The last week saw a weakened US Dollar with bears pushing from the start of the week. The final blow was on Friday after the US and Canadian NFP Employment figures falling which was mostly expected by the market.
Currently, investors have become somewhat obsessed with the US Dollar as there is a high vaccination rate in the US, a view of a strong economic recovery and the possibility that the Federal Reserve will start to tighten monetary policy soon.
Last Thursday, the EURUSD dropped below 1.20 for the first time since the 1st of December 2020 which is significant not only technically but also psychologically. It provided a blunt reminder that the Eurozone is lagging far behind the US (and the UK) in vaccinating its citizens against the Covid-19 and that any economic recovery will therefore likely lag too.
In the week ahead, there are not a lot of high impact economic announcement on the agenda. The highpoint could be the Wednesday’s final German inflation data for January (CPI), anticipated to show a rise to 1.0% year/year after the previous 0.3% fall. Moreover, German and Eurozone industrial production and German trade figures are on the calendar too.
On Wednesday, Japanese banks will be closed in observance of National Foundation Day. In China, Chinese banks will be closed in observance of the Spring Festival both on Wednesday and Thursday.
Past week performance and signals:
EUR/USD
Last week, the pair has been ranging as expected but closed on the downside. The EU seems to be lagging on vaccinations and an economic recovery seen far away and another interest rate cut still a prospect. With a weakened dollar we expect the Eurodollar to range.
FORECAST: NEUTRAL
Resistance: 1.2100, 1.2150, 1.2200
Support: 1.2000, 1.1950, 1.1900
AUD/USD
A very good week for the Aussie as it saw a 0.75% increase. The AUD/USD pair is in recovery mode but its bullish muscle is limited at this point.
FORECAST: SHORT
Resistance: 0.7700, 0.7750, 0.7800
Support: 0.7650, 0.7600, 0.7550
USD/CAD
Last week, the USDCAD pair kept ranging within 100 pips with a weak Canadian dollar. While Canada’s employment reports were worse than expected, the continued rally in the oil market provided sufficient support to commodity-related currencies on the foreign exchange market. We remain bullish.
FORECAST: LONG
Resistance: 1.2800, 1.2850, 1.2900
Support: 1.2700, 1.2650, 1.2600
GBP/USD
The Cable rate shot from a two-week low during this week’s session, courtesy of the Bank of England’s hawkish tone following its latest policy meeting. Meanwhile, with the US economic outlook looking increasingly optimistic, we could see the US Dollar carry its bullish momentum over into next week’s session.
FORECAST: SHORT
Resistance: 1.3750, 1.3800, 1.3850
Support: 1.3700, 1.3650, 1.3600
USD/JPY
Last week saw the USDJPY pair to increase by 0.44% as US Treasury yields got boosted by a sharp decline in the US unemployment rate. The pair is expected to continue its bullish push. The pair seems overbought and could extend its corrective decline in the near-term at the weekly opening.
FORECAST: SHORT
Resistance: 105.50, 106.00, 106.50
Support: 105.00, 104.50, 104.00
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