AUD/USD Price Forecast – Continues to Build Up Pressure to the Upside

The Australian dollar initially pulled back during the course of the trading session on Thursday to reach down towards the 50 day EMA. Ultimately, it looks as if the market is trying to build up enough momentum to finally break above the 0.78 handle, which of course is the massive resistance barrier that the market has been fighting for some time. All things been equal, the market breaking above there could open up the possibility of a move to the 0.80 level given enough time. That of course is an area that is important from a longer-term standpoint, as you can see it clearly as resistance on the monthly chart.

AUD/USD Video 07.05.21

Ultimately, if we can break above that 0.80 region of resistance, this market will go much higher. It would then become a “buy-and-hold” situation, but overnight China decided that they were going to end all discussions involving trade with the Australians, so there was a little bit of a selloff that lasted just a short amount of time. Ultimately, the commodity boom should continue to lift the Australian dollar over the longer term, but obviously we have a lot of noise to deal with. The last couple of months have been very difficult, and it appears that we have more of the same ahead of us.

That being said, if we were to turn around and break below the 0.76 level it is likely that we could go looking towards the 0.75 level. If we break down below that handle, then I believe that the Australian dollar probably needs to “reset” closer to the 0.70 level which of course is an area that will attract a lot of attention due to the psychological importance of it.

For a look at all of today’s economic events, check out our economic calendar.

AUD/USD Forex Technical Analysis – If Downside Momentum Continues then Look for Test of .7675 – .7641

The Australian Dollar is edging lower on Thursday as traders position themselves ahead of a speech by Reserve Bank Governor Guy Debelle at 09:00 GMT. On Wednesday, the Aussie Dollar rose as the U.S. Dollar retreated after a report showed the private sector added fewer jobs than forecast.

At 04:34 GMT, the AUD/USD is trading .7728, down 0.0020 or -0.26%.

U.S. private payrolls rose by the most in seven months in April, ADP data showed on Wednesday, as companies boosted production to meet a surge in demand amid massive government spending and rising COViD-19 vaccinations. But the 742,000 private jobs created fell short of the 800,000 jobs expected by economists in a Reuters poll.

Daily AUD/USD

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The trend turned down on Tuesday when sellers took out the swing bottom at .7691. A trade through .7675 will signal a resumption of the downtrend. A move through .7818 will change the main trend to up.

The short-term range is .7532 to .7818. Its retracement zone at .7675 to .7641 is the next downside target and potential support area.

The main range is .8007 to .7532. Its retracement zone at .7770 to .7826 is resistance. This zone stopped the rally at .7818 last week.

Daily Swing Chart Technical Forecast

The direction of the AUD/USD on Thursday is likely to be determined by trader reaction to the main 50% level at .7770.

Bearish Scenario

A sustained move under .7770 will indicate the presence of sellers. If the move creates enough downside momentum then look for the selling to possibly extend into the short-term retracement zone at .7675 to .7641. We could see a technical bounce on the first test of this area, but if it fails then look for a possible spike into the .7586 main bottom.

Bullish Scenario

A sustained move over .7770 will signal the presence of buyers. If this move generates enough upside momentum then look for the rally to possibly extend into the main top at .7818, followed closely by the main Fibonacci level at .7826. Taking out this level could trigger a further rally into the main top at .7849. This is a potential trigger point for an acceleration to the upside.

For a look at all of today’s economic events, check out our economic calendar.

Economic Data and Monetary Policy in Focus, with the Bank of England in the Spotlight

Earlier in the Day:

It was a relatively quiet start to the day on the economic calendar this morning. The Kiwi Dollar was in action early this morning.

For the Kiwi Dollar

Building consents were in focus this morning.

In March, building consents jumped by 17.9% following a revised 19.3% slide in February.

According to NZ Stats,

  • A record 41,028 new homes had been consented in the year ended March 2021.
  • In the month of March, a monthly record 4,128 new homes were consented.

The Kiwi Dollar moved from $0.72178 to $0.72169 upon release of the figures. At the time of writing, the Kiwi Dollar was up by 0.01% to $0.7217.

Elsewhere

At the time of writing, the Japanese Yen was down by 0.11% to ¥109.33 against the U.S Dollar, while the Aussie Dollar was up by 0.01% to $0.7748.

The Day Ahead:

For the EUR

It’s a quieter day ahead on the economic data front. German factory orders and Eurozone retail sales figures will be in focus later today.

While we will expect some EUR sensitivity to the retail sales figures, German factory orders will likely be the key driver.

At the time of writing, the EUR was down by 0.02% to $1.2003.

For the Pound

It’s a relatively quiet day ahead on the economic calendar. Finalized services and composite PMI figures are due out for the UK.

Expect any revisions to the services PMI to influence ahead of the Bank of England monetary policy decision later in the day.

With the markets expecting the BoE to stand pat, any dissent in the ranks and hawkish chatter would give the Pound a boost.

At the time of writing, the Pound was flat at $1.3905.

Across the Pond

It’s a relatively quiet day ahead on the economic calendar. Unit labor costs and nonfarm productivity figures for the 1st quarter are in focus later today along with jobless claims figures.

Expect the weekly jobless claims figures to be the key driver. The markets will be looking for a fall to sub-500k levels ahead of tomorrow’s NFP numbers.

At the time of writing, the Dollar Spot Index was up by 0.01% to 91.316.

For the Loonie

It’s another quiet day ahead on the economic calendar. There are no material stats due out of Canada to provide the Loonie with direction. The lack of stats will leave the Loonie in the hands of market risk sentiment on the day.

At the time of writing, the Loonie was down by 0.01% to C$1.2268 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

May 6th 2021: DXY Enters Quiet Phase Above 91.00 as Traders Await US Job’s Data on Friday

Charts: Trading View

EUR/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Following a three-month retracement, demand at 1.1857-1.1352 made an entrance and inspired a bullish revival in April, up 2.4 percent at the close.

April upside throws light on the possibility of fresh 2021 peaks in the months ahead, followed by a test of ascending resistance (prior support [1.1641]).

Based on trend studies, the primary uptrend has been underway since price broke the 1.1714 high (Aug 2015) in July 2017. Additionally, price also breached trendline resistance, taken from the high 1.6038, in July 2020.

Daily timeframe:

Technical structure unchanged from previous analysis.

Thanks to Wednesday’s bearish presence heading into the European close, the 200-day simple moving average is now within touching distance, currently circling 1.1940 levels. This—as aired in recent technical writing—represents a dynamic value that could deliver support if tested. To the upside, however, Quasimodo resistance stands at 1.2169.

In terms of trend, despite the 2021 retracement, the currency pair has been entrenched within an uptrend since early 2020, movement that many traders will likely refer to as a primary trend on this timeframe.

The RSI recently placed support at 51.36 in the mix, following a retreat south of the overbought setting in late April.

H4 timeframe:

Wednesday’s decline, as evident from the H4 scale, had EUR/USD shake hands with support at 1.1990 and a Fibonacci cluster between 1.1971 and 1.1986 (a defined area on a price chart where Fib retracement levels converge). For the moment, buyers have welcomed the area, yet to add bullish conviction traders are likely watching for either a break of yesterday’s high at 1.2026 or a bullish candlestick configuration to form.

As highlighted in Wednesday’s technical briefing, overthrowing the aforesaid Fib cluster unearths additional support at 1.1937 (aligns closely with the 200-day simple moving average on the daily scale), while a decisive rotation to the upside shines light on resistance at 1.2108.

H1 timeframe:

For those who read Wednesday’s technical briefing, you may recall the following (italics):

From the H4 timeframe, however, focus is on support at 1.1971/1.1990 (support/Fibonacci cluster). This also unlocks a possible whipsaw through 1.20 on the H1 to test the noted H4 support as well as H1 support at 1.1989. A H1 close back above 1.20—following a 1.1971/1.1990 test—is likely to be interpreted as a bullish theme, targeting at least 1.2035 (H1) resistance.

As evident from the H1 chart, 1.20 did indeed embrace a mild whipsaw on Wednesday, allowing support to 1.1989 to enter the fray. However, upside attempts have been somewhat lacklustre thus far, unable to pencil in a fresh higher high and reach H1 resistance at 1.2035.

Action out of the RSI indicator reveals the value has struggled to overturn 47.50 resistance, parked just south of the 50.00 centreline. However, readers may also be aware that 47.50 rejections have become softer in recent trade, echoing a possible break in the not-to-distant future.

Observed levels:

Recovery from the key figure 1.20 on the H1 could still grace the chart, reinforced by the H4 crossing swords with support at 1.1971/1.1990 (support/Fibonacci cluster) and the monthly scale showing buyers rebounding from demand at 1.1857-1.1352.

Another dip-buying scenario to be mindful of is a move to H4 support at 1.1937, a level sharing chart space with the 200-day simple moving average from 1.1940 (daily timeframe).

AUD/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Since the beginning of 2021, buyers and sellers have been battling for position south of trendline resistance (prior support – 0.4776 high) and supply from 0.8303-0.8082. Should a bearish scenario unfold, demand at 0.7029-0.6664 (prior supply) is featured to the downside.

Trend studies (despite the trendline resistance [1.0582] breach in July 2020) show the primary downtrend (since mid-2011) remains in play until breaking 0.8135 (January high [2018]).

Daily timeframe:

Technical structure unchanged from previous analysis.

From mid-April, AUD/USD has been consolidating around resistance from 0.7817.

Territory to the downside shines the technical spotlight on February’s low at 0.7563, followed closely by trendline resistance-turned support, extended from the high 0.8007, and the 200-day simple moving average at 0.7466.

Rupturing 0.7817, nevertheless, unbolts the door for an approach to supply at 0.8045-0.7985.

Interestingly, the RSI value recently tested trendline support-turned resistance, extended from the low 36.55, though has so far been unable to influence a bearish presence south of the 50.00 centreline. Therefore, traders are urged to pencil in the possibility of a move north to test trendline resistance, drawn from the high 80.12.

H4 timeframe:

Elevated on the back of risk flow—note strong gains witnessed in European equity indexes—the Australian dollar eked out modest gains versus the greenback on Wednesday.

Erasing the majority of Tuesday’s losses, yesterday’s gains lifted price action out of 0.7696-0.7715 demand (this area experienced a whipsaw on Tuesday) and clocked a session peak at 0.7755.

AUD/USD bulls are likely eyeballing Monday’s tops at 0.7766, followed by Quasimodo resistance at 0.7800.

Also of technical relevance is the currency pair has been busy carving out a consolidation between the 0.7800 Quasimodo resistance and the aforesaid demand area since April 20th.

H1 timeframe:

US trade, in spite of efforts to hold beneath the 100-period simple moving average around 0.7737, dethroned the said SMA and crossed paths with resistance at 0.7752.

Territory north of 0.7752 throws light on a Fibonacci cluster between 0.7767 and 0.7760, closely shadowed by Quasimodo resistance at 0.7777.

Interestingly, RSI movement scaled above the 50.00 centreline and clocked tops just south of overbought status, which guided a test of a neighbouring trendline support, extended from the low 24.48.

Observed levels:

Follow-through upside, according to the H4 chart, is a possibility, at least until reaching Monday’s tops at 0.7766. Despite this, short-term buyers face H1 resistance at 0.7752, together with a Fibonacci cluster between 0.7767 and 0.7760 (which houses Monday’s peak at 0.7766).

Longer term, daily eyes likely remain on resistance from 0.7817, consequently drawing attention to the 0.78 figure based on the H1 scale and Quasimodo resistance from 0.7800 on the H4.

USD/JPY:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Following January’s bullish engulfing candle and February’s outperformance, March concluded up by 3.9 percent and marginally cut through descending resistance, etched from the high 118.66.

Although April finished lower by 1.3 percent and snapped the three-month winning streak, the pair is attempting to hold the breached descending resistance, echoing potential support.

Daily timeframe:

Technical structure unchanged from previous analysis.

Despite the monthly timeframe chalking up possible supportive structure, the daily timeframe has price engaging supply at 109.97-109.18.

Trendline support, extended from the low 102.59, serves as a downside target south of current supply; a bullish showing, on the other hand, casts light towards longer-term supply at 110.94-110.29, stationed under another supply at 111.73-111.19.

Trend studies show the unit has been trending higher since the beginning of 2021.

The RSI indicator, although ending last week above the 50.00 centreline (a sign of trend strength), is seen testing resistance at 57.00.

H4 timeframe:

Technical structure unchanged from previous analysis.

61.8% Fib resistance at 109.60—located under supply at 109.97-109.72 (an area positioned within the upper range of daily supply at 109.97-109.18)—remain primary areas on the H4 scale, with support at 108.99 serving as a floor for the time being.

External areas to be aware of are support at 108.50 and neighbouring demand from 108.20-108.43, in addition to supply posted at 110.85-110.46 (fixed within daily supply at 110.94-110.29).

H1 timeframe:

It was another relatively quiet session on Wednesday, with buyers and sellers going toe to toe between the 100-period simple moving average (now circling 109.21) and supply from 109.52-109.39 (a decision point to break the 109.26 low). Despite this, we see sellers attempting to overthrow the aforesaid moving average, as we write.

Below the moving average, 109 stands in sight, joined by trendline support, drawn from the low 107.47. Below 109, however, unmasks demand at 108.57-108.46.

Above current supply, aside from tops around Monday’s peak at 109.69, we can see resistance calling at 109.95, alongside the 110 figure.

Observed levels:

The 109 figure on the H1, aligning with H1 trendline support, is an area short-term buyers may take aim at today, particularly as the 100-period simple moving average is on the verge of giving way. What’s also technically appealing around 109 is H4 support plotted at 108.99.

Technicians are also likely to note monthly currently testing descending resistance-turned support.

GBP/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

The pendulum swung in favour of buyers following December’s 2.5 percent advance, stirring major trendline resistance (2.1161). February subsequently followed through to the upside (1.7 percent) and refreshed 2021 highs at 1.4241, levels not seen since 2018. Contained within February’s range, however, March and April witnessed decreased volatility.

Despite the trendline breach (which could serve as possible support if retested), primary trend structure has faced lower since early 2008, unbroken (as of current price) until 1.4376 gives way (April high 2018).

Daily timeframe:

Technical structure unchanged from previous analysis.

Resistance at 1.4003 has proved a stubborn hurdle since March, capping upside attempts on multiple occasions. Any downside from this base throws light on 1.3670 bottoms, arranged north of Quasimodo support at 1.3609.

Should buyers regain consciousness and brush aside current resistance, Quasimodo resistance at 1.4250 could enter the frame.

From the RSI indicator, the value recently dropped from 58.20 peaks and crossed swords with trendline support, pencilled in from the low 36.14. As you can see, the aforementioned trendline is holding for the time being.

As for trend, GBP/USD has been trending higher since early 2020, despite the two-month retracement.

H4 timeframe:

Technical structure unchanged from previous analysis.

Resistance at 1.3919 continues to reject upside movement, following Monday’s one-sided advance from demand at 1.3809-1.3832.

Upstream—north of 1.3919— brings light to tops around 1.3976, followed by Quasimodo resistance at 1.4007. Below the aforesaid demand brings attention to Quasimodo support at 1.3750, which happens to align with a 1.272% Fib projection at 1.3746 and a 78.6% Fib level at 1.3739 (Fib cluster).

H1 timeframe:

Sellers failed to step in from the 1.39 figure and 100-period simple moving average on Wednesday, highlighting nearby resistance at 1.3929.

As shown on the H1 chart, 1.39 represents support at the moment, aided by the aforesaid moving average. Defending 1.39 as support and taking on 1.3929 resistance potentially sets the technical stage for a run to tops noted on the H4 scale at 1.3976, as well as the 1.40 figure (housed between H1 Fibonacci resistance at 1.4013-1.3988).

Observed levels:

The combination of the 1.39 figure on the H1 and the 100-period simple moving average is a zone possibly on the radar today for short-term buyers. Breaking H1 resistance at 1.3929 could add bullish weight as this would also secure a bullish presence north of H4 resistance from 1.3919.

Longer term, technical eyes are perhaps drawn to daily resistance at 1.4003, which blends closely with the key figure 1.40 on the H1 and Quasimodo resistance on the H4 at 1.4007.

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AUD/USD Price Forecast – Australian Dollar Continues Consolidation

The Australian dollar rallied again during the course of the trading session on Wednesday as we have bounced from the 50 day EMA yet again. This is a market that continues to try to work off some of the recent consolidation and decide where it is going to go next. The 50 day EMA appears to be followed closely by technical traders and has been important multiple times over the last couple of weeks. With this being the case, I do believe that we will continue to go back and forth in the short term, perhaps waiting on the jobs number on Friday.

AUD/USD Video 06.05.21

To the downside, if we were to break down below the 50 day EMA there is plenty of support underneath there near the 0.76 handle, so I think we are essentially stuck in this range. This is especially true when you look at the 0.78 level and how resistive it has been. In other words, there is so much going on in this pair that is difficult to imagine that we are going to see an easy escape. That being said, eventually there will be an impulsive candlestick that you can fall, but we do not have it yet and therefore unless you are a short-term range bound trader, you probably do not have much to do in this pair. Furthermore, there are a lot of questions about China, as it stock markets have underperformed most of its peers, showing that there is perhaps some cracks in the ice when it comes to the Chinese economy. If that is going to continue to be the case, this pair is going to struggle to break out.

For a look at all of today’s economic events, check out our economic calendar.

Economic Data Puts the EUR, Pound, and Dollar in the Spotlight

Earlier in the Day:

It was a relatively busy start to the day on the economic calendar this morning. The Kiwi Dollar and the Aussie Dollar were in action early this morning.

For the Kiwi Dollar

Employment figures were in focus this morning.

In the 1st quarter, employment increased by 0.6%, following a 0.6% rise in the 4th quarter of last year. Economists had forecast a 0.2% rise.

According to NZ Stats,

  • The unemployment rate fell from 4.9% to 4.7% in the March quarter, easing further back from a Q3 peak of 5.2%.
  • While easing back, however, the unemployment remained high compared with recent years.
  • The underutilization rate increased by 0.4 percentage points to 12.2% quarter-on-quarter. Year-on-year, the underutilization rate was up by 1.8 percentage points.
  • Quarter-on-quarter, the employment rate increased from 66.8% to 67.1%, while down by 67.7% from the March quarter of 2020.

The Kiwi Dollar moved from $0.71500 to $0.71701 upon release of the figures. At the time of writing, the Kiwi Dollar was up by 0.41% to $0.7174.

For the Aussie Dollar

Building approvals were in focus this morning.

In March, building approvals rose by 17.4% following a 21.6% jump in February. Economists had forecast a more modest 3.0% rise.

The Aussie Dollar moved from $0.77254 to $0.77304 upon release of the figures. At the time of writing, the Aussie Dollar was up by 0.38% to $0.7736.

Elsewhere

At the time of writing, the Japanese Yen was up by 0.06% to ¥109.26 against the U.S Dollar.

The Day Ahead:

For the EUR

It’s a busy day ahead on the economic data front. Service sector PMIs for Italy and Spain are due out along with finalized PMIs for France, Germany, and the Eurozone.

Barring marked revisions to prelim figures, Italy’s services PMI and the Eurozone’s Composite PMI will likely have the greatest impact.

The devil will be in the details, with employment, new orders, and sector optimism likely to be material takeaways from the surveys.

At the time of writing, the EUR was up by 0.09% to $1.2025.

For the Pound

It’s a quiet day ahead on the economic calendar. There are no material stats for the markets to consider ahead of the Bank of England monetary policy decision tomorrow.

The lack of stats will leave the Pound in the hands of market risk sentiment on the day.

At the time of writing, the Pound was up by 0.18% to $1.3912.

Across the Pond

It’s a relatively busy day ahead on the economic calendar. The market’s favored ISM Non-Manufacturing PMI is due out along with finalized Markit services and composite PMI numbers.

Ahead of the private sector PMIs, ADP nonfarm employment change figures are also due out.

Expect the ADP nonfarm employment change and Non-Manufacturing PMIs to have the greatest impact on the day.

At the time of writing, the Dollar Spot Index was down by 0.12% to 91.177.

For the Loonie

It’s a quiet day ahead on the economic calendar. There are no material stats due out of Canada to provide the Loonie with direction. The lack of stats will leave the Loonie in the hands of crude oil inventory numbers and market risk sentiment on the day.

At the time of writing, the Loonie was up by 0.18% to C$1.2287 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

May 5th 2021: Soured Risk Appetite Elevates Safe-Haven USD Demand; Euro Tests $1.20

Charts: Trading View

EUR/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Following a three-month retracement, demand at 1.1857-1.1352 made an entrance and inspired a bullish revival in April, up 2.4 percent at the close.

April upside throws light on the possibility of fresh 2021 peaks in the months ahead, followed by a test of ascending resistance (prior support [1.1641]).

Based on trend studies, the primary uptrend has been underway since price broke the 1.1714 high (Aug 2015) in July 2017. Additionally, price also breached trendline resistance, taken from the high 1.6038, in July 2020.

Daily timeframe:

Largely unchanged from previous analysis.

The 200-day simple moving average remains flirting around 1.1939 levels, a dynamic value that could deliver support if tested. Quasimodo resistance at 1.2169, on the other hand, commands attention to the upside.

Despite the 2021 retracement, trend studies reveal the currency pair has been entrenched within an uptrend since early 2020, movement that many traders will likely refer to as a primary trend on this timeframe.

In terms of RSI action, last week’s withdrawal from 69.00 positions the value within shouting distance of support at 51.36.

H4 timeframe:

Technical structure unchanged from previous analysis.

The Dollar index (ticker: DXY) firmed Tuesday, unwinding a portion of April’s 2 percent decline amid fading risk appetite.

As you can see, this pressured Europe’s single currency to fresh weekly troughs at 1.1998, and consequently tipped the scales in favour of a move to support at 1.1990 and a Fibonacci cluster between 1.1971 and 1.1986 (a defined area on a price chart where Fib retracement levels converge).

Overthrowing the aforesaid Fib cluster unearths additional support at 1.1937 (aligns closely with the 200-day simple moving average on the daily scale), while a rotation to the upside shines light on resistance at 1.2108.

H1 timeframe:

Tuesday’s bearish phase watched the 1.20 figure make an appearance, action that clearly stirred short-term bullish interest mid-way through London hours. Technically interesting here is the support level residing beneath 1.20 at 1.1989, a prior Quasimodo resistance.

RSI movement on the H1 pencilled in bullish divergence yesterday, as price shook hands with 1.20. Subsequent action witnessed the RSI value exit oversold waters to test space just south of the 50.00 centreline.

Observed levels:

Partly modified from previous analysis.

April showing life out of monthly demand from 1.1857-1.1352 reinforces a possible retest (dip-buying scenario) at the 200-day simple moving average from 1.1939 (daily timeframe).

From the H4 timeframe, however, focus is on support at 1.1971/1.1990 (support/Fibonacci cluster). This also unlocks a possible whipsaw through 1.20 on the H1 to test the noted H4 support as well as H1 support at 1.1989. A H1 close back above 1.20—following a 1.1971/1.1990 test—is likely to be interpreted a bullish theme, targeting at least 1.2035 (H1) resistance.

AUD/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Since the beginning of 2021, buyers and sellers have been battling for position south of trendline resistance (prior support – 0.4776 high) and supply from 0.8303-0.8082. Should a bearish scenario unfold, demand at 0.7029-0.6664 (prior supply) is featured to the downside.

Trend studies (despite the trendline resistance [1.0582] breach in July 2020) show the primary downtrend (since mid-2011) remains in play until breaking 0.8135 (January high [2018]).

Daily timeframe:

Technical structure unchanged from previous analysis.

From mid-April, AUD/USD has been consolidating around resistance from 0.7817.

Territory to the downside shines the technical spotlight on February’s low at 0.7563, followed closely by trendline resistance-turned support, extended from the high 0.8007.

Rupturing 0.7817, nevertheless, unbolts the door for an approach to supply at 0.8045-0.7985.

Interestingly, the RSI value is seen testing trendline support-turned resistance, extended from the low 36.55, and recently nudged south of the 50.00 centreline. North of here, traders are urged to pencil in trendline resistance, drawn from the high 80.12.

H4 timeframe:

A bearish phase unfolded on Tuesday, largely driven on the back of a USD bid amidst safe-haven demand.

Technically, this had price action whipsaw through the walls of 0.7696-0.7715 demand (and trendline support, taken from the low 0.7531), movement which missed a Fibonacci cluster between 0.7657 and 0.7672 by a whisker (green).

Upside targets to be mindful of on the H4 scale are Monday’s tops at 0.7766, followed by Quasimodo resistance at 0.7800.

H1 timeframe:

Early US hours delivered a vigorous whipsaw through 0.77 bids on Tuesday, with enough force to trip protective stops and fill breakout sellers’ sell stops to cause a bear trap. Traders will note that price snapping through 0.77 not only came within striking distance of support at 0.7668, the move was accompanied by RSI bullish divergence and a near-test of RSI support at 19.40 (the value now hovers nearby the underside of the 50.00 centreline).

The absence of supply north of 0.77 unlocks a possible bid today, taking aim at resistance from 0.7752 and the 100-period simple moving average.

Observed levels:

The 0.77 whipsaw on the H1—together with H4 crossing swords with trendline support and coming within a whisker of testing Fibonacci support at 0.7657/0.7672—underlines a potential bullish scenario above 0.77, targeting at least H1 resistance from 0.7752.

USD/JPY:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Following January’s bullish engulfing candle and February’s outperformance, March concluded up by 3.9 percent and marginally cut through descending resistance, etched from the high 118.66.

Although April finished lower by 1.3 percent and snapped the three-month winning streak, the pair is attempting to hold the breached descending resistance, echoing potential support.

Daily timeframe:

Technical structure unchanged from previous analysis.

Despite the monthly timeframe chalking up possible supportive structure, the daily timeframe has price engaging supply at 109.97-109.18.

Trendline support, extended from the low 102.59, serves as a downside target south of current supply; a bullish showing, on the other hand, casts light towards longer-term supply at 110.94-110.29, stationed under another supply at 111.73-111.19.

Trend studies show the unit has been trending higher since the beginning of 2021.

The RSI indicator, although ending last week above the 50.00 centreline (a sign of trend strength), is seen testing resistance at 57.00.

H4 timeframe:

61.8% Fib resistance at 109.60—located under supply at 109.97-109.72 (an area positioned within the upper range of daily supply at 109.97-109.18)—remain primary areas on the H4 scale, with support at 108.99 serving as a floor for the time being.

External areas to be aware of are support at 108.50 and neighbouring demand from 108.20-108.43, in addition to supply posted at 110.85-110.46 (fixed within daily supply at 110.94-110.29).

H1 timeframe:

Monday’s 109 test—aided by the 100-period simple moving average—elevated the currency pair higher on Tuesday, consequently crossing paths with supply at 109.52-109.39 (a decision point to break the 109.26 low) and intersecting trendline support-turned resistance, taken from the low 107.64.

The 109.52-109.39 test, as you can see, pressured short-term flow to the 100-period simple moving average, which replied with a bullish wave back to the aforesaid supply.

Above current supply, aside from tops around Monday’s peak at 109.69, we can see resistance calling at 109.95, alongside the 110 figure. Below 109, however, trendline support, drawn from the low 107.47, is seen close by, with subsequent selling unmasking demand at 108.57-108.46.

Observed levels:

Short-term range traders will likely be drawn to the H1 scale today, as price fluctuates between supply at 109.52-109.39 and the 109 base (along with the 100-period simple moving average). Technicians may also note the 109 figure aligns closely with H4 support at 108.99.

Range traders, however, are urged to pencil in the possibility of whipsaws forming. Directly above H1 supply we have the H4 timeframe’s 61.8% Fib resistance at 109.60, while south of 109 has H1 trendline support ready to accept any fakeout movement.

GBP/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

The pendulum swung in favour of buyers following December’s 2.5 percent advance, stirring major trendline resistance (2.1161). February subsequently followed through to the upside (1.7 percent) and refreshed 2021 highs at 1.4241, levels not seen since 2018. Contained within February’s range, however, March and April witnessed decreased volatility.

Despite the trendline breach (which could serve as possible support if retested), primary trend structure has faced lower since early 2008, unbroken (as of current price) until 1.4376 gives way (April high 2018).

Daily timeframe:

Technical structure unchanged from previous analysis.

Resistance at 1.4003 has proved a stubborn hurdle since March, capping upside attempts on multiple occasions. Any downside from this base throws light on 1.3670 bottoms, arranged north of Quasimodo support at 1.3609.

Should buyers regain consciousness and brush aside current resistance, Quasimodo resistance at 1.4250 could enter the frame.

From the RSI indicator, the value dropped from 58.20 peaks and crossed swords with trendline support, pencilled in from the low 36.14.

As for trend, GBP/USD has been trending higher since early 2020, despite the two-month retracement.

H4 timeframe:

1.3809-1.3832 demand, as you can see, survived Friday’s mild breach, with GBP/USD bulls entering an offensive phase and shaking hands with resistance at 1.3919 on Monday. As evident from the chart, the aforementioned resistance held firm and supported a bearish response on Tuesday.

Below the aforesaid demand brings notice to Quasimodo support at 1.3750, which happens to align with a 1.272% Fib projection at 1.3746 and a 78.6% Fib level at 1.3739 (Fib cluster).

Above 1.3919, nonetheless, brings light to tops around 1.3976, followed by Quasimodo resistance at 1.4007.

H1 timeframe:

Monday embracing resistance at 1.3929 stirred bearish flow, with early hours Tuesday pushing below the 1.39 figure and 100-period simple moving average.

As you can see, Tuesday had price knock on the door of lows at 1.3838 in early US and stage a recovery back to within touching distance of 1.39. A bearish rejection forming from the latter today, with enough force to dethrone Tuesday’s low, throws light on a possible test of 1.38 (a level mingling with a 61.8% Fib level and a 100% Fib projection at 1.3789).

RSI flow has the value attempting to find acceptance north of the 50.00 centreline, following earlier lows at 37.40.

Observed levels:

The combination of the 1.39 figure on the H1 and the 100-period simple moving average is a zone possibly on the radar today. A stab at lower prices from the aforesaid resistances is likely to zero in on H4 demand from 1.3809-1.3832, an area shadowed by the 1.38 figure on the H1.

1.39 shorts, however, must take into account H4 resistance at 1.3919 and H1 resistance from 1.3929, as these levels could pull price higher to collect more sellers (and trip 1.39 stops) before driving lower.

DISCLAIMER:

The information contained in this material is intended for general advice only. It does not take into account your investment objectives, financial situation or particular needs. FP Markets has made every effort to ensure the accuracy of the information as at the date of publication. FP Markets does not give any warranty or representation as to the material. Examples included in this material are for illustrative purposes only. To the extent permitted by law, FP Markets and its employees shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided in or omitted from this material. Features of the FP Markets products including applicable fees and charges are outlined in the Product Disclosure Statements available from FP Markets website, www.fpmarkets.com and should be considered before deciding to deal in those products. Derivatives can be risky; losses can exceed your initial payment. FP Markets recommends that you seek independent advice. First Prudential Markets Pty Ltd trading as FP Markets ABN 16 112 600 281, Australian Financial Services License Number 286354.

AUD/USD Price Forecast – Australian Dollar Sits on 50 day EMA

The Australian dollar has fallen a bit during the trading session but continues to see support near the 50 day EMA. As a result, it looks as if we are going to continue the overall sideways action that we have seen over the last couple of days, and that we are not quite ready to break down. In that scenario, it is very likely that we will continue to see noisy behavior that we can get involved in. Because of this, I believe that the market is probably still going to try to build up enough momentum to take out the 0.78 handle, but we are clearly nowhere near being able to do that right now.

AUD/USD Video 05.05.21

The 0.76 level could be a target if we do in fact break down below the 50 day EMA on a daily close, but at this point in time I have to assume that we will see more of the same as we head towards the jobs number on Friday. With that being the case, we may have a couple more days of sideways nowhere action, as we try to figure out where to go next. That being said, if we were to turn around a break above the 0.78 handle, then I think the market is likely to go much higher, perhaps reaching towards the 0.80 level. With the commodities markets going wild, one would think that we would have already done that. We have not though, so that does make me a bit suspicious of the Aussie in general.

For a look at all of today’s economic events, check out our economic calendar.

AUD/USD and NZD/USD Fundamental Daily Forecast – Aussie Falls after RBA Disappoints

The Australian and New Zealand Dollars are under pressure on Tuesday as investors react to the release of latest monetary announcements from the Reserve Bank of Australia (RBA). Traders are reacting negatively to the disappointing news that the central bank sharply upgraded forecasts for the local economy yet still predicted no tightening in its super-loose policy until at least 2024.

At 08:47 GMT, the AUD/USD is trading .7725, down 0.0038 or -0.49%.

Rates on Hold

The RBA wrapped up its May policy meeting by holding rates at 0.1% as widely expected, while reiterating a hike was unlikely until 2024.

Major Decisions Pushed to July

The RBA said it would decide at its July meeting whether it would roll over its three-year bond target from the April 2024 line to the November 2024 note, and whether to expand its bond buying programme for a third time.

Analysts suspect that a decision not to roll over the bond target would be seen in the market as an early step toward tapering, which could put upward pressure on bond yields.

“We reiterate our view that the Bank will announce an additional A$100 billion of bond purchases in July, though we expect it to maintain the April 2024 bond for its 3-year yield target rather than switch to the November bond,” said Marcel Thieliant, senior Australia economist at Capital Economics.

RBA Turns More Bullish on Outlook

The commitment to long-term stimulus came even as the bank turned more bullish on the outlook. Notably, the bank now saw unemployment falling to 4.5% by the end of next year, down a full percentage point from its previous forecast and closer to estimates of full employment.

Daily Outlook

The AUD/USD is dropping because domestic yields are falling, making the Australian Dollar a less-attractive asset. Market pricing suggests investors assume the RBA’s bond target will not be rolled over, with three-year yields down near the target of 0.1% while four-year bonds trade up at 0.46%.

Yields on 10-year bonds dipped to 1.68% on Tuesday, but have spent two months unable to break under 1.62%.

Traders are also monitoring commodity prices. CBA’s head of international economics, Joseph Capurso, estimated the rise in commodities had lifted the Aussie’s fair value to $0.8400, within a range of $0.0078 to $.8900.

With the AUD/USD currently trading just above $.0077, by these measures, it’s grossly undervalued. However, prices aren’t likely to rise much unless real rates rise or the RBA starts the tightening process.

For a look at all of today’s economic events, check out our economic calendar.

AUD/USD Daily Forecast – Australian Dollar Moves Lower After RBA Interest Rate Decision

AUD/USD Video 04.05.21.

U.S. Dollar Gains Ground Against Australian Dollar

AUD/USD has recently made an attempt to settle below the support at the 50 EMA at 0.7710 while the U.S. dollar gained ground against a broad basket of currencies.

The U.S. Dollar Index has recently tested the resistance at the 20 EMA at 91.30 but failed to develop sufficient upside momentum and pulled back. In case the U.S. Dollar Index gets above the 20 EMA, it will move towards 91.50 which will be bearish for AUD/USD.

Today, foreign exchange market traders focused on RBA Interest Rate Decision. RBA decided to leave the rate unchanged at 0.1%, in line with the analyst consensus.

RBA noted that the economic recovery in Australia was stronger than expected. RBA also added that the number of people with a job exceeded pre-pandemic level.

RBA revised its central scenario for GDP growth and now expects that Australia’s GDP will grow by 4.75% in 2021 and 3.5% in 2022. Interestingly, RBA believes that inflation will remain modest despite strong employment and GDP growth.

Importantly, RBA reiterated that it was not considering a change of a 0.1% yield target for 3-year government bonds. As a result, low yields will continue to serve as a bearish catalyst for the Australian dollar.

Technical Analysis

aud usd may 4 2021

AUD/USD declined below the support at the 20 EMA at 0.7730 and made an attempt to settle below the support at the 50 EMA at 0.7710. If AUD/USD gets below the 50 EMA, it will test the next support level at 0.7700.

A successful test of the support at 0.7700 will open the way to the test of the support at 0.7665. If AUD/USD declines below this level, it will head towards the support at 0.7635.

On the upside, the 20 EMA will serve as the first resistance level for AUD/USD. A move above the 20 EMA will push AUD/USD towards the resistance at 0.7750. In case AUD/USD settles above this level, it will head towards the next resistance at 0.7775. A successful test of this level will open the way to the test of the resistance at 0.7800.

For a look at all of today’s economic events, check out our economic calendar.

Australia Central Bank Keeps Rates Near Zero as Economy Picks up Speed

By Swati Pandey

The Reserve Bank of Australia (RBA) reiterated its commitment to keep the cash rate at the record-low of 0.1% for as long as is needed to pull down unemployment and push inflation higher.

The RBA’s as-expected decision comes as it painted a rosy picture of the A$2 trillion ($1.55 trillion) economy, and upgraded the growth forecast to 4.75% over 2021, from its February forecast of 3.5%.

The jobless rate is seen declining to be around 5% at the end of this year and 4.5% at Dec-2022. In February, the RBA’s forecast had unemployment at 5.5% by end-2022.

“The economic recovery in Australia has been stronger than expected and is forecast to continue,” RBA Governor Philip Lowe said in a short post-meeting statement.

“A pick-up in business investment is expected and household spending will be supported by the strengthening in balance sheets over the past year,” Lowe said.

Still, the RBA signalled it’s not ready to raise rates until 2024 at the earliest, falling in line with major central banks who are willing to run their economies hot to fire up inflation, which has been elusive for years.

“The RBA…remains fearful of tightening monetary policy too soon, due to concerns about stifling the economic recovery,” said Anthony Doyle, cross asset specialist at Fidelity.

The central bank, which said it places a high priority on a return to full employment, will release detailed economic forecasts on Friday at 0130 GMT.

HOUSING BOOM

In a bid to blunt the economic shock from the coronavirus pandemic last year, the RBA cut interest rates three times, announced a yield curve control (YCC) programme to keep three-year government bond yields at 10 basis points and launched a massive quantitative easing programme targeting longer term bonds.

Its current A$100 billion ($77.40 billion) quantitative easing programme ends in September and the board will consider future bond purchases at its July board meeting.

The RBA’s efforts are being supplemented by Australia’s federal government which has ditched its long-held obsession with creating budget surpluses and has promised to not take “any sharp pivots towards austerity” in its Budget update on May 11.

Solid monetary and fiscal stimulus have lit a fire in Australia’s property market where prices are hitting record highs, largely led by demand from owner-occupiers and first-home buyers.

But official data on loan approvals out on Tuesday showed investors too were rushing back in to the market.

“Should investor activity further lift, that would add to the potential for macro-prudential regulation in the sector given prior comments that strong investor activity has the potential to amplify the housing cycle,” said Tapas Strickland, Sydney-based economist for National Australia Bank.

The RBA noted the price rise and said it was carefully monitoring trends in housing borrowing.

(Reporting by Swati Pandey; Editing by Shri Navaratnam)

Economic Data Puts the Loonie and the Greenback in Focus

Earlier in the Day:

It was a busier start to the day on the economic calendar this morning. The Aussie Dollar was in action early this morning.

Later this morning, the RBA is also in action. With the markets expecting the RBA to stand pat, the rate statement will be key.

For the Aussie Dollar

In March, the trade surplus narrowed from A$7.529bn to A$5.574bn. Economists had forecast a widening to A$8.000bn.

According to ABS,

  • Goods and services credits fell A$681m (-2%) to A$38,274m.
    • An A$708m fall in the export of non-monetary gold contributed to the fall in total exports.
    • Rural goods exports saw a modest A$28m fall, while the exports of general merchandise rose by A$128m.
    • Total services credits also weighed, falling by A$101m.
  • Imports rose by A$1,340m (4%) to A$32,700m.
    • General merchandise debits jumped by A$790m, with non-monetary gold imports up A$529m.
    • There were also increases in the imports of consumer goods (A$147m), capital goods (A$309m), and intermediate and other merchandise goods (A$334m).

The Aussie Dollar moved from $0.7745 to $0.77434 upon release of the figures. At the time of writing, the Aussie Dollar was down by 0.26% to $0.7743.

Elsewhere

At the time of writing, the Japanese Yen was down by 0.17% to ¥109.25 against the U.S Dollar, with the Kiwi Dollar down by 0.21% to $0.7186.

The Day Ahead:

For the EUR

It’s a quiet day ahead on the economic data front. There are no material stats due out of the Eurozone to provide  to provide the EUR with direction.

The lack of stats will leave the EUR in the hands of market risk sentiment on the day. Following disappointing GDP numbers from last week, the EUR could come under more scrutiny with little else to consider.

At the time of writing, the EUR was down by 0.13% to $1.2048.

For the Pound

It’s a quiet day ahead on the economic calendar. April’s finalized Manufacturing PMI is due out later today.

Barring a marked revision from prelim figures, however, the numbers should have a muted impact on the Pound.

With the UK economy continuing to open up, market optimism should continue to support the Pound at current levels ahead of the BoE policy decision on Thursday.

At the time of writing, the Pound was down by 0.20% to $1.3883.

Across the Pond

It’s a quieter day ahead on the economic calendar. March trade data and factory orders are due out later today.

While trade data will be of interest, factory orders will have the greatest influence on market risk sentiment.

At the time of writing, the Dollar Spot Index was up by 0.16% to 91.091.

For the Loonie

It’s a relatively busy day ahead on the economic calendar. Building permit figures and trade data are due out later today.

Expect the trade data to have the greatest impact on the Loonie. With the BoC’s shift in policy outlook, a marked widening in the trade surplus would deliver the Loonie with another boost.

At the time of writing, the Loonie was down by 0.12% to C$1.2294 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

May 4th 2021: USD on the Backfoot Amid Disappointing Data; DXY Beneath 91.00

Charts: Trading View

EUR/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Following a three-month retracement, demand at 1.1857-1.1352 made an entrance and inspired a bullish revival in April, up 2.4 percent at the close.

April upside throws light on the possibility of fresh 2021 peaks in the months ahead, followed by a test of ascending resistance (prior support [1.1641]).

Based on trend studies, the primary uptrend has been underway since price broke the 1.1714 high (Aug 2015) in July 2017. Additionally, price also breached trendline resistance, taken from the high 1.6038, in July 2020.

Daily timeframe:

The 200-day simple moving average at 1.1937 serves as dynamic support, in the event of a push southbound.

Quasimodo resistance at 1.2169, on the other hand, commands attention to the upside.

Despite the 2021 retracement, trend studies reveal the currency pair has been entrenched within an uptrend since early 2020, movement that many traders will likely refer to as a primary trend on this timeframe.

In terms of RSI movement, last week’s withdrawal from 69.00 took the indicator to within striking distance of support at 51.36.

H4 timeframe:

Europe’s single currency, as can be seen from the H4 chart, eked out modest gains against the US dollar on Monday, leaving support at 1.1990 and a Fibonacci cluster between 1.1971 and 1.1986—a defined area on a price chart where Fib retracement levels converge—unchallenged.

As for risk events, the calendar was somewhat thin. Though according to the Institute for Supply Management (ISM), US manufacturing grew at a slower pace in April (60.7 vs. consensus estimate 65.0).

Overthrowing the aforesaid Fib cluster unearths additional support at 1.1937 (aligns with the 200-day simple moving average on the daily scale), while a continued rotation to the upside shines light on resistance at 1.2108.

H1 timeframe:

Monday discovered a floor just north of the 1.20 figure, a level stationed above another layer of support at 1.1989 (prior Quasimodo resistance). The bullish stance subsequently elevated EUR/USD to within a whisker of supply at 1.2091-1.2077—houses the 100-period simple moving average at 1.2083. Also of technical relevance is the 1.21 figure located just above current supply.

From the RSI oscillator, we can see the value climbed from oversold space, reclaimed resistance at 35.45 and engulfed the 50.00 centreline. This suggests further upside momentum could be on the cards, with RSI (overbought) resistance arranged at 78.97.

Observed levels:

Partly modified from previous analysis.

April showing life out of monthly demand from 1.1857-1.1352 reinforces a possible retest (dip-buying scenario) at the 200-day simple moving average from 1.1937 (daily timeframe).

Shorter-term action, however, has H1 facing supply at 1.2091-1.2077, the 100-period simple moving average and the 1.21 figure as a potential ceiling. This area also brings with it additional fuel in the shape of H4 resistance nearby at 1.2108 and, therefore, could ignite a bearish scenario.

AUD/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Since the beginning of 2021, buyers and sellers have been battling for position south of trendline resistance (prior support – 0.4776 high) and supply from 0.8303-0.8082. Should a bearish scenario unfold, demand at 0.7029-0.6664 (prior supply) is featured to the downside.

Trend studies (despite the trendline resistance [1.0582] breach in July 2020) show the primary downtrend (since mid-2011) remains in play until breaking 0.8135 (January high [2018]).

Daily timeframe:

Since mid-April, AUD/USD has been seen consolidating around resistance from 0.7817.

Territory to the downside shines the technical spotlight on February’s low at 0.7563, followed closely by trendline resistance-turned support, extended from the high 0.8007.

Rupturing 0.7817, nevertheless, unbolts the door for an approach to supply at 0.8045-0.7985.

Interestingly, the RSI value is seen testing trendline support-turned resistance, extended from the low 36.55. North of here, traders are also urged to pencil in trendline resistance, drawn from the high 80.12.

H4 timeframe:

The consolidation visible on the daily scale also dominates the H4, as buyers and sellers square off between 0.7800 Quasimodo resistance and 0.7696-0.7715 demand (blends with trendline support, taken from the low 0.7531).

Should price rupture the noted demand, a Fibonacci cluster between 0.7657 and 0.7672, is seen lying in wait, while demand-turned supply at 0.7848-0.7867 calls for attention north of 0.7800.

H1 timeframe:

Amidst a bout of USD weakness Monday, EUR/USD lifted above resistance at 0.7752 and the 100-period simple moving average at 0.7757, with price action subsequently retesting 0.7752 as support and forming a dragonfly doji candle—bullish signal.

Quasimodo resistance is plotted overhead at 0.7777, with further outperformance casting focus towards the 0.78 figure (also represents H4 Quasimodo resistance).

With respect to momentum, as measured by the RSI, the value recorded a mild top, a stone’s throw from overbought territory.

Observed levels:

0.7800 Quasimodo resistance on the H4 is likely to attract technical attention. Not only does the level represent a psychological base (applied to the H1), 0.7800 aligns closely with daily resistance at 0.7817.

Short-term flow, on the other hand, shows that scaling higher could also be on the table. The retest of H1 support at 0.7752, and nearby 100-period simple moving average, may have intraday bulls take aim at H1 Quasimodo resistance at 0.7777, followed then by the noted 0.78 neighbourhood.

USD/JPY:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Following January’s bullish engulfing candle and February’s outperformance, March concluded up by 3.9 percent and marginally cut through descending resistance, etched from the high 118.66.

Although April finished lower by 1.3 percent and snapped the three-month winning streak, the pair is attempting to hold the breached descending resistance, echoing potential support.

Daily timeframe:

Partly modified from previous analysis.

Despite the monthly timeframe chalking up possible supportive structure, the daily timeframe watched price establish a half-hearted shooting star pattern on Monday—bearish candlestick signal—from supply pinned at 109.97-109.18. As you can see, the bearish formation also snapped a two-day winning streak.

Trendline support, extended from the low 102.59, serves as a downside target south of current supply; a bullish showing, on the other hand, casts light towards longer-term supply at 110.94-110.29, stationed under another supply at 111.73-111.19.

Trend studies show the unit has been trending higher since the beginning of 2021.

The RSI indicator, although ending last week above the 50.00 centreline (a sign of trend strength), is seen engaging resistance at 57.00.

H4 timeframe:

61.8% Fib resistance at 109.60—located under supply at 109.97-109.72—provided a platform for sellers to work with on Monday. This rejuvenated a bearish presence and pencilled in a retreat back to support at 108.99, which, for now, holds.

Space south of 108.99 shines light back on support at 108.50 and neighbouring demand from 108.20-108.43.

H1 timeframe:

Monday’s bearish narrative shaped clear-cut supply at 109.52-109.39—a decision point to break the 109.26 low and trendline support, pencilled in from the low 107.64. Ensuing action observed a 109 test, a level accompanied by the 100-period simple moving average at 108.99.

The lack of buyer intent from 109 unearths potential selling, targeting another trendline support, taken from the low 107.47.

The view from within the RSI has the value attempting to discover support around the 40.00 region. Dipping a toe in oversold waters, however, highlights support from 18.76.

Observed levels:

Though 109 has so far failed to stir much bullish curiosity on the H1, the psychological base still echoes strength, technically speaking, as it joins hands with the 100-period simple moving average, H4 support at 108.99, and also seeing monthly price defending the descending resistance-turned possible support.

H1 failing to hold 109, however, could see a short-term dip to trendline support, taken from the low 107.47, a move that may also stir dip-buying activity.

GBP/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

The pendulum swung in favour of buyers following December’s 2.5 percent advance, stirring major trendline resistance (2.1161). February subsequently followed through to the upside (1.7 percent) and refreshed 2021 highs at 1.4241, levels not seen since 2018. Contained within February’s range, however, March and April witnessed decreased volatility.

Despite the trendline breach (which could serve as possible support if retested), primary trend structure has faced lower since early 2008, unbroken (as of current price) until 1.4376 gives way (April high 2018).

Daily timeframe:

Partly modified from previous analysis.

Resistance at 1.4003 has proved a stubborn hurdle since March, capping upside attempts on multiple occasions. Any downside from this base throws light on 1.3670 bottoms, arranged north of Quasimodo support at 1.3609.

Should buyers regain consciousness and brush aside current resistance, Quasimodo resistance at 1.4250 could enter the frame.

From the RSI indicator, the value dropped from 58.20 peaks and crossed swords with trendline support, pencilled in from the low 36.14.

As for trend, GBP/USD has been trending higher since early 2020, despite the two-month retracement.

H4 timeframe:

1.3809-1.3832 demand, as you can see, survived Friday’s mild breach, with GBP/USD bulls entering an offensive phase and shaking hands with resistance at 1.3919. Should sellers fail to find grip from the aforementioned resistance, technicians are likely to watch Quasimodo resistance at 1.4007.

Below the aforesaid demand brings notice to Quasimodo support at 1.3750, which happens to align with a 1.272% Fib projection at 1.3746 and a 78.6% Fib level at 1.3739 (Fib cluster).

H1 timeframe:

Launching above 1.39 and the 100-period simple moving average on Monday guided H1 candles to neighbouring resistance at 1.3929 and put a cap on intraday gains.

The reaction from 1.3929 witnessed price retreat to within a pip of 1.39 and the 100-period simple moving average. Interestingly, a bullish showing north of 1.39, movement that scales 1.3929, unlocks the possibility of reaching as far north as the 1.40 figure.

From the RSI, we can see the indicator recently forged hidden bearish divergence at overbought territory, with the value settling Monday around the 60.00 region.

Observed levels:

1.39 buyers (H1) face H1 resistance at 1.3929 and H4 resistance at 1.3919. Buyers finding acceptance above the aforesaid resistances brings light to a potential bullish wave towards the 1.40 resistance area (1.40 figure [H1], H4 Quasimodo resistance at 1.4007 and daily resistance at 1.4003).

1.39 giving way, nonetheless, may spark a short-term bearish scenario, targeting at least H1 support at 1.3864.

DISCLAIMER:

The information contained in this material is intended for general advice only. It does not take into account your investment objectives, financial situation or particular needs. FP Markets has made every effort to ensure the accuracy of the information as at the date of publication. FP Markets does not give any warranty or representation as to the material. Examples included in this material are for illustrative purposes only. To the extent permitted by law, FP Markets and its employees shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided in or omitted from this material. Features of the FP Markets products including applicable fees and charges are outlined in the Product Disclosure Statements available from FP Markets website, www.fpmarkets.com and should be considered before deciding to deal in those products. Derivatives can be risky; losses can exceed your initial payment. FP Markets recommends that you seek independent advice. First Prudential Markets Pty Ltd trading as FP Markets ABN 16 112 600 281, Australian Financial Services License Number 286354.

AUD/USD Price Forecast – Aussie Dollar Bounces From 50 Day EMA Again

In what can basically be described as a continuation of sideways behavior, the Australian dollar has bounced from the 50 day EMA to show signs of life again. Ultimately, the market looks as if it is trying to build up enough momentum to finally break above the 0.78 level, an area that has been like a brick wall for this market. We did break above there once, and then collapsed from the 0.80 level. 0.80 level is a massive level on the charts when it comes to the monthly timeframe, and if we managed to break above there and clear the 0.81 handle, that could open up a move all the way to the 0.90 level.

AUD/USD Video 04.05.21

This is probably going to be based upon the commodity super cycle that people claim is going on right now, and it certainly would make a lot of sense. However, price simply cannot break above the 0.78 level right now, and that something that you have to pay attention to. After all, it does not matter if you are “correct in your analysis” if you do not get the timing right. With that being said, a break above the 0.78 level has me buying and then looking towards the 0.80 level. On the other hand, if we turn around a break down below the 0.75 level, I will become very bearish on this pair for several months. Remember that the commodities markets will have their say, but gold is not helping the situation, so perhaps that is part of what is going on here.

For a look at all of today’s economic events, check out our economic calendar.

The Dollar Consolidates Pre-Weekend Advance

The UK holds local elections, and the US and Canada report employment data at the end of the week. In addition, the earnings season continues, while the US will also announce details of its quarterly refunding plans. Several markets are closed for holidays, including China and Japan (through Wednesday). UK markets are closed for a bank holiday.

After falling 1.15% last week, the MSCI Asia Pacific Index traded heavily today, with only Australia and New Zealand bucking move. Europe’s Dow Jones Stoxx 600 fell for the second consecutive week to the end of April and is struggling to sustain early upticks today. US S&P and Dow futures are trading higher, but the NASDAQ was nearly flat after a mixed performance last week. European benchmark 10-year yields are 1-2 bp firmer.

The US 10-year yield begins the new week around 1.63%. The dollar, which rose sharply ahead of the weekend is narrowly mixed today. Sterling and the Swedish krona are leading European currencies higher, while the yen, and to a lesser extent, the Canadian dollar, are nursing losses. Similarly, among emerging market currencies, eastern and central European currencies are mostly firmer, while Asian currencies are mostly lower, led by a 1% loss of the South Korean won.

The JP Morgan Emerging Market Currency Index is little changed after losing 1% in the last two sessions. Gold is consolidating in last Thursday’s range (~$1756-$1790) and is slightly firmer. Oil prices have slipped lower. Last week, June, WTI tested $65.50 and found support in the $62.90-$63.00 area.

Asia Pacific

Australia reported a small upward revision in April’s manufacturing PMI and a further gain in house prices. The PMI edged up to 59.7 from the preliminary estimate of 59.6 and 56.8 in March. The average in Q1 was 57.0. The rise in house prices is becoming a greater concern to policymakers (in New Zealand and Canada). Prices rose by 1.8% in April after a 2.8% rise in March. Prices have risen steadily since the middle of last year. The average monthly gain over the past six months is 1.5%, while over the past three months, the average has accelerated to 2.2% a month. Tomorrow it reports March trade figures ahead of the central bank meeting.

South Korea is integrated into global supply chains, making its trade figures reported ahead of most other countries a lead indicator. Its April trade figures were released over the weekend, and the 41.1% jump in exports from a year ago exaggerates the strong recovery that is, in fact, taking place. There were two additional working days, which, if adjusted for, still lifted South Korean exports by almost 29.5%.

The second distortion comes from the base effect. The 25.6% year-over-year decline in April 2020 made for a low base. Nevertheless, the takeaway is that the South Korean economy, which returned to its pre-pandemic peak in Q1, is continuing to expand. Exports are averaging about $2.2 bln a day this year. Shipments of semiconductor chips rose by a little more than 30%, and auto exports rose by almost 73.5% from year-ago levels.

Rising South Korean exports to its major trading partners, including China, the US, EU, ASEAN, and Japan, underscore that the global recovery is accelerating. South Korean imports also surged. The nearly 34% year-over-year increase is exaggerated for the same reason imports were flattered. Three forces appear evident. First, South Korea is embarking on a capex cycle for semiconductor chips. Fabrication equipment imports soared by nearly 135%.

Second, importing intermediate goods and components, like display panels, will be used as inputs for exports. Third, the 25% increase in consumer goods imports speaks to the strength of the domestic economy.

The dollar is rising against the yen for the fifth session in the past six again. It reached JPY109.70, its highest levels since April 13, and has met the (61.8%) retracement objective of the decline since peaking near JPY111.00 at the end of March. The JPY110.00-JPY110.10 is the next hurdle. Support is building near JPY109.20.

The Australian dollar retreated from $0.7800 and dipped below $0.7700 at the end of last week. It consolidating in quiet turnover at the lower end of the pre-weekend range. The nearby cap is seen around $0.7740. With Chinese markets closed, the offshore yuan (CNH) weakened for the second consecutive session. It is the first back-to-back decline in three weeks and appears to simply reflect the better tone of the US dollar. The dollar closed at about CNY6.4750 and is trading around CNH6.4760.

Europe

While the final manufacturing PMI was a bit disappointing, the real takeaway is that the eurozone economy is recovering from the Q1 contraction. Moreover, claims about a double-dip recession that the Financial Times called out in a headline are misleading. It is hard to say that it truly recovered from the “first” one. And recall, there is no fixed definition of a recession. Europe’s seven-day vaccination average has surpassed the US and is still accelerating. In the US, nearly all adults who want a vaccine have gotten at least one jab.

EMU’s April manufacturing PMI stands at 62.9 rather than 63.3 of the preliminary estimate and 62.5 in March. It was at 55.2 at the end of last year—slower supply deliveries, which are how the supply chain bottlenecks are expressed with rising prices. German and French flash readings were shaved, and although Italy and Spain showed improvement, it was not quite as much as economists anticipated.

Although last week’s release of Q1 GDP figures takes away some of the interest in the high-frequency data from March, German retail sales were stellar. March retail sales soared by 7.7%, more than twice the median forecast in the Bloomberg survey. Moreover, the February series was revised to show a 2.7% gain instead of 1.2%.

European negotiators appear more restrained than Iranians about the prospect of a deal on the nuclear accord. Separately, Iran’s state television claimed a deal was struck–prisoner swap with the US and UK and as much as $7 bln in funds, which the US quickly denied. Getting the US and Iran back into compliance with the 2015 agreement has ramifications not just for Iran, which apparently has been hit hard by the pandemic, but also for the oil market.

Already, last month, Iranian output is believed to have risen by 200k barrels per day to around 2.5 mln, which would be the largest increase in OPEC. Iran and several small producers were exempt from the OPEC+ output cuts, which are now being slowly reversed. Iran’s capacity is estimated to be a bit higher than 3.5 mln barrels per day, but it needs around 1.2-1.5 mln bpd for its domestic consumption. Estimates suggest Iran has around 70 mln barrels in floating storage. A deal is thought necessary before the end of this month, ahead of the June 18 Iranian elections.

Russia may be withdrawing its forces that had massed on the Ukraine border, but relations with Central and Eastern Europe are the most strained since the annexation of Crimea in 2014. Whatever goodwill Putin sought through is vaccine diplomacy has been undermined its aggressive behavior. Bulgaria and the Czech Republic believe Moscow was behind explosions in arms depots and the 2016 poisoning of an arms dealer.

They expelled some Russian diplomats, and Moscow retaliated in kind, and Prague kicked out more. Of particular note, Lithuania and Slovakia moved in sympathy and also expelled Russian diplomats. There arguably is a lost opportunity for the UK. Eastern and Central European were natural allies for the British on various issues, including a harder line toward Russia. Meanwhile, the Greens, whose fortunes in Germany are rising as the center (CDU/CSU and the SPD) continues to lose support, seems to also take a harder line against Russia (and China).

The euro initially extended its pre-weekend drop but has subsequently rebounded from a little below $1.2015 to about $1.2055 in the European morning. The intraday technicals are stretched, and the $1.2065-$1.2080 area offers a nearby cap. Similarly, sterling successfully tested $1.3800, where a large option (~GBP845 mln) expires tomorrow. It has recovered to around $1.3860, which stretched the intraday momentum indicators.

Resistance is seen in the $1.3860-$1.3880 area. Separately, we note despite a slightly smaller increase than expected in Turkey’s April CPI (17.14% year-over-year from 16.19% in March, and 17.3% median forecast in Bloomberg’s survey), there is little chance that the central bank will cut rates this week. Last week, it raised this year’s inflation forecast. Yet, the drop in the manufacturing PMI (50.4 from 52.6) illustrates how the high rates and pandemic are weighing on the economy. The dollar has traded on both sides of its pre-weekend range against the lira and is firm in the European morning around TRY8.30.

America

The US has a packed economic diary this week, with the April employment report at the end of the week, the highlight. Another gain of around a million jobs is expected. Today features the final April manufacturing PMI report and the initial ISM manufacturing index, and the economists in Bloomberg’s survey look for a 60k jump in manufacturing jobs last month.

The preliminary look at Q1 GDP last week gives good reason to expect a sharp recovery in construction spending in March after a 0.8%, weather-induced decline in February. April auto sales will trickle in over the course of the North American session. Recall that in March, they jumped to a 17.75 mln seasonally adjusted annual rate. It was the most since December 2017. It may be difficult to have sustained that level in April.

Canada sees its manufacturing PMI today, but the Canadian dollar does not seem particularly sensitive to this report. The March merchandise trade balance is out tomorrow, but the week’s highlight is the employment report at the end of the week. In March, Canada grew a dramatic 303k jobs. The risk is of a weaker report. Note that the better part of three rate hikes has been discounted over the next two years.

Mexico reports its PMIs today, but the focus may be on March worker remittances after President AMLO tipped a record of $4.128 bln. Last year, worker remittances were a greater source of capital inflows than Mexico’s trade surplus ($40.6 bln vs. $34.5 bln). The highlight of the week, though, maybe the CPI report and another gain will solidify ideas that its rate cycle is over. Brazil has a full economic diary, including what is expected to be a record trade surplus. Still, little will distract the market from Wednesday’s central bank meeting, which is expected to signal another 75 bp rate hike.

The US dollar has carved out a small shelf against the Canadian dollar in the CAD1.2265-CAD1.2275 range. Initial resistance near CAD1.2320 has already been tested. A break of it could see the greenback firm to around CAD1.2400. Meanwhile, the dollar is extended last week’s 2.1% gain against the Mexican peso that halted a four-week slide. Today’s high near MXN21.3150 is the best level of the US dollar since early April. The next technical target is a little above MXN21.37. At the end of last week, the dollar jumped 1.8% against the Brazilian real to around BRL5.4450. A move above there will target the BRL5.49 area.

This article was written by Marc Chandler, MarctoMarket.

For a look at all of today’s economic events, check out our economic calendar.

AUD/USD Bullish Zone is Holding

The AUD/USD is making 1-2-3 bullish pattern at the weekly and daily support zones and slightly above the ATR projection low.

0.7705-0.7720 is the zone where buyers should show up. 1-2-3 pattern is holding and bouncing off the camarilla weekly and daily levels. We should see the upward price movement towards W H3, D H5 and W H5. Intraday targets are 0.7740 snf 0.7765 while the swing target is 0.7840. Swing target only comes into play if the price closes the day above the intraday target.

For a look at all of today’s economic events, check out our economic calendar.

Cheers and safe trading,

Nenad

 

AUD/USD Daily Forecast – Australian Dollar Tries To Rebound At The Start Of The Week

AUD/USD Video 03.05.21.

Support At The 50 EMA Stays Strong

AUD/USD received support at the 50 EMA at 0.7710 and is trying to get above the resistance at the 20 EMA at 0.7730 while the U.S. dollar is pulling back against a broad basket of currencies.

The U.S. Dollar Index failed to settle above the resistance at the 20 EMA at 91.35 and is moving towards the support at the 91 level. If the U.S. Dollar Index gets to the test of this level, AUD/USD will get more support.

Today, Australia reported that Manufacturing PMI increased from 56.8 in March to 59.7 in April compared to analyst forecast of 59.6.

Foreign exchange market traders will also have a chance to take a look at the final reading of U.S. Manufacturing PMI report which is expected to show that Manufacturing PMI increased from 59.1 in March to 60.6 in April.

Traders will also keep an eye on the developments in commodity markets which are mostly calm at the beginning of the week. If commodity markets continue to move higher, commodity-related currencies like Australian dollar will get more support.

Technical Analysis

aud usd may 3 2021

AUD/USD failed to settle below the support at the 50 EMA at 0.7710 and is trying to settle above the resistance at the 20 EMA at 0.7730. If AUD/USD manages to settle above the 20 EMA, it will head towards the next resistance level which is located at 0.7750.

A successful test of the resistance at 0.7750 will open the way to the test of the resistance at 0.7775. A move above this level will push AUD/USD towards the next resistance at 0.7800.

On the support side, AUD/USD needs to settle below the support at the 50 EMA at 0.7710 to have a chance to develop additional downside momentum. If AUD/USD gets below the 50 EMA, it will get to the test of the support level at 0.7700.

A move below the support at 0.7700 will open the way to the test of the support at 0.7665. In case AUD/USD gets below this support level, it will head towards the support at 0.7635.

For a look at all of today’s economic events, check out our economic calendar.

AUD/USD Forex Technical Analysis – Shift in Momentum Could Lead to Test of .7675 to .7641

The Australian Dollar is trading slightly better against the U.S. Dollar during a low volume, low volatility session early Monday, shrugging off strong labor market data as traders expressed caution ahead of a Reserve Bank (RBA) meeting this week.

At 06:47 GMT, the AUD/USD is trading .7719, up 0.008 or +0.10%.

Data on Monday showed nationwide home prices posted another solid increase in April, while job advertisements climbed to their highest level since 2008 and up almost 200% on a year when a pandemic lockdown shut many industries.

Investors expect the RBA on Tuesday to maintain its ultra-supportive policy settings at its monthly rate-setting meeting.

Daily AUD/USD

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum is trending lower following last Thursday’s closing price reversal top and Friday’s subsequent confirmation.

A trade through .7818 will negate the closing price reversal top and signal a resumption of the uptrend. The main trend will change to down on a move through .7691.

The minor trend is down. It changed to down on Friday when sellers took out .7725. This move was further confirmation of the shift in momentum.

The main range is .8007 to .7532. Its retracement zone at .7770 to .7826 is resistance. This zone stopped the rally last week at .7818.

The short-term range is .7532 to .7818. Its retracement zone at .7675 to .7641 is the primary downside target. Buyers could return on a pullback into this area. However, if .7641 fails then look for the selling to possibly extend into an area supported by a pair of main bottoms at .7586 and .7532.

Daily Swing Chart Technical Forecast

The direction of the AUD/USD on Monday is likely to be determined by trader reaction to .7711.

Bullish Scenario

A sustained move over .7711 will indicate the presence of buyers. If this move creates enough upside momentum then look for a rally into .7770. This is not likely on Monday due to the low volume and the bank holiday in Australia.

Bearish Scenario

A sustained move under .7711 will signal the presence of sellers. The first downside target is the main bottom at .7691, followed by the short-term retracement zone at .7675 to .7641.

Taking out .7691 will change the main trend to down, but don’t be surprised if aggressive counter-trend buyers stepped in at .7675 to .7641.

For a look at all of today’s economic events, check out our economic calendar

A Busy Economic Calendar Puts the EUR and the Dollar in Focus

Earlier in the Day:

It was a quieter start to the day on the economic calendar this morning. The Aussie Dollar was in action early this morning.

For the Aussie Dollar

In April, the AIG Manufacturing Index rose from 59.9 to 61.7.

According to the AIG report,

  • April’s PMI hit the highest level since Mar-2018 and the third highest under the current format of the report.
  • All six manufacturing sectors expanded, as did all seven activity indicators.
  • Australia’s capacity utilization index hit a record high, suggesting a need for increased employment and / or investment.

The Aussie Dollar moved from $0.77167 to $0.77170 upon release of the figures. At the time of writing, the Aussie Dollar was up by 0.10% to $0.7724.

Elsewhere

At the time of writing, the Japanese Yen was down by 0.21% to ¥109.54 against the U.S Dollar, with the Kiwi Dollar up by 0.18% to $0.7175.

The Day Ahead:

For the EUR

It’s a busy day ahead on the economic data front. Manufacturing PMI figures for Italy and Spain and finalized PMIs for France, Germany, and the Eurozone are due out.

German retail sales figures will also be in focus ahead of the PMI numbers.

Barring marked revision to prelim figures, Italy and the Eurozone’s manufacturing PMIs and German retail sales will be key.

At the time of writing, the EUR was up by 0.01% to $1.2021.

For the Pound

It’s yet another particularly quiet day ahead on the economic calendar.

There are no material stats to provide the Pound with direction, with the UK markets closed.

At the time of writing, the Pound was up by 0.01% to $1.3824.

Across the Pond

It’s a busy day ahead on the economic calendar. The market’s favored ISM Manufacturing PMI figures for April are due out. Finalized Markit survey manufacturing PMI figures are also due out though we would expect the ISM number to be key.

Late in the day, FED Chair Powell is also scheduled to speak. Expect any deviation from the recent guidance to influence.

At the time of writing, the Dollar Spot Index was up by 0.02% to 91.298.

For the Loonie

It’s a quiet day ahead on the economic calendar. There are no material stats to provide the Loonie with direction.

Expect Manufacturing PMI numbers and COVID-19 news updates to influence.

At the time of writing, the Loonie was up by 0.09% to C$1.2295 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

The Dollar can Build on the Pre-Weekend Gains

The Japanese yen was a notable exception. The rise in US yields helped lift the greenback nearly a percent against the yen. The Fed’s standpat stance in light of the surging economy and signals the Norwegian central bank and the Bank of Canada seemed dovish. The contrast carried the Norwegian krone and Canadian dollar to new three-year highs last week. Even if the greenback’s pre-weekend advance was exaggerated, it looks to be turning after trending lower in April.

The Federal Reserve’s broad trade-weighted nominal dollar index fell by about 7.5% in the last three quarters of 2020 after rising by 4.6% in Q1 as the pandemic struck and the dollar was bought partly as a safe haven. In addition, it was partly a function of unwinding structured positions that used the greenback as a funding currency. It gained 1.3% in Q1 21 but traded with a heavier bias in April and surrendered most of the Q1 gains, falling over 1%. Moreover, the technical indicators for the dollar have been stretched by its persistent decline in recent weeks. Frequently, it seems that the short-term trends in the dollar are reversed or consolidated around the US employment data. The April report is released on May 7, and another strong report is anticipated.

Our broad macro view is that given the large US fiscal and trade deficit (the March goods balance reported last week widened to a new record high deficit of a little more than $90 bln) requires higher yields or a weaker dollar, or some combination thereof. The fact that the US 10-year yield rose nearly 83 bp in Q1 and the dollar strengthened, and the yield fell in April, and so did the dollar is not coincidentally. We do not want to overstate the link between exchange rate and yields. The long-term relationship does not appear linear but cyclical. However, when trying to discern the recent broad trend, the foreign exchange market seems particularly sensitive to US rates.

Dollar Index

The Dollar Index fell by about 2.5% in April, essentially unwinding the March gain. The pre-weekend advance, helped apparently by month-end position adjustments, was the most since early March. Tentative support was found near 90.40. The MACD looks poised to turn higher, but the Slow Stochastic has flatlined in the overextended territory. The close above 91.15 may help stabilize the tone. To signal a correction to April, the 91.55 area may be overcome. Above there, 92.00 comes back into view.

Euro

The dovish Fed lifted the euro to $1.2150, its highest level since the end of February. Sellers greeted it and pushed it back to around $1.2015 ahead of the weekend. The move seemed exaggerated by month-end adjustments. Follow-through selling will likely test support is likely in the $1.1980-$1.2000 area. The momentum indicators are stalling. In the near term, we are more inclined to sell into strength than buy dips. Three-month euro volatility (implied) slipped below 5.5% before the weekend, its lowest level since March 2020, but closed near session highs.

Japanese Yen

The dollar bounced smartly against the yen last week. It had finished the previous week below JPY108, but the rise in US yields seemed to fuel the greenback’s recovery. After falling in nine of the past ten sessions, the dollar rose at the beginning of last week and recorded higher highs until consolidating ahead of the weekend and month-end. The MACD and Slow Stochastics have turned up, suggesting the dollar’s recovery will continue.

The dollar rose above JPY109.30 before the weekend to push and closed above the (50%) retracement of April’s decline. The next retracement target (61.8%) is near JPY109.65, and then the JPY110 level beckons. Implied vol trended lower in April alongside the dollar. The dollar’s recovery is likely to see higher implied vol, which at a little below 6%, is also near its 20-day moving average.

British Pound

A five-day advance rally was halted before the weekend as it pulled back and slipped below the 20-day moving average (~$1.3850). Once again, the market was reluctant to push it above $1.40. Sterling has not closed above that threshold since the end of February, though it has flirted with it several times. The pre-weekend drop succeeded in turning sterling lower for the week after threatening to extend its weekly advance to three. The momentum indicators stalled. Many observers see the local elections, and the election in Scotland, in particular, as a risk to sterling.

On the other hand, the Bank of England is expected to be upbeat as the fiscal stimulus and vaccine will spur a recovery sooner and stronger than previously projected. If $1.40 is the upper end of the range, then the $1.3670 area has been the lower end of the range. Initial support is seen around $1.3800. Three-month sterling vol fell below 7% last week to make a marginal new low since last March.

Canadian Dollar

The Canadian dollar was easily the strongest currency last week, gaining 1.5% against its US counterpart. It the fourth consecutive weekly advance, and it was the biggest of the year. The central bank has begun tapering, rising commodity prices is seen as constructive, and its 1.6% expansion in Q1 matches the US. However, a note of caution is generated as the US dollar closed below the lower Bollinger Band every day last week and finished the week on its lows. Another note of caution comes from the market that may be getting ahead of itself as it prices in three rate hikes by the end of 2023.

The momentum indicators are still falling, and the Slow Stochastic is stretched, and the US dollar still made new three-year lows ahead of the weekend. Initial resistance is seen near CAD1.2335 and then CAD1.2400. The low from 2018 is about CAD1.2250, and below there, chart support is sparse until the 2017 low of almost CAD1.2060. Implied volatility has begun rising. It had briefly fallen below 6% near-mid April, its lowest level since last July, but finished above 6.5%.

Australian Dollar

Rising commodity prices, including industrial metals, and a dovish Federal Reserve failed to sustain an Aussie rally above $0.7800. While it flirts and penetrates it on an intraday basis, it has failed to close above it since the end of February. Indeed, it finished the week close at its lowest level in about two and a half weeks, a tad above $0.7700, briefly dipping below it in a thin NY Friday afternoon. The momentum indicators a mixed. The Aussie spent April mostly in the $0.7600-$0.7800 range and largely above $0.7700 since mid-monthly. A break warns of a return to the lower end of the range.

The RBA meets on May 5 in Sydney. It may be a bit early for it to signal that it too wants to pull back from its extraordinary monetary support, but it seems like a good candidate for later Q3. The central bank will publish new economic projections at the end of the week, ahead of the government’s budget announcement the following week. Three-month vol is trading in its trough below 9.0%. It reached 8.75% last week, its lowest level since last March.

Mexican Peso

The peso had its worst week in a couple of months, falling in four of the five sessions. It snapped a four-week advance with a 2,1% decline, making it the second-worst performing emerging market currency after the Colombian peso (~-2.4%). Higher global interest, including a modest rise in US yields and the prospect of another 75 bp hike in Brazil in the week ahead, encouraged some profit-taking.

News of a large and unexpected trade deficit ($3 bln in March) was not helpful, but the surprising expansion in Q1 (0.4% quarter-over-quarter GDP) did not prevent the peso from extending its losses. The US dollar finished the week around MXN20.2460, its best level since April 16. The MACD and Slow Stochastic have turned up. It met the (38.2%) retracement objective of the decline since late March high near MXN20.2350. The halfway mark is about MXN20.3730.

Chinese Yuan

The broad dollar gains ahead of the weekend halted the yuan’s four-day advance. It was only the second session that the greenback gained over the redback in three weeks. Still, the dollar fell for the fourth consecutive week, which followed a six-week advance. Over the four-week streak, the yuan rose by 1.6%, making it the second strongest currency in the region after the Taiwanese dollar (~2.1%).

If the dollar strengthens in the near term, as it looks likely against a range of currencies, it can return to the CNY6.50 area. The yuan and the euro remain highly correlated. On a purely directional basis, the correlation over the past 30 and 60 days is slightly more than 0.85. The onshore market will be closed the first part of next week to celebrate the May Day holiday.

This article was written by Marc Chandler, MarctoMarket.

For a look at all of today’s economic events, check out our economic calendar.