. We spent a few minutes discussing the likely reason for this persistent weakness, tying this theme of a weak US Dollar along with the continued rise in Treasury Yields.
S&P Stuck in the Middle
The S&P 500 remains supported; but we’re at an interesting juncture between the 50% and 61.8% retracements of last week’s bearish move that showed Tuesday-Thursday. This bearish move developed on the back of new Fed Chair Jerome Powell’s first day of testimony; and that weakness has been largely erased by strong outings on Friday and yesterday. But – this does keep the door open for resistance around 2750; and if we get a concerted topside break, the bid is back in US stocks and the door is opened for a retest of last week’s wing high at 2788.
USD/JPY Tip-Toeing Below Symmetrical Wedge
We’ve been following the Yen a bit closer this year as a tonality change has started to show in the currency. While Yen-weakness was a previously reliable theme as we came into 2018 - that has started to come into question as Yen strength has been fairly persistent. This is likely coming from a continued rise in inflation, as December and January both produced 33 and 34-month highs, respectively. The BoJ meets later this week, set to announce their rate decision on Thursday night/Friday morning; but what might they be able to say to pacify investors that the BoJ will continue with ‘pedal to the floor’ levels of liquidity, even as inflation fast-approaches their own 2% target.
This can keep the door open to Yen-strength strategies in the near-term.
USD/CAD Tests 1.3000 Ahead of the Bank of Canada
Tomorrow also produces a Bank of Canada rate decision, and of late the Canadian Dollar has been extremely weak. Yesterday produced the first test of the 1.3000 psychological level since July of last year. The pair has pulled back since that level has come into play, but the more operative stance here appears to be to let CAD strengthen so that USD/CAD may pull back to set some higher-low support. This would allow that 1.3000 level to be re-purposed as a topside target on bullish resumption plays.
EUR/JPY for Yen-Strength Scenarios
We looked at a potential setup in EUR/JPY for short-side continuation strategies. The pair worked-down to a fresh low just last week, and after turn-around Thursday, a retracement has started to develop. We saw the Fib level that had previously helped to set support around 132.05 come-in as resistance earlier this morning. Bears haven’t yet been able to turn the tide, but we looked at a couple of different ways to work with the short-side of EUR/JPY.
GBP/USD Starting to Clear Up a Bit
The support zone we were looking for last week did not find any actual support, thereby nullifying bullish stances. Prices worked down to a fresh near-term low, and at this stage, it appears as though we’re waiting for the next lower-high. We looked at two possible areas for this to print below that prior point of resistance around 1.4000.
AUD/USD for USD-Strength Scenarios
The pair put in a bearish move last week, and we looked at a couple of areas that could be interesting for short-side continuation; around .7850 and .7900, respectively.
NZD/USD Look for .7335
We’ve been following the price of .7335 on the pair as this level has had a tendency to help produce resistance on longer-term charts. This is the 38.2% retracement of the 2009-2011 major move in the pair.
To read more:
Are you looking for longer-term analysis on the Euro, the British Pound or the U.S. Dollar? Our DailyFX Forecasts for Q1 have a section for each major currency, and we also offer a plethora of resources on our EUR/USD, GBP/USD, USD/JPY, AUD/USD and U.S. Dollar pages. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.
--- Written by James Stanley, Strategist for DailyFX.com
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