Pairs in Focus This Week – EUR/USD, GBP/USD, USD/JPY, AUD/USD, Gold, USD/CAD, AUD/JPY, USD/CHF
The EUR/USD has gone back and forth during the trading week, as we continue to test the 50-Week EMA. At this point, it looks like there’s a lot of choppiness and indecision, and I think that continues to be the case going forward. If we break down below the last couple of weeks, then it’s possible that we could go down to the 1.03 level. After that, then the market could go looking to the parity level, which obviously would attract a lot of attention. In the short term, I think we could probably go back and forth, but I still favor the downside as Jerome Powell has made it clear that the Federal Reserve is going to remain tight for some time, and perhaps even tighten interest rates quicker than people originally thought.
The GBP/USD has gone back and forth during the course of the trading week to show signs of hesitation, but we did dip a little bit lower during the week. Because of this, I think that if we break down below the bottom of the candlestick for the week, then it opens up a potential run down to the 1.15 level. To the upside, the 50-Week EMA comes into the picture near the 1.22 level, and I think could offer a bit of resistance. It does look like we are trying to bounce a bit, but it’s worth noting that several of the previous weekly candlesticks have formed inverted hammers and therefore I think going higher from here is going to be a bit of a struggle.
The USD/JPY initially tried to rally during the trading week against the Japanese yen but found the ?138 level to be very difficult to get above. That being said, the ?138 level is an area that had been resistant previously, therefore I think it suggests that the market will have a big fight in that area. However, underneath we have the 50-Week EMA underneath, which of course is rising and could offer a significant amount of support. The Bank of Japan continues to work against the value of the yen by keeping interest rates down, therefore I think it’s probably only a matter of time before the greenback turns around and rallies again.
The AUD/USD has gotten hammered during the trading week, and quite frankly looks like it’s on the verge of breaking down rather significantly. Because of this, I think the market does likely end up going down to the 0.64 level. The 0.67 level above there is an area that I think could be difficult to overcome, and therefore I think short-term rallies will more likely than not attract a lot of selling pressure.
Gold markets initially fell during the week but after the Non-Farm Payroll announcement, we have seen a lot of buying pressure as the US dollar took a little bit of a head. From a technical analysis standpoint, it’s obvious that the market has found quite a bit of support at the 50-Week EMA, and also near the 50% Fibonacci level. If we can break above the weekly candlestick, it’s possible that we could make a move toward the $1900 level, an area where we have seen a lot of selling pressure previously.
The USD/CAD has rallied rather significantly to break above the 1.38 level during the week. If we can break above the area just above current pricing, we will threaten the 1.40 level. Any break above the 1.40 level would be extraordinarily strong for the US dollar, and the Canadian dollar will get hit as a result. This makes a certain amount of sense because the Bank of Japan has already stated that they are essentially done raising interest rates. At this point, short-term pullbacks more likely than not will end up being buying opportunities.
The AUD/JPY has gotten hammered against the Japanese yen during the week, and it now looks as if it is being threatened. In fact, you could make an argument that anything below the ?87 level kicks off a head and shoulders pattern. Granted, it’s very complex and very noisy, but it is an argument you can make. On the other hand, if we rally from here, the ?92 level above could be resistance, so a short-term rally is more likely than not to get sold into. If we break above the ?92 level, then we could go look into the ?96 level after that.
The USD/CHF has given up a significant amount of gain early in the week, as we then plunged down to the 0.92 level. That being said, we are near a major support level for the US dollar against the Swiss franc, so I would not be surprised at all to see this market bounce for the week. I think this sets up more or less a market that is trying to find some type of range to trade in.