Last week’s FX market saw the sharpest rise in the euro and the sharpest fall in the value of the U.S. dollar.
The headline from last week was that market sentiment stays risk-on, particularly in the US and the EU. Demand has been fuelled by dovish monetary policies plus stimulus in the U.S., despite fears that policy will lead to unsustainable inflationary pressures and higher corporate taxes. The S&P 500, temporarily traded at a new all-time high price on Friday.
The greenback dropped again over the past week after running into technical resistance three weeks ago, while its long-term trend is mixed. There is medium-term push against the US dollar while there are similar bullish forces in favour of the euro and to a lesser extent the Japanese yen. We also see long-term strength in the Canadian dollar, which is supported by fundamental factors and the policies of the Bank of Canada. The Bank of Canada reduced its QE program from C$4 billion to C$3 billion, becoming the first G7 bank to tighten policy since the Covid-19 pandemic began.
Also, last week saw the global number of confirmed new Covid-19 cases increase for the eighth consecutive week to new record highs, after dropping for over two months. This increase was driven mainly by a resurgence of the virus in Asia, especially in India. The total number of global deaths also increased again last week for the fifth week running.
This week starts with the Australian & New Zealand banks to be closed in observance of Anzac Day, on Monday. The main events this week will be the Federal Funds Rate and FOMC Statement from the US Federal Reserve, plus the US Advance GDP data and the Bank of Japan’s Outlook Report. Usually, FOMC releases are the major driver of market volatility, so we can expect an active FX market during the second half of this week although no change is expected from the Fed.
Major Currencies Performance and Signals
EUR/USD
Although there is no long-term trend, the weekly chart below shows we have seen relatively powerful bullish momentum over the past three weeks, with the real bodies of these candlesticks larger than we have seen for several months. We can therefore say there is a bullish medium-term trend which may continue to at least the resistance level at 1.2227
FORECAST: BUY
Resistance: 1.2150, 1.2200, 1.2250
Support: 1.2100, 1.2050, 1.2000
GBP/USD
GBP/USD broke above the 1.40 level last week but was unable to hold above this line and had to settle for slight gains over the week. This week we expect the trend to continue upwards.
FORECAST: BUY
Resistance: 1.3900, 1.3950, 1.4000
Support: 1.3850, 1.3800, 1.3750
AUD/USD
Australian data beat expectations last week, but the Aussie gains were offset by weakening metals. New Zealand and Australian markets will be closed this Monday amid ANZAC day. The AUDUSD pair is technically neutral, with buyers defending the 0.7700 price zone.
FORECAST: NEUTRAL
Resistance: 0.7800, 0.7850, 0.7800,
Support: 0.7750, 0.7700, 0.7650
USD/JPY
With a clear bearish tone having impact from the psychologically important 110.00 area in USDJPY we can say there is a bearish medium-term trend which may continue to at least the support level at 106.67
FORECAST: SELL
Resistance: 108.00, 108.50, 109.00
Support: 107.50, 107.00, 106.50
USD/CAD
The USDCAD keeps a tight 30 point range for the week. The last lowest close for USDCAD was since 1.2400 on March 17. WTI climbs back above $62, without trend since late February. The Markets looking are ahead to this week’s FOMC with a rebound expected.
FORECAST: NEUTRAL
Resistance: 1.2500, 1.2550, 1.2600
Support: 1.2450, 1.2400, 1.2350
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