Will the USD/CAD Bulls Hold Their Nerve?

Any signs of recovery were hammered on July 20 when the pairing fell 140 pips on news that Canada’s May retail sales had shot up 2%, rather than the forecast 1.1%. Recent comments by US President Donald Trump about his disdain for domestic interest rate hikes have also put pressure on the US Dollar.

But are we seeing an end to the USD/CAD upward momentum, or is this simply a slight pullback before the chart begins moving north again? The answer will likely be determined more by what Mr. Trump and the US is doing, rather than anything happening in Canada. That’s not a dig at Canada, more a reflection of the importance of the US dollar to all world markets.

The Canadian dollar, steady as she goes

The Canadians are widely seen as being dependable folk, and their currency is also regarded as one of the world’s most stable, traded by long-term investors and intraday traders in large numbers. Interest has increased locally because residents now benefit from using brokers with $1 million protection offered by the Canadian Investor Protection Fund (CIPF), which pays out if a broker goes belly up.

Because the Canadian dollar is the fifth most commonly held currency, it usually does not show the sort of hair-raising price volatility that befalls smaller currencies. But that’s not to say traders can’t take advantage. Intraday corrections come thick and fast on the back of regular scheduled economic news announcements, just like the Retail Sales one on Friday, July 20. This is a monthly statistic, along with Labour Force Survey (Canada’s employment figures), Consumer Price Index and Industrial Price Index. Traders also eagerly await the quarterly Gross Domestic Product figures.

But it’s commodity prices that have a huge impact on the Canadian dollar. The country relies heavily on its natural resources of oil, lumber and natural gas, and exports much of this abroad. This means that not only is foreign demand a pressure factor, but also the price of crude oil itself. When the price of crude slumped from US$105 to US$45 in 2014/15, Canada’s economy took a hit, sending it into a downturn for the first time in years. It’s often said that commodity prices, especially oil, have a greater influence on the Canadian dollar than economic news, and it’s no great surprise given the country’s reliance on its natural resources. Oil prices rise since the beginning of 2018 which helped the Canadain dollar to remain strong versus the greenback and other currencies. As long as oil prices rise, the Canadian dollar might be a correct position.

For the long-term investor, most of these volatility factors (economic news and the price of crude oil, for example) can be exploited by riding on the back of a long-term trend. But as we’ve seen, in a currency pairing like USD/CAD it takes two to tango. And when you’re dance partner is the US, it tends to take the lead.

USD volatility, the Trump effect

The US dollar is subject to volatility like any other currency, with changes to supply and demand, commodity prices and regular economic data all pushing or pulling the price up or down. As the most traded currency in the world, second-guessing which way the USD will go has become an art form. But now there is a new factor influencing the currency’s fortunes, and it’s one that is becoming rather hard to predict.

Step forward Donald Trump, the US President whose habit of speaking his mind often has ripple effects in the markets. While his imposition of trade tariffs with the European Union, Canada and China buoyed sentiment, the currency dropped when he openly questioned the Fed’s policy of interest rate hikes, suggesting it was keeping the dollar too high. Mr. Trump wants a lower dollar, making it cheaper for the US to do business abroad. And if there’s one thing we’ve come to learn about Mr. Trump, it’s that he likes to get what he wants.

USD/CAD long or short?

With all this variance and the unpredictability of looming trade wars, Brexit and maybe a currency war, too, how can you call what the future movement of the USD/CAD pairing will be? You can certainly look at our own financial market forecasts and analysis, but your willingness to jump in might be influenced by your desire to try to cash in on short-term movements or to hang in there for the long term.

As we’ve seen, the long-term trend for USD/CAD is bullish. The USD has been consistently strong, while the Canadian dollar less so. If you believe Mr. Trump won’t have any influence on the Federal Reserve’s decision making on interest rates, which he really shouldn’t as its meant to be impartial to political interference, then interest rates will continue on an upward curve, which in turn will keep the US dollar high. However, even Mr. Trump talking about interest rates has brought a dollar price correction, and any hint that the Fed might actually shift policy might make the dollar price fall further.

What is clear is that the Canadian economy is going through a purple patch. While retail sales are up, so too is inflation, with the figure at a six-year high of 2.5% in June, fuelled by increasing gas costs. What that means is the possibility of another increase in interest rates, which would drive up the Canadian dollar, and potentially drive down the USD/CAD, but only if the US dollar continues to weaken.

So, with all things considered, and without a crystal ball to give you the answer, the best bet might well be to follow the long-term trend and go long on USD/CAD. But intraday traders can lick their lips at short-term volatility, so long as they’re on the right side of any correction. Following Mr. Trump on Twitter now seems as important as watching out for key financial news, and it’s probably a lot more entertaining.

Technical Update For USD/CAD, EUR/CAD, NZD/CAD & CAD/CHF: 26.07.2018

USD/CAD

USDCAD’s dip beneath the 50-day SMA & four-month old horizontal-region can’t be termed as strong Bearish signal as 100-day SMA level of 1.2955, an upward slanting TL stretched since early-February, at 1.2890, and the 1.2805 figure comprising 200-day SMA, still stand tall to challenge sellers. In case if the pair closes below 1.2805 on D1 basis, it can then aim for 1.2740 and the 1.2700 support-levels. On the upside, the 1.3045-50 horizontal-line and the 50-day SMA level of 1.3090 could try limiting the pair’s near-term advances, breaking which the 1.3110, the 1.3160 and the 1.3210 might offer intermediate halts before highlighting the 1.3270 trend-line barrier. Should the 1.3270 fails to disappoint buyers, the 1.3320-30 and the 1.3385 may appear in their radar to target.

EUR/CAD

Given the EURCAD’s daily closing below 50-day SMA, the 1.5200 is likely to appear on the chart but the 1.5140-50 region can confine the pair’s additional declines. Though, pair’s sustained downturn past-1.5140 can avail the 1.5060 and the 1.5000 mark as buffers prior to diverting market attention to recent low of 1.4915. If at all the quote closes above 50-day SMA level of 1.5290, it can revisit the 1.5320 and the 1.5360 resistances ahead of pushing bulls to aim for the 1.5440, the 1.5470 and the 1.5515 trend-line. Moreover, pair’s successful trading beyond 1.5515 may not hesitate questioning the strength of the 1.5580, the 1.5640 and the 1.5710 resistances.

NZD/CAD

Having reversed from resistance-line of short-term descending triangle formation, the NZDCAD seems all set to re-test the 0.8875-70 horizontal-support, which if fail to restrict the pair’s south-run can drag it to 0.8860 and the 0.8830 rest-points. Also, pair’s refrain to respect the 0.8830 mark can make it vulnerable to plunge towards 61.8% FE level of 0.8770. Alternatively, the 0.8915 and the 0.8950 can please counter-trend traders during the pair’s U-turn but the aforementioned TL, at 0.8960, may tame its further advances. However, break of  0.8960 could theoretically confirm the pair’s rise to the 0.9100 number with the 0.9000 and the 0.9065 being intermediate stops.

CAD/CHF

Unless clearing the 200-day SMA level of 0.7615 on a daily closing basis, the CADCHF can’t be termed strong enough to aim for the 0.7665 resistance, breaking which 0.7700-0.7705 becomes crucial to watch. In case the pair conquers the 0.7705 hurdle,  the 0.7740, the 0.7765 and the 0.7805 might lure the buyers. Meanwhile, inability to surpass the 0.7615 may reprint 0.7585 on the chart while immediate ascending TL figure of 0.7535 can restrict the pair’s following downside. Assuming that the prices drop below 0.7535, then the 0.7510, the 0.7445 trend-line number and the 0.7400 may please the Bears.

Important CAD Pairs’ Technical Overview: 12.07.2018

USD/CAD

USDCAD’s bounce off the three-month old ascending trend-line presently struggles with 1.3200-1.3210 horizontal-region in order to justify its strength in targeting the 1.3260 and the 1.3340 resistances. In case the pair manage to extend its recovery beyond 1.3340 on a daily closing basis, the 1.3385 and the 1.3470, comprising 61.8% FE can please the Bulls. On the contrary, the 1.3130-20 is likely immediate support for the pair to test during its pullback before revisiting the 1.3060 TL figure. Assuming that the quote keep declining beneath the 1.3060, the 50-day SMA level of 1.3025 and the 1.3000 round-figure can act as buffers prior to highlighting the 1.2925 mark, encompassing 100-day SMA.

EUR/CAD

Having failed to surpass the 1.5440-45 resistance-zone, the EURCAD seems inclined to re-test the 1.5285-80 support-area; however, the 1.5340 can offer intermediate halt to the pair. Should prices dip below 1.5280, the 1.5220 and the 1.5150 are expected following rests that can be availed if holding short positions. Let’s say the pair surpasses the 1.5445 upside barrier, then it can quickly rise to 1.5480 and the 1.5540 resistances. Moreover, pair’s successful rally above 1.5540 can push buyers to aim for the 1.5585 and the 61.8% FE level of 1.5700.

GBP/CAD

Even after bouncing off the 1.7285-95 support-region, the GBPCAD has to clear the 1.7460-70 hurdle if the pair is to make itself eligible for the 1.7515 and the 1.7550 resistances. Given the pair crosses the 1.7550, the 1.7580, the 1.7615 and the 1.7670 could try challenging the optimists ahead of channeling market attention towards recent high of 1.7770. Alternatively, the 1.7360, the 1.7360 and the 1.7295-85 may offer nearby supports to the pair, breaking which the 1.7250 and the 1.7200 could entertain the sellers. During the pair’s additional declines below 1.7200, the 1.7110 and the 1.7050 may appear in the traders’ radar.

CAD/JPY

With more than six-month old descending trend-line restricting the CADJPY’s immediate upside, together with overbought RSI, the pair is likely witnessing profit-booking towards the 84.70 and the 84.40 but 100-day SMA level of 83.95 may limit its further south-run. If the pair refrains to respect the 83.95 SMA number, the 83.50, the 83.00 and an upward slanting trend-line, at 82.40, should be watched carefully. Meanwhile, pair’s ability to run above the 85.45 TL on a daily closing basis can escalate its north-run to 85.90 and the 200-day SMA level of 86.20 whereas 86.70-80 horizontal-region can provide tough resistance afterwards. In case prices continue rallying beyond 86.80, the 87.80 and the 88.30 could become crucial.

Things to Consider When Trading the Canadian Dollar

The Canadian Dollar (CAD) is an important currency part of the Forex dashboard. As part of the DXY (Dollar Index), where it holds almost a ten percent stake, the CAD reflects the strengths and weaknesses of the Canadian economy.

Speaking of Canada, the country stands for a symbol of capitalism and freedom. Part of NAFTA (North America Free Trade Agreement), Canada has a performant economic model many countries only dream about.

The CAD pairs in Forex trading are favorite among retail traders. The leading one, apparently, is the USDCAD pair, as it considers the CAD against the world’s reserve currency, the U.S. Dollar.

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The funny thing is that the two countries share a common border, so the two economies are interconnected in more ways that many traders believe.

In trading, when buying or selling a currency pair, traders analyze the two economies corresponding to the currencies that make up the pair. In this case, the United States and the Canadian economy.

Because the United States economy is the largest in the world, and the USD is the world’s reserve currency, the economic data out of the United States dominates the economic calendar.

As for the CAD and CAD pairs, here’s the most important economic data to consider:

  • Bank of Canada interest rate decisions and press conferences
    • Bank of Canada (BOC) meets every six weeks, on a Wednesday, to set the rate on the Canadian Dollar. Traders oversee the decision as the press conference that follows offers more details that influence the value of the Canadian Dollar
    • the higher the interest rate, the better for the currency
  • Unemployment Rate and the Employment Change numbers
    • The jobs data is typically released at the same time with the NFP (Non-Farm Payrolls) in the United States – first Friday of every month. However, sometimes a one week delay may exist between the two.
    • Positive data is good for the CAD
    • When released at the same time with the NFP, the USDCAD pair is difficult to trade due to bi-directional flows
  • CPI or Inflation
    • The Consumer Price Index or inflation is part of the BOC mandate
    • Higher inflation leads to higher interest rate, so it’s bullish for the currency
    • Lower inflation triggers lower CAD
  • Ivey PMI
    • In Canada, there’s only one PMI (Purchasing Managers Index) release, unlike in other countries
    • Values higher than 50 are positive for the CAD
    • Lower values than 50 signal contraction for the Candian economy
  • Oil prices and U.S. oil inventories
    • Canada is an energy-driven economy as it is a big oil producer. Hence, the price of oil has a big impact on the GDP (Gross Domestic Product).
    • Lower oil prices trigger lower CAD
    • Higher oil prices lead to strong CAD
    • S. oil inventories cause fluctuations in the CAD pairs because most of the Canadian oil exports go to the United States
    • Lower U.S. inventories trigger a bullish CAD reaction
    • Higher U.S. inventories trigger a bearish CAD reaction
Canada is an energy-driven economy as it is a big oil producer

Conclusion

As a leading currency in Forex trading, the Canadian Dollar is part of essential currency pairs. It fluctuates freely, hence it is a source of potential successful speculation. Understanding what drives its moves is critical for Forex traders.

Canadian Dollar Steady as BoC Expected to Hike Interest Rates

The UK’s first monthly GDP release by the ONS showed that the economy had advanced 0.3% on the month in June. However, the positive GDP growth report was offset by manufacturing production which rose 0.4% missing estimates of a 1.0% increase. Construction output, however, beat estimates, rising strongly by 2.9% on the month. Industrial production, on the other hand, weakened, falling 0.4%.

Data from Germany showed that the ZEW economic sentiment index fell to -24.7 while the Eurozone economic sentiment index fell to -18.7.

The economic calendar today will see investors shifting focus to the BoC’s monetary policy meeting. Chances of a rate hike remain high as the economists polled expect to see the BoC raising rates by 25 basis points at today’s meeting.

The BoC meeting will be concluded by the press conference. Later in the day, the Bank of England Governor, Mark Carney is also expected to speak. From the Federal Reserve, the FOMC member, Williams is due to speak as well.

On the economic front, the U.S. producer prices index data is expected to show a modest slowdown to 0.2% increase in both core and headline PPI for June.

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EURUSD intra-day analysis

EUR/USD 4H Chart
EUR/USD 4H Chart

EURUSD (1.1729): The EURUSD currency pair was seen posting modest declines on the day as price action remains consolidating around the 1.1730 level. The daily chart signals a hidden bearish divergence to the Stochastics which suggests a near-term decline. The initial support at 1.1686 remains the first level of support that could be tested. In the event of a break down below this level, then the EURUSD could be seen testing 1.1600 level to the downside.

USDJPY intra-day analysis

USD/JPY 4H Chart
USD/JPY 4H Chart

USDJPY (111.07): The USDJPY currency pair was seen giving up the gains as the currency pair slipped below the 111.13 level. However, price action has seen currently making up for the declines. However, a retest of 111.13 is likely to occur. Failure to break out above 111.13 could signal a move to the downside. The USDJPY currency pair could be seen settling into a range between 111.13 and 110.62 level. A breakout from this level could trigger a short-term trend in the direction of the breakout.

XAUUSD intra-day analysis

Gold 4H Chart
Gold 4H Chart

XAUUSD (1250.82): Gold prices continued to decline following the brief retest of the 1263 resistance. The decline back to the 1247 handle invalidated the bullish flag pattern as price action returns to the familiar support level. As long as 1247 support holds, gold prices could be seen holding on. However, in the event of a break down below, the next support level is seen in 1242. A reversal of this level is required for gold prices to maintain the range within the levels.

This article was written by Orbex

Important CAD Pair’s Technical Overview: 28.06.2018

USD/CAD

USDCAD’s inability to surpass the 1.3380-90 resistance-region presently drags the pair to re-test the broader resistance-turned-support, at 1.3260 now, which if broken could highlight the 1.3210-1.3200 support-zone. If at all sellers manage to conquer the 1.3200 mark on a daily closing basis, pair’s subsequent drop to 1.3155 & 1.3100 can’t be denied. In case if the pair pulls itself back from 1.3260 support, it can again confront the 1.3380-90 area, clearing which the 1.3430, the 1.3500 and the 1.3530 could entertain the traders. Assuming that the quote keep rallying beyond 1.3530, the 1.3570 and the 1.3640 are likely following numbers to appear in Bulls’ radars to target.

EUR/CAD

Unlike USDCAD, the EURCAD still has some room towards south, till the support-line figure of ascending trend-channel, at 1.5285. Hence, pair’s dip to the same becomes imminent to expect but a break of which might not hesitate flashing 1.5250 & 1.5200 on the chart. Should prices continue trading southwards after 1.5200, the 1.5140 and the 1.5100 can please the Bears. Alternatively, 1.5440 may offer immediate resistance to the pair ahead of pushing buyers to aim for the 1.5500, the 1.5540 and the 1.5585 consecutive upside barriers. Though, the 1.5610, comprising channel-resistance, may limit the pair additional rise above 1.5585, if not then 1.5660 & 1.5700 may grab market attention.

GBP/CAD

Having breached a month-old ascending trend-line, the GBPCAD seems all set to revisit the 1.7320-15 horizontal-support but oversold RSI may confine the pair’s further downside. However, break of 1.7315 could make the quote vulnerable enough to test 1.7200 and the 1.7110 rest-points before looking at the 1.7050 and the 1.7000 psychological magnet as supports. Meanwhile, the 1.7465 and the support-turned-resistance line of 1.7530 may restrict the pair’s nearby advances prior to highlighting the 1.7560-70 resistance-zone. If the pair surpass 1.7570, the 1.7670, the 1.7715 and the 1.7770 should be watched carefully.

CAD/CHF

Even after ticking a bit up from the short-term descending trend-channel, the CADCHF’s recovery can’t be expected unless it clears the 0.7530-35 resistance-area, which in-turn could help optimists target 0.7560 & 0.7600 numbers. Let’s say the pair crosses the 0.7600 hurdle, then it can rise to 0.7650 & 0.7680 levels. On the downside, the 0.7460 & the 0.7425 may try supporting the pair’s decline, breaking which 0.7410 & 0.7390 can play its role as strong bases. Given the prices keep running down post-0.7390, the channel-support of 0.7340 and the 0.7300 round-figure gain importance for the sellers.

Draghi Sticks to the Baseline. Cites Risks from Trade, Oil Prices and Market Volatility

The comments were in line with the ECB’s statement and press conference that was held just the week before. While officials outlined their plans to taper QE to 15 billion euro from October and ending QE by December 2018, central bank officials noted that interest rates will not change at least through summer of next year.

Speaking at the conference, Draghi said, “We will remain patient in determining the timing of the first rate rise and will take a gradual approach to adjusting policy thereafter, the path of very short-term interest rates that is implicit in the term structure of today’s money-market interest rates broadly reflects these principles.”

Draghi, however, clarified that the ECB was committed to ending its bond purchase program by the end of this year. This would mark the end of the ECB’s nearly a decade-long effort to stimulate the Eurozone economy following the financial crisis which led to a recession in the Eurozone.

Draghi also said that this didn’t mean that the ECB would withdraw its support to QE. Another official from the ECB noted that the central bank’s monetary policies will remain focused on the economic development and growth which would remain a key factor when determining the forward guidance on interest rates.

Officials maintain the timing of the interest rates remains key but that the monetary policy is also data dependent. The ECB is expected to keep its borrowing costs low at the current levels and could maintain low-interest rates even at the end of summer of 2019. They said that such a step was necessary in order to ensure that the central bank’s policies will continue to support growth and in achieving the price stability target.

Consumer prices in the Eurozone were seen to be fairly positive after recent data showed that headline inflation rose 1.9% for the first time in nearly a decade, closer to the ECB’s 2% inflation target rate. However, core inflation rate still lagged, rising just 1.1% on the year in May 2018.

While Draghi’s comments were slightly optimistic on the economy and growth, the central bank chief said that there were also increasing number of growing uncertainties, for which he said the central bank would be cautious.

Draghi cited three main sources of risk which were the increased threat of protectionist policies from the U.S. such as imposing tariffs on steel and aluminum imports. He also mentioned the risk of rising oil prices on account of increased geopolitical risks and the persistently high market volatility.

Draghi’s comments echoed views from many other central banks including the U.S. Federal Reserve which perceived the ongoing threats of tariffs on imports from other nations as being detrimental to growth.

While there has been an overall increase in the threat to global trade, the U.S. administration upped its ante earlier last week when President Trump announced that he would impose further tariffs on imports from China to about $200 billion.

While there is uncertainty on whether President Trump will follow through on his threats, officials in China are expected to draft up similar measures against the U.S. This could potentially trigger tit-for-tat responses between the U.S. and its trading partners.

Just a few weeks ago, the U.S. administration’s steel and aluminum tariffs went into effect with Canada, Mexico, and the Eurozone seeing their brief exemption periods being lapsed.

Draghi said that amid the threats, there could be risks of lower investment which could, in turn, limit the Eurozone’s economy from achieving its full potential.Orbex

ECB Decides Gradual Exit from QE is Best Move

The EUR/USD is posting a volatile reaction to the downside on Thursday after the European Central Bank revealed its plans to end its huge stimulus program by the end of the year. The price action suggests another “buy the rumor, sell the fact” event, although there is probably more too it. Since this is an on-going event, we’re going to take the liberty to clarify the central bank’s decision.

In outlining its plan to end the stimulus, the ECB also said it would extend its monthly purchases through the final quarter, but at a tapered pace.

The move by the ECB was no secret with rumors of the event seeping into the market over the past two weeks. This may be the reason for the sell-off. Based on the current 12 session rally, it looks as if the news had already been fully-priced into the market.

The whip-saw like price action first triggered buy stops above the recent top at 1.1841 before enough selling pressure hit the market to drive the EUR/USD through yesterday’s low at 1.1725. If the selling pressure continues then we could see a move into 1.1676 to 1.1636 before today’s close.

The event is breaking as of this writing at 1217 GMT and based on the price action, downside momentum continues to build. This is likely being fueled by the ECB’s attempt to explain how it would start preparing to end its stimulus. This assessment is based on recent comments from the ECB’s Peter Praet.

The price action could also be a result of position-squaring and adjusting as to the new specifications revealed by the ECB.


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Currently, the quantitative easing (QE) program is scheduled to last until September and the bank purchases around 30 billion Euros or $35 billion of government and private debt every month. Traders had priced the Euro based on this information.

The price adjustments are being made because today’s announcement prolonged QE until December, but reduced to 15 billion Euros a month in the last quarter of the year. This is the ECB’s way of showing they want to make a gradual exit from QE.

The EUR/USD may be moving lower because the extension of QE and the increased amount of stimulus is essentially bearish for the Euro. However, it is a necessary step in the process to avoid shocking the Euro Zone economy by exiting from stimulus too quickly.

The easing from QE could also the result of the recent geopolitical turmoil in Italy and the spate of weaker economic data from the Euro Zone. If this is the reason for the gradual move then this would suggest there was a debate among ECB members where some favored exiting QE quickly while other voiced their opinions against it. The way the news was presented suggests a compromise had been reached.

A Bullish Short-Term View on the Euro

The breakaway gap in the Euro (in this article, we use “Euro” to refer to the currency pair EUR/USD) on the 24th of April 2017 on the back of positive first round French election results that weekend broke through a resistance trendline from 2014, a 5-month ascending triangle and the 200-day moving average. It heralded a reversal in the trend of the Euro and what followed was a near 1-year rally that took the price from 1.087 to a high of 1.2558, a rise of 15.5%. It was only 100 pips away from testing a resistance trendline from 2008!

After consolidating in a symmetrical triangle, the Euro broke to the downside and has been falling for over a month now. The decline has been precipitated by an unwinding of one of the largest net long speculative positions in the history of the Euro, rising bond yields in the US attracting capital away from the EU and vast increases in the number of negative data surprises as shown by the Citi Euro Economic Surprise Index.

Currently, the Euro is on the ropes and as is often the case with trends and extended moves, analysts and market commentators are falling over themselves to forecast lower and lower target prices for the Euro.

After correctly calling the reversal in the dollar at the start of the year (the report can be found by clicking here) we are happy to again be on the other side of this boat and forecast that the Euro has found a bottom that should hold for a few weeks, if not months. Technically, the price found support on a trendline at the same time the Dollar Index (DXY) found major lateral resistance as detailed in our earlier report on the Dollar. Where the bounce ends will be very telling if the rising trend that began in the Euro in 2017 will continue or if Euro and Dollar parity is on the cards next year. In any case, the bounce may be good for a solid trade that should last at least a few weeks in our view.

The Technical Picture

The Euro has been confined to a narrow, falling channel since breaking a symmetrical triangle to the downside in late April of this year. The fall has taken it to a new low for the year and it is down about 2.5% YTD. However, the price recently experienced a trend-ending downwards spike on the back of political developments out of Italy. The price ran stops on a trendline from the end of 2017 lows but managed to close on it. It had a huge reversal the next day.

The spike downwards and the subsequent reversal constitutes a false downside break of lateral support at the 1.16 level. False downside breaks are reliably bullish signals, as is the close on the trendline.

Looking at momentum indicators, the PMO (Price Momentum Oscillator) is at its lowest level since the end of 2015. The false downside break has already caused the signal line to inflect and trend upwards. A further rise in the price will be confirmed by a bullish crossover in the PMO (the PMO is a lagging indicator).

The RSI (Relative Strength Index) was recently at its lowest level since the start of 2015. The trend-ending spike downwards pushed the RSI into a deeply oversold territory. The subsequent reversal in the price was accompanied by a reversal in the RSI as well. The RSI has now made a higher high while the price has not. This is the first sign that a reversal in the price trend is on the cards.

While there still exists a non-trivial risk that the price will make a new low before bottoming (as the price usually bottoms after the RSI does), the sharp, trend-ending spike and subsequent false downside break confirmation greatly reduce that risk in this instance.

The last time both the PMO and RSI were at such depressed levels, the price rallied substantially in the weeks that followed.

EUR/USD Daily Chart
EUR/USD Daily Chart

Drilling down to a 1-hour chart, we can see the falling channel the price is currently in more clearly. However, we can also see that the price has now formed a head & shoulders bottom.

The price has recently broken above the neckline which validates the pattern. A target price projection from the completed head and shoulders bottom is roughly 1.177. as it occurred in the past days, the price will break out of the falling channel which is the most important development that needs to happen to confirm a bottom and start a bounce.

A rise out of the falling channel and above 1.17 (EUR/USD is trading at 1.1816 at the time of writing), the figure is where we may look to start establishing some long positions.

EUR/USD 1H Chart
EUR/USD 1H Chart

Our Outlook

As mentioned above, we believe that a bottom for the price that will last for a few weeks, or even months, may now be in place. Our belief is based on the price holding a longer-term trendline, confirming a false downside break of important lateral resistance, very oversold momentum indicators in the form of the PMO and RSI and a head & shoulders bottom on the 1-hour chart.

We may look to establish long positions as the pair is above 1.17. This is a clear ‘big figure’ resistance and breaks out of a falling channel that has been in place for over a month.

The first target for the bounce is the 38.2 Fibonacci level from the late April drop just under 1.186. Further up, resistance will come from the 50 and 61.8 Fibonacci levels, as well as the 50- and 200- day moving averages, with major resistance just under 1.21. This is where we may take profits on our long positions. We may use any decent pullbacks along the way to add to positions.

EUR/USD Daily Chart
EUR/USD Daily Chart

Expressing your view

Whether you agree with our analysis above or not, there is no better FX broker to express your bullish or bearish view on the Euro through than Rakuten Securities Australia. With our new 400:1 leverage account launching June 4th, this means minimal capital allocation is needed to make a big profit on any moves in the Euro. What’s more, our tight, fixed spreads (for 95% of market hours) means that you can trade with certainty and confidence. The ultra-low trading costs mean more money in your pocket!

What Happens if Italy Leaves the Euro?

Distinctively different than Brexit

The populist movement that has been underway in Italy has been frequently compared to the movement underlying Brexit by some outside observers. However, there are several variables that make the current political situation in Italy very different than what occurred in the United Kingdom.

The first, and perhaps most obvious, the difference is that the United Kingdom never implemented the Euro, to begin with. Though the UK’s departure from the Europe Union had a decisive impact on the European economy, the continuous use of the pound (GBP) likely minimized the blowback experienced by global currency markets.

Additionally, it is important to note that some leaders of Italy’s Five Star Movement – who were recently allowed more time by President Sergio Mattarella to form a full government – are primarily focused on abandoning the Euro and are less focused on actually leaving the EU. However, abandoning the Euro could still be the first step to leaving the EU altogether and, with enough momentum, it is still possible that both of these actions could happen simultaneously.

Recent polls conducted by the Pew Research Center do indicate the Italian support for the EU is declining. However, the fact that 56 percent still advocate for membership (with only 35 percent advocate leaving) suggests that a “Leave” referendum comparable to Brexit would likely not succeed.

A decrease in Exchange Values

The primary concern surrounding Italy’s threat to potentially abandon the Euro is that the currency itself would begin to lose its exchange value. Italy’s population and economy both compose major portions of the Eurozone and, consequently, losing both the labor and capital that Italy has to offer could have some far-reaching and negative consequences.

However, it seems that the main issue with exchange values may actually be the level of uncertainty that exists in the status quo. Between November 2017 and mid-April 2018, the Euro lost a significant amount of exchange value when compared to the US Dollar. Since then, the Euro has seen a major rebound followed by a minor retraction. When compared to the past ten years of currency exchange data, it is clear that global currency markets have been experiencing greater degrees of variability. Though there are obviously many different variables contributing to these changes, the future uncertainty of Italy’s role in the Eurozone has undeniably had a major impact.

Domino Effect

Another common concern from both political and economic analysts is that Italy’s departure from the Eurozone – whether this is simply an abandonment of the Euro or a complete leave from the EU – could potentially contribute to a much greater domino effect. In reaction to issues relating to immigration, unemployment, and the concentration of power, populism has measurably been on the rise in a number of European nations. In addition to Italy, populist movements in Hungary, Czechia, Austria, and even EU-powerhouse Germany have all gained momentum over the past few election cycles.

Because of the parliamentary style of governing, that is inherent to most European nations, fringe movements typically have a limited amount of power and are often excluded from the governing coalition. But, if a major Eurozone nation such as Italy could successfully abandon the Euro and even the EU, then the precedence for future nations doing so would be systematically increased. In addition to what has already occurred with Brexit, it has become clear that the Rome Treaties’ goal of “Ever Closer Union” will certainly be tested over the next decades to come.


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Major Changes in the EU

Ultimately, it seems that Italy’s recent wave of Euro-skepticism could yield multiple different outcomes. Without the ability to form a full government, then Italy leaving the Eurozone will likely be incredibly difficult and many efforts to do so may eventually be abandoned. But if Italy is able to successfully form a government, ruled largely by the populist Five Star Movement and Northern League, then it seems that Italy, EU, and the rest of the world will likely experience a wave of major changes.

Italy’s abandonment of the Eurozone would likely result in the remaining members revisiting the debates about the structure, purpose, and implementation of the Euro and the European Union as a whole. Additionally, changes in policies relating to the distribution of wealth between nations, lending, currency values, and immigration will all likely be revisited. Though, in the long-run, it is quite possible that both the European Union and Italy may find themselves in a stable position, the current state of uncertainty is undoubtedly a cause for concern.

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Is this the Beginning of the End – Can the EUR Survive the Summer?

Just a few months ago, the Establishment breathed a sigh of relief as populist parties lost in elections in France, the Netherlands, with Merkel eventually managing to form a coalition government and see yet another term as German Chancellor.

Focus had been on France and Germany, with Macron and Merkel expected to reunite the EU and bring an end to the rise of populist parties across the region.

The Italian election saw both the League and Five Star soften talk of an intention to call referendums to pull out of the Eurozone, with the Five Star – League coalition was eventually formed. The Establishment seemed to have had different ideas and a possible action plan in the event of a populist government.

There had been no talk of a plan to exit, even over the weekend and it should have remained so, but with Italian President Mattarella’s veto of anti-EUR economic minister Savona on Sunday, the Establishment has bared its teeth once more, reminding Italian voters, the region and the global financial markets just how malleable the Establishment is when it comes to the every changing demographic landscape.

While Greece was an appetizer, Italy is an altogether different beast. Any threat of a departure from the Eurozone of far greater significance, not just for the Eurozone, but for the global economy, as any material disruption to Eurozone growth, is bad news all around.

Italy is the Eurozone’s 2nd largest economy, manufacturing key and with Italy’s mountain of debt, leaving the EUR is not the only thing the markets will need to fear, a default on government debt becoming a real prospect, reflected in Italian government bonds, 2-year yields hitting levels not seen since the birth of the EUR.

The surge in bond yields has not only rattled the global equity markets, with major European indexes following the FTSE MIB Index into the red, the MIB down 3.18% at the time of writing, but also the EUR, which was down a whopping 0.7% this morning to $1.1544. The EUR’s not seen $1.15 levels since November of last year and, with Spanish Prime Minister facing a vote of no confidence on Friday, there could be more shocks in the days ahead and quite possibly talks of Dollar parity should the uncertainty persist in the weeks ahead.

One doesn’t even want to consider a snap election and a Podemos victory in Spain that could ultimately lead to EU Referendum’s in both Italy and Spain in the months ahead.


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Whatever happens, the Establishment may need to rethink its approach towards European politics and the European call for change. Brexit may have been considered an acceptable outcome for Brussels, as they continue to strong arm the British government, but Italy and Spain, well that really would be a head in the sand moment for Brussels that continues to demonstrate just how out of touch it is with what’s going on across the region.

Stocks and Euro Sink on Political Uncertainty in Italy, Turkish Lira Stable

The euro currency’s rebound lost its steam after reaching the 1.1730 area. During the European session, EURUSD lost just over 1%, coming close to the 6-month lows near 1.1550. The flow of strong data from the United States, signs of a slowdown in Europe and the threat of a political crisis in Italy caused the euro to decline by 6.5% in 7 weeks. Italian stock index, FTSE MIB dropped 3.21% on Tuesday.

GBPUSD continues its fall to trade near 1.3250, while USDCAD has seen a decline to trade near to 1.30. USD has given up gains against JPY and has stabilized against a number of EM (emerging markets) currencies. This combination is very unusual as the growth in JPY is often perceived as a safe haven. It is very likely that after a short correction the EM currencies could experience a new wave of downward pressure.

Oil Prices Under Pressure

Brent had begun the week and falling to 74.60 per barrel but has recovered to around 75.60 at the start of Tuesday’s trading. It is possible that the lull is due to low trading activity and today more players will add to price pressure, due to expectations of rising production in the coming months.


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Turkey’s Central Bank Stabilises Turkish Lira

Among notable movements in the markets, it is worth highlighting the rollback of the Turkish lira after the press release of the central bank on the simplification of the monetary policy framework, making the weekly repo rate (now 16.5%) as its Key rate. Earlier last week the Bank of Turkey increased this rate by 3 percentage points. All these measures are positively perceived by the markets and helped TRY to stabilize after falling 20% in May. The positive news for TRY has a favorable impact on the overall market attitude of developing countries. It also helps to reduce the yield of the American 10-year Treasuries, which makes the purchase of USD denominated debt less attractive.

Early morning Asian markets were in cautious mode due to protests in Brazil caused by rising fuel prices. These protests make the markets wonder whether current quotes are a serious obstacle to further global growth. In these circumstances, a major energy consumer, Asia, is also experiencing a decline in stock prices. The political situation in Italy, the caution of Asian exchanges and the increased demand for safe assets are likely to keep the demand for USD during Tuesday trading.

Among significant publications today we have the release of the Consumer sentiment indicator in the U.S. This indicator is close to multiyear highs, and the expected decrease can be a sign of the peak and turning to downwards.

This article was written by FxPro

Global Stocks Mixed, Italian Bonds Highest Since 2011. Oil Prices Continue to Drop

Friday saw the markets focusing on Crude Oil. Oil experienced a daily decline of 3.2% is the first weekly decline for almost two months. Early Monday trading has seen the downward pressure continue as Brent prices move closer to $75 per barrel, the lowest levels since the beginning of May and 7% of the peak levels reached the last week. Similarly, WTI lost 9% from recent highs.

Recent comments from Russian and Saudi Arabian officials on the readiness to ease their restrictions on production as soon as next month appears to be the main factor forcing Oil prices lower. Such a stance appeared after oil reached $80 per barrel and demand outlook appeared to be strong.  In addition, Saudi Arabia and Russia appear dissatisfied with the growth of production in the United States and the fact that they are actively trying to expand their market share.

However, there are great risks of repetition of the scenario that occurred in 2014, when the reluctance of OPEC to concede its share resulted in excessive growth in production and provoked the collapse of Crude Oil prices from above $100 pb to near $30 pb in a little more than a year.

Previously the decline was initiated by fixing profits, after reaching an important mark of $80 per barrel by Brent, as well as a significant increase in crude oil reserves with stable production in the United States. Other factors include the signs of a slowdown in the European economy, clear problems with growth in developing-country markets and a stronger dollar.

Crude Oil can trade contrarian to this but these periods are usually short and much more likely to end with a retracement in oil prices rather than a reversal of dollar strength.


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On Friday, the dollar index reached its highest since November 2017 mainly because of downward pressure on the euro. The weakening of the common currency was attributed to the nomination of a Eurosceptic for an important economic post in Italy that could lead to further nationalistic undertones. As a result, EURUSD fell below 1.1650 on Friday. Early Monday trading has seen EURUSD trade higher to 1.1720 due, in part, to the Italian President not accepting the nomination.

The recent weakness of EUR is likely to remain as the Italian situation could turn into a political crisis in a country where the President does not have sufficient power to make changes. Italian bonds in May displayed the highest growth yields since the end of 2011 – levels not seen since the Greek debt crisis. Sustained growth in bond yields in Europe may cause the ECB to leave rates low in the region for much longer, which could lead to a serious depreciation in EUR. However, Italian bonds strengthen on Monday morning.

It is worth remembering that during the Greek debt crisis EUR lost almost 20% in just over a year on the fears of a eurozone collapse, and only the assurances of Draghi “to do whatever it takes” avoided a worse outcome.

On Monday morning Asian news reports that the United States is still preparing for the North Korea Summit.

This article was written by FxPro

EURUSD and GOLD give back all the gains

EURUSD started this week great but it did not last for long. The second half of the Monday was very bad for the main pair and instead of the legitimate buy signal we got the sell one instead. The price broke the 1.194 support and the lower line of the flag. Currently, we are using the 1.194 as a resistance and the further drop is more probable.

Gold is also suffering because of the stronger USD. Here, it was a little bit more expected as the style of the bullish bounce was very questionable. Buyers failed to break the 1322 USD/oz and failed to hold above the 1318 USD/oz. As for now, the sentiment is negative and another test of the 1305 USD/oz looks imminent.

Good buying opportunity can be spotted on the EURCAD, where the price is bouncing from the combination of three important supports: long-term up trendline, 38,2% Fibonacci and the horizontal one on the 1.523. The mid/long-term buy signal is definitely on.

This article is written by Tomasz Wisniewski, a senior analyst at Alpari Research & Analysis

Downside Action in Vogue for Euro Again

The U.S Dollar has been strong the past week and speculators may aim for downside action from the Euro short term.

Euro Resumes its Downward Trend this Morning

The Euro has resumed its downward trend early this morning and is below the 1.29 juncture versus the U.S Dollar. After showing some stability yesterday, trading has turned negative again for the Euro, as the U.S Dollar has reignited its strong run in forex.

EUR/USD 4H Chart
EUR/USD 4H Chart

The Euro is near critical support and the 1.21 level may appear to support psychologically, while resistance now appears to be the 1.2275 mark.

Long Term Support Ratios Being Tested Now

However, for traders who like to gauge forex via a daily chart scenario, the Euro is actually hovering above vital long-term technical ratios. And should it nosedive further, the Euro clearly shows the possibility of falling to around 1.20 against the U.S Dollar.

EUR/USD Daily Chart
EUR/USD Daily Chart

The European Central Bank Press Conference is tomorrow but no major changes to policy are expected. It may be the U.S growth numbers on Friday which impact the Euro more. Until then traders need to remain alert.

In the short term, we believe the Euro could be positive. The mid-term and Long term we are unbiased.

Yaron Mazor is a senior analyst at SuperTraderTV.

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Technical Outlook of Important CAD Pairs: 25.04.2018

USD/CAD

USDCAD’s break of 1.2805-15 horizontal-area presently struggles with the 1.2860 resistance-line in order to justify its strength in targeting the 1.2900 and the 1.2945-50 upside barriers. Though, break of 1.2950 could quickly propel the quote towards 1.3000 and the 1.3050 resistances. Should prices fail to clear the 1.2860 mark, the 1.2830 can act as immediate support before highlighting the 1.2815-05 region for one more time. Given the pair’s drop beneath the 1.2805, also smashing the 1.2800 round-figure, the 1.2770 and the 1.2745 can reappear on the chart. Moreover, pair’s additional declines below 1.2745 can entertain the sellers with the 1.2670 and the 1.2620 ahead of pleasing them by showing 1.2580 number.

EUR/CAD

Even if the EURCAD manages to surpass immediate trend-line resistance of 1.5705, the 1.5750-55 zone could limit the pair’s following advances, if not then its present recovery can aim for the 1.5800, the 1.5830 and the 1.5865 consecutive resistances. On the downside, the 1.5675, the 1.5640 and the 1.5600-1.5595 might be considered as adjacent supports for the pair during its U-turn. In case the pair refrains to respect the 1.5595 rest-point, the 1.5540 and the 1.5500 may become buffers prior to shifting traders’ attention to early-month low around 1.5460.

GBP/CAD

Alike EURCAD, the GBPCAD seems also finding it hard to stretch latest up-moves as month-old descending TL, at 1.7955, holds the gate for the pair’s rise in direction to the 1.8000 and the 1.8050 resistances. Assuming the pair’s ability to conquer 1.8050, the 1.8110, the 1.8135 and the 1.8170 can be buyers’ favorites. Meanwhile, the 1.7900 and the 1.7840 could offer rest to the pair on its reversal but 1.7820-15 might confine extended south-run. Though, break of 1.7815 may not hesitate reprinting the 1.7775, the 1.7730 and the 61.8% FE level of 1.7700 on pessimists’ minds.

CAD/JPY

With more than a week-long downward slanting trend-line restricting the CADJPY’s nearby upside around 84.95, the pair may revisit 84.55 before availing the 84.30-25 support. Should the pair declines below 84.25, an ascending TL, at 83.30, becomes important to watch, which if broken could drag the prices to 82.80 and the 82.50 supports. Alternatively, break of 84.95 can again fuel the quote to 85.20 and the 85.45 while recent high of 85.75 and the 86.30, comprising 61.8% FE, seem crucial then after.

Cheers and Safe Trading,
Anil Panchal

How Could Ecofin Meetings Affect the Euro?

Ecofin stands for Economic and Financial Affairs Council, which is responsible for policy-making in relation to the economy, taxation issues and financial services regulation.

As such, this council can have a major impact on any economy in the EU, and any Ecofin meeting is an event which forex traders investing in the euro keep a keen eye out for. Here are some of the ways Ecofin meetings can affect the euro and investors.

Caution

Given that Ecofin meetings often have an impact on major economic and financial policies in the EU; it makes sense that traders may be cautious in the run-up to such meetings. New economic policies in the EU have a good chance of affecting the value of the euro in both the short and long term, so those investors who want to avoid volatility may sell their euros before the meeting occurs (potentially reducing its value).

Any forex calendar worth its salt will undoubtedly have this event flagged for its significance and potential to affect any currency paired with the euro, and professional forex traders worldwide will likely monitor it closely.

Opportunities

That being said, the Ecofin meetings also present a chance for forex traders to take advantage of any volatility they investigate, as the value of the euro could well shoot up in the short term if investors believe that any given policy will strengthen the currency.

Depending on the traders’ strategies, the Ecofin meetings could well prove to be a major opportunity for forex traders across the world to invest in the euro. Provided they are willing to take on the extra risk, they may well find that the meetings make them a profit.

Member States

It is important to note that these meetings are attended by many different (European) countries, so it is likely that any policymaking will be fairly limited, given that it needs consent and input from nearly all members present.

As such, it could be the case that any impact these meetings have on the long-term value of the euro is actually fairly minimal, and those traders seeking long-term gains may not gain anything from these meetings (although they may still have a small impact).

The Policies

Much of the Ecofin meetings’ potential to impact the euro’s value depends on the actual policies being discussed, and how significant they may be in relation to trade and different EU economies.

During the Greek debt crisis in 2015, for instance, it was Ecofin which had a major role in providing bailout money for the Greek economy (after forcing the country to accept strict reforms). Major policies like this can have a huge effect on the euro’s value, whereas the more mundane, low profile policies are less likely to impact its value.

Ultimately, Ecofin meetings mostly have the potential to affect the euro’s value in the short term, potentially making the currency more volatile in the run-up to the meeting. In the long term, however, the effect is likely to be more limited.

This article was written by Vanessa Bastos

EURCAD and USDCAD – H&S Formations Work!

Today, as always, we do have three good trading occasions. Two of them are with CAD and have nice head and shoulders patterns, which are already up and running. EURCAD is the first one. Here, the price broke the up trendline (red), neckline (blue) and the horizontal support (orange). After that, we got a strong drop and then, a reversal testing the recent support as a resistance. The test was positive for the sellers and currently, the price is making new weekly lows. The potential target is 380 pips lower.

USDCAD had a similar setup. The broken neckline and then, the comeback testing it as a resistance. There was a small difference though. On EURCAD sellers were much stronger. On the USDCAD, the price managed to climb back above the neckline which was scary for many bears. At the end of the day, they managed to push the price lower but for sure they had a bit of stress. Sell signal is on.

The last one is the NZDUSD, which broke the mid-term down trendline and is heading towards the yearly highs. After bouncing off the 38,2% Fibo, the chances that we will get there are very high.

This article is written by Tomasz Wisniewski, a senior analyst at Alpari Research & Analysis

Cable still under the neckline. Good setups on the EURUSD and EURCAD!

Cable is having a beautiful head and shoulders pattern. The formation is already active as the price broke the neckline. We even tested that as a resistance. As long as we stay below the 1.408, the sentiment is negative and we should see a further drop.

EURCAD is also having a head and shoulders formation but the thing is that we did not break the neckline yet. That is what sellers are expecting and hoping for now. The breakout of the neckline will be a strong signal to go short with a nice risk to reward ratio. The target for this slide is more than 500 pips lower. Tempting, huh?

Since the middle of January, EURUSD is locked inside of the range between 1.218 and 1.254 (orange). We are waiting for the breakout, which can potentially bring us a very lucrative movement. The situation is interesting for the patient traders only cause it looks like we will have to wait for this breakout a bit.

This article is written by Tomasz Wisniewski, a senior analyst at Alpari Research & Analysis

Technical Outlook of USD/CAD, EUR/CAD, CAD/JPY & CAD/CHF: 15.03.2018

USD/CAD

With its another bounce towards the 1.3000–1.3010 horizontal-region, the USDCAD seem capable enough to surpass the same during this time and may even rise to 61.8% FE level of 1.3040. However, overbought RSI is likely a problem that might confine the pair’s rally beyond 1.3040, which if ignored could please the Bulls with 1.3100 and the 1.3160 resistances. In case if the pair again fails to clear the 1.3010, the 1.2920 and an upward slanting trend-line, at 1.2865, can entertain counter-trend traders. Should prices drop beneath the 1.2865, another ascending TL figure of 1.2800 and the 1.2755-60 horizontal-area might gain market attention.

EUR/CAD

Alike USDCAD, the EURCAD is also near to short-term important resistance-line, it’s a week-long descending TL figure of 1.6050 in this case, breaking which the pair can rally to the 1.6120 and then to the 61.8% FE level of 1.6215. Moreover, pair’s successful trading above 1.6215 could help it aim for 1.6300 and the 1.6320 resistances. On the downside, the 1.5980, the 1.5915 and the 1.5860 could act as immediate rests for the pair to avail before highlighting the 1.5835 trend-line support. Given the pair extended downturn below 1.5835, the 1.5750-45 could try challenging the sellers before pleasing them with 1.5685 number.

CAD/JPY

Following its inability to sustain the TL break during last-week, the CADJPY again aims to visit the 81.35 support but has to clear the 81.65 barrier. If Bears keep dominating the momentum after 81.35, the 61.8% FE level of 80.75 and the 80.00 round-figure could appear in their radars to target. Meanwhile, 82.00 and the 82.30 may restrict the pair’s nearby upside, breaking which 82.90 & 83.45 can test its strength. Additionally, 83.85 and the 84.50 can become the buyers’ favorite if they conquer the 83.45 mark.

CAD/CHF

Considering the immediate ascending trend-line support and the RSI recovery, CADCHF is likely recovering towards 0.7320, breaking which the 0.7345, the 0.7370 and the 0.7400 may offer consecutive resistances to the pair ahead of pushing it to the 0.7425 horizontal-line. In case if the pair rallies beyond 0.7425, 0.7470 & 0.7500 may play their roles. Alternatively, break of the 0.7275 trend-line support can fetch the quote to 0.7245 and then to the 0.7220 while its following downside can be limited by 61.8% FE level of 0.7175. During the pair’s further declines below 0.7175, the 2017 low of 0.7120 and the 0.7100 round-figure seem important to observe.

Cheers and Safe Trading,
Anil Panchal