GBP/USD a week ahead

The talk of a Brexit continues to impact the GBP/USD. The pair now consolidates that could see some dramatic moves in the week ahead.

The technical indicators are showing some interesting signals as the RSI Oscillator remains relatively flat, near oversold territory, despite the recent price declines. There is some divergence between the indicator and price action that could be indicating a reversal of the short term trend.
Traders have to consider for the entry of a long position above the key 1.4170 resistance level. Alternatively, a break below the 1.40 handle would indicate a sharp push towards the bottom of the channel is likely. However, be aware of any short side move as the Risk/Reward ratio is not advantageous.

The pair  is likely to wait upon the UK Manufacturing Production results before making a strong move. However, given the recent collapse in the pair’s value, the downside might be relatively limited. The most likely scenario is a sideways consolidation at the current level .

The only element

The Federal Open Market Committee (FOMC) Meeting Minutes are a detailed record of the committee's policy-setting meeting held about two weeks earlier. The minutes offer detailed insights regarding the FOMC's stance on monetary policy, so currency traders carefully examine them for clues regarding the outcome of future interest rate decisions. Last night, FOMC minutes pushed  US markets higher as the dollar dropped. The stronger greenback is making the matter difficult for USAexporters as their profit margin is constantly being squeezed. Now the weaker dollar will be a good sign for US corporate earnings.

The rebound in oil prices on the back of the crude inventory data has provided a much needed lifeline for the energy sector. However, traders are questioning whether it can last until the OPEC members meet in Doha.

 The Japanese Yen has fallen below the critical level of 110. Traders are hoping that the currency will be weaker.

The only element which may keep investors on the edge, will be the weak global growth, which could have a massive impact on the earnings.

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To strengthen the US dollar

Since the beginning of the week, the USD/CAD pair has been growing. The growth in pair started amid statements made by the Bank of Canada Governor Stephen Poloz on Monday.
Today in the afternoon, a series of macroeconomic indicators are released in the US and Canada. The US trade deficit is   widen  to $47.06 billion. On the other hand, the pair can get support if Canada posts a bigger trade deficit than in the previous month. Moreover, favorable data on ISM Non-Manufacturing PMI can strengthen the US dollar

Bollinger Bands on the daily chart is directed down. The pair is trading between the lower and the middle MAs of the indicator. MACD histogram is in the negative zone. Stochastic is moving up in the middle of its range.
It is recommended to wait for clearer trading signals.
Support levels: 1.3000, 1.2904, 1.2855.
Resistance levels: 1.3121, 1.3278, 1.3343, 1.3583

Look at Doha on April 17

Crude had rallied (+44%) from its thirteen year low on a proposal by the Saudi’s, Russia, Venezuela and Qatar to cap oil output and reduce a global surplus.

The investors again are losing faith in crudes recent rally. Global fundamentals just do not support oil prices. Perhaps more importantly, doubts are growing over whether the major producers will be able to agree on an output freeze in Doha on April 17.

Both WTI and Brent retreated last week (-4%) for the first time since mid-February and remain on the back foot starting this week.

Iran  wants  to continue to produce until they can restore pre-sanction levels. While the Saudi’s Crown Prince Mohammed bin Salman said that his country would freeze their output only if “Iran and other major producers do as well.”

It seems that if an agreement could be reached to freeze output without Iran in Doha, it would not amount to anything.

Futures positions indicate that  traders are again adding to their ‘short’ positions and this after the liquidation of record ‘shorts’ position that were squeezed in the +44% rally over the past two-months.

Window for USD strength

Based on other wage indicators, the previous month’s reading of 2.2% looked low compared to the trend in other datasets (more like 2.5%). With that in mind, there is the potential for some more encouraging wage growth figures over the next few months, as pent-up demand in the labour market starts to translate into more rapid pay rises.

After a couple of mixed US labour reports, today’s data was fairly encouraging. Wage growth provided a pleasant surprise to markets, coming in at 0.3% MoM vs 0.2% expectations and taking the year-on-year change up to 2.3%. The rest of the report was fairly in line with expectations - Non-farm payrolls came in a touch above consensus at 215k, roughly around what we believe to be the current underlying trend (around 200k). The unemployment rate ticked back up to 5%, in line with our forecast, although not because of a correction in the household survey measure of employment.

OPEC to discuss the output oil freeze on 17 April

Everybody focuses on a global supply oil gut. Oil prices swung between gains and losses in North American trade on Thursday, as a broadly weaker U.S. dollar boosted the appeal of dollar-denominated commodities.

The prospect of less U.S. interest rate hikes this year according to United States Federal Reserve Chair Yellen   drove the dollar down against its major rivals..

Oil prices typically strengthen when the U.S. currency weakens as the dollar-priced commodity becomes cheaper for holders of other currencies.

Yesterday the U.S. Energy Information Administration said in its weekly report that crude oil inventories rose by 2.3 million barrels last week to an all-time high of 534.8 million barrels, underlining concerns over a domestic supply gut.

Saudi Arabia and fellow OPEC members Qatar and Venezuela agreed with non-OPEC member Russia to freeze output at January levels, provided other oil exporters joined in.

OPEC member Iran is expected to attend an oil producers meeting in Doha on April 17 to discuss an output freeze, although it may not necessarily partake in negotiations.

In the overbought territory - EUR/USD

The price has pierced the Bollinger band, as shown in the chart  on a 4 hour time frame and this confirms that the volatility is high. The piercing of the Bollinger band does has a significant importance  as an opportunity to buy or sell. The significance of the piercing of the Bollinger band is even higher  because  this takes place at an important level of support or resistance. Under the circumstances we are still a little away from the minor resistance zone.

The EUR/USD pair is trading above its upward trend line. This confirms that the trend is skewed towards the upside and as long as we remain above this trend line, the bias may remain for further upside move.

The reading for the Bollinger the upper and lower bands are 1.1201 and 1.1069 respectively.

The RSI is trading at 75 which is in the overbought territory and this may push the price lower or trigger a pause for the price action.

EURGBP. Key event of the week ‐ Eurozone CPI Report (March 31, 12:00

Inflation is a key aspect of Eurozone econom  and representatives of European Central bank are trying to   to boost it. Unfortunately, low oil price and slow reaction on economy stimulating measures  prevent  this intention.

At the moment Year-over-Year CPI remains negative, while the target is 2.5%.

If CPI actual results are higher that expectations – EUR will significantly strengthen

There is still the uptrend on EURGBP chart and for the last week EUR gained over 100 points yet again. 0.79277 and 0.79477 are the next important levels of support.

EURUSD. Second Key event of the week – US Unemployment rate and Nonfarm Payrolls (April 1, 15:30 GMT +3)

This Friday the most anticipated report will be published – US Unemployment rate and NonFarm Payrolls report. These are the most important news from the labor market and they have a massive impact on rate movements. Unemployment rate is more significant compared to Nonfarm report and market participants consider it first.

Numbers keeps decreasing (almost 3% for the last week), and that is a very good result. Then it will have  a positive effect on USD. 

USDCHF Advice: SELL

A similar formation is present as the previous two times on the 4h chart, however it may be the last one as the count shows it could resemble a C wave ending at 0.96515. Currently the prognosis is bearish following the movements since 27.11.2015 with a major support at the 0.9802 critical resistance level. For now the targets remain on the 0.95556 and 0.95152 supports, however if the level is to raise above 0.9802 it will show a change in direction for the trend and possible jump up for a strong 1st wave which is our fallback count. There is no real unusual movements this week from a fundamental standpoint and a more decisive movement is expected on Wednesday and/or Thursday.

How far will EUR/USD fall

As most banks around the world are closed today , there's not enough volume to trade so we should see more ranging /consolidating markets today.

Key support level to watch out for EUR/USD, end of day expiry would be 1.11530. By end of the day this pair should be ranging between 1.11500-1.11850.

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EUR/USD went  higher last week because of the meeting  on Wednesday, but since then, the world’s most widely-traded pair has slowly but surely given back most of those gains. Since last Thursday’s high, rates have been consistently edging lower within a near-term bearish channel, and based on the price action alone, the unit shows no signs of breaking this trend any time soon.

We are asking   how far will EUR/USD fall?  In our view, EUR/USD should logically be trading higher now than it was at the start of the last week. Therefore, we’d favor a bullish breakout and possible move back toward 1.1300 at some point next week   Of course we will  follow economic data. Price is the only thing that pays, so short-term EUR/USD traders may want to consider waiting until the unit has definitively broken the bearish channel one way or another before committing too aggressively.

Bottom in the US dollar against the Canadian dollar

We have been looking for a bottom in the US dollar against the Canadian dollar. 

It is been difficult, but now it appears that the technicals are turning. The chart from Bloomberg shows that the US dollar is moving above a trend line down off the January 20 high just below CAD1.47. The prospects of  bullish movement of the pair  may be will be helped by a expected positive employment report next week

We see here downtrend   from the end of February and the mid of March. It intersects today near CAD1.3200.

Now very important is the level CAD 1.3400-CAD 1.3460.

Oil prices went down the same day the USD peaked against the Canadian dollar. Oil prices put in a high on March 18, the same day the US dollar put in its low against the Canadian dollar. We expect downtrend of the Oil prices. 

GBPUSD Recommendation: BUY

Following an unexpectedly large drop this is a make or break moment for the pound/dollar. Each of the support going down was easily overtaken during the week and the rate is going close to the big one at 1.40620. In the meantime the RSI has fallen to 27% so a rise is expected soon. Now is a good time to buy with a close stop at the major support.
There are two backup scenarios where one is a turnaround and I am far from the idea at the moment and the other one is a bounce off the 1.39760 support which would rearrange the way that we view the waves in this formation. Right now the risk is low and potential bullish profits are high so my short positions just closed and the next few movement is the one we are expecting and it is crucial.
On the fundamental side the Crude Oil Inventories huge rise did not affect the USD as much as anticipated so not much to discuss really

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Slight losses for EUR/USD

The pair trades below 1,12 during the Euro session and  we do not see major events in the Eurozone. Today we have the figures of New Home sales. New Home Sales measures the change in percentage of the new home sales, A new home sale is considered to be any deposit or contract signing either in the year the house was built or the year after it was built. A strong number would indicate a strong housing activity, and therefore a strong economy. Now we witness  a lower than expected number 2 % compared to the forecasted 3,2% . So we can not expect stronger USD as well in short  term . So today was a trading range day with not breakthrough.

GBPUSD

Recommendation: Strong BUY
Following last week’s developments the GBPUSD pair is moving as planned with a corrective formation.
For those that are risk seekers the short term profit still remains in selling, however I have started building up buy positions with smaller volumes and will increase the volumes the closer we get to the strong 1.40626 stop line.
Currently a clear Elliot wave is forming with the end of the 3rd wave’s 1st wave and going into a 2nd wave corrective formation.
On the fundamental side, the trigger for a movement either up or down will probably be Wednesday with oil and key speakers.
The expected supports where the correction end could be expected are 1.42262 and 1.41612.

NZD/USD in the coming week

I didn’t feel very risk averse and am trying to milk the situation.

In the coming week scenario 1 is a small correction and a rocket upwards after, however we need to be aware that this is a very subtle break in the triangle therefore it is reasonable to wait a bit before going long.

Support lines that we need to be aware of are 0.6857, 0.6756, 0.6610, 0.6528. These points may hit an end to the correction.

In the long term after escaping an ascending triangle a goal of 0.75429 is set with intermediate goals of 0.71969 and 0.72791. In the coming week there is no strong fundamental sentiment for the NZD and the Wednesday USD movements can easily be hedged with another instrument at that point (as they will probably have a minor effect on this pair).

NZD/USD Long-Term: Strong BUY

Short-Term: SELL

Long-Term: Strong BUY

An interesting turn of events unfolded in the New Zealand Dollar and the US Dollar this week. What we may be seeing is a possible break of the ascending triangle we have been observing from October.

Short term it is quite possible for the rate to bounce back from the 0.68716 support line (which I am taking advantage of), but the momentum is following a classic formation and decreasing therefore we are expecting a strong break. 

The long-term trend remains bullish

The unexpected pickup in economic activity and rising factory-gate prices may encourage Canadian companies to boost consumer prices and a stronger CPI report may cause further decline as it boosts expectations for the interest-rate.

But the long-term trend remains bullish. That’s  why we will look at further losses as corrective and treat them as an opportunity to enter long at more attractive levels once the pullback is exhausted.

GBP/USD

The larger picture would points towards a big increase to a possible 1.48000. A practical solution would be to wait for an increase in momentum or a second upwards break of the 1.44356 support.

While committing to a buy position now could prove beneficial, a chain of positions is advised while the correction formation presents itself and can be observed better.

Friday: Not much is expected except for the University of Michigan consumer sentiment, but be aware of a strong upwards move incoming.

An alternative scenario is a possible turnaround with the initial markings of a head and shoulders – something to be aware of in case of a fall and bounce off the 1.40000 support.

GBP/USD Strong BUY

GBP/USD

While at the moment the trend is set upwards after bouncing off the 1.4000 support, we need to consider the possibility of a decline to gather momentum after such a big and sudden jump. After the big turmoil on Thursday (today) and with the lack of any serious fundamental sentiment until the end of the week it is very likely that the trend follows into a corrective formation that could continue for a while

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