For most people Foreign exchange means an exchange of one fiat currency to another when we are going to an overseas location for a vacation or a business trip to pay goods or service but for traders like me, Forex (short for foreign exchange) is the single biggest & the most liquid financial market in the World. Trillions of dollars get exchanges every single on this market. Let’s shed some light on the topic for people who don’t know much about it – the following infographic summarizes the concept beautifully. For others who are interested in trading and/or the technical setups of the USD Major pairs, I will continue after that.
Coming back to the trading side, it was a mixed bag for different pairs last week but the Dollar Index (DXY) lost ground on four out of five days. DXY started the week @ 97.47 and ended it @ 96.85 – the basket of currencies index has now made several unsuccessful attempts at the high created last November. For now, the daily gains remain capped below the 97.70 level. Let’s look at some the hourly charts of the Major pairs to make sense of the individual moves.
EURUSD (ST Bullish, MT Neutral)
Although the most traded pair stays firmly pegged in the bearish territory the short-term move with the daily support holding at the second attempt market by a higher low in RSI despite testing the support points towards exhaustion in the current medium-term bear run. For the short-term, the immediate support stands @ 1.1285 which provides momentum for the bull run but a break of this level would extend the consolidation. A break of 1.1250 would flip the ST bias to the bearish side. Risk events this week include Euro-Zone ZEW Survey (Economic Sentiment), Consumer Price Index & Markit Composite PMIs.
This pair has been held hostage to the uncertainty emanating from the Brexit confusion for the past many months and it is set to continue as European lawmakers have granted a longer extension for UK to sort out the exit modalities. The whipsawed action between 1.3040-1.3120 range continued last week with the indecisiveness in the pair. For now, the bias remains pegged in the neutral zone as long as these two levels hold on to the anchor. Data on the docket include UK quarterly employment data, CPI & Retail sales.
USDCAD (ST Bearish, MT Bullish)
The commodity pair is having a hard time breaking the 1.3300 level in the daily chart to confirm the bearish posture in Medium term. The break higher in Oil prices has sustained bearishness in the short-term for USDCAD but only barely. A sustained move above the 1.3400 level would confirm the continuation of the MT bullish pattern. The pair is indecisive at the moment with the next move. Economic events this week include existing Home sales, CPI & Retail sales.
USDJPY (ST Bullish, MT Bullish)
The pair has shown classic risk-on moves with the Equities bounce this week on the back of an expectation of a U.S-China trade deal soon. Sustained gains in the short-term confirm the bullish trajectory with the strong momentum set to continue above the immediate support @ 111.80 a break of which would signal an extended consolidation but as long as the strong support @ 111.30 holds, expect the bullishness to return. This week would mark the release of Japanese Industrial Production & CPI data.
AUDUSD (ST Bullish, MT Neutral)
The second commodity pair has been making higher lows in the Short term with strong support at the psychological level of 0.7000 in the daily chart (MT). The immediate bias remains bullish as long as the ST support @ 0.7130 holds. This week would see RBA Minutes of April Policy Meeting, Westpac Leading Index & Employment data affecting the pair’s moves.
NZDUSD (ST Bearish, MT Bearish)
This commodity pair has been the most sluggish against the Greenback becoming the weakest performing in Majors recently as is signified by the bearish sentiment in both the Short & Medium term. Although it survived with the bounce from the recent low of 0.6720, any gains look capped below 0.6800 – a level which needs to be penetrated convincingly to flip the ST bias. The pair would be looking at the CPI risk event this week.
USDCHF (ST Bullish, MT Bullish)
And finally, USDCHF looks comfortably placed in a bullish channel in both the hourly & daily charts with the risk on sentiment in the global equities replicating the move of USDJPY with higher lows. Although a correction towards the immediate support @ 1.0010 looks plausible, the bullish bias is set to continue even if the pair extends the consolidation towards the next stronger support @ 0.9980. Swiss trade date release this week.
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