Last week was a rollercoaster ride from start to finish, with the market closing on Friday. Equity markets initially showed weakness before being propped up by strong tech earnings mid-week.
Central banks that decided on the interest rate last week all held their rates. Bank of Canada held at 2.75%, Bank of Japan at 0.50%, and the FED held at 4.50%. However, for the first time since 1993, there were two dissents within the FED's board, who argued that the rates should be cut.
Stocks sold off, further driven by Thursday's data for the core PCE index, which is seen as the FED's preferred measure of inflation. A 2.8% reading further reduced the odds of a September cut. Yet, the market got properly torpedoed on Friday after an abysmal non-farm payroll reading, which saw only 73,000 jobs added. Meanwhile, May and June labor data have been collectively revised down by nearly 260,000 jobs. Trump responded by firing the Bureau of Labor Statistics Commissioner Erika McEntarfer, accusing her of rigging the data before last year's election.
Naturally, the US dollar index fell by over 1.5%, while haven currencies like the Japanese yen and Swiss franc rallied. Commodity currencies like the Australian dollar also showed signs of weakening. This dynamic will dictate the next week, which is rather light on news, except for the Bank of England's anticipated rate cut.
Key News
- Monday: CHF - CPI
- Tuesday: USD – ISM PMI
- Wednesday: NZD - Unemployment
- Thursday: GBP – Rate Decision, USD - Unemployment
- Friday: CAD - Unemployment
Pairs In Focus
1. NZD CHF
After a full week of oscillation in a relatively tight 30-pip range and a fakeout higher on Thursday, this pair closed the week down. The price action indicates the next leg of the downtrend might be underway.
NZD/CHF H4 chart, Source: TradingView
As the price has decisively broken the 0.47770 support, any pullback and their subsequent rejections can be sold, particularly on rejection from previous support. An intermediate target is the support from April at 0.46800.
2. EUR AUD
After failing to take the previous high, it completed a minor pullback to sweep the previous low. However, after a rally above the key level, the premise now remains the same. Watch for the sweep of the previous around 1.81000 and a subsequent pullback to previous resistance – which is now around 1.79500.
EUR/AUD daily chart, source: TradingView
If that resistance rejects and turns support, the opportunity would be to look for a long entry with a target to take out the April high.
Notes:
- AUD NZD: Swept the lows in a volatile trading week. Established a new higher fair value around 1.09200.
- AUD CAD: Remains in an established range between 0.88750 and 0.90. That range has to resolve before the next big move.
- AUD CHF: Setting up the next leg of a short. It might either break a support at 0.51730 or pull back, but both scenarios could offer a good short opportunity.
- AUD JPY: Failed to take out the monthly high and fell to the support. As long as support around 95.260 holds, it might remain in range.
- AUD SGD: After sweeping the monthly high,it promptly moved back into the range. The trend is tilting to a bearish side.
- CHF JPY: Pulled back in a volatile week. Created a new fair value level at the market top around 184.800.
- CAD JPY: Swept the previous high and crashed by the week’s end, like many yen pairs. It broke the support around 107.100.
- EUR/JPY: Started pulling back after more than two months of continuous rally. The solid support below the market is around 169.200.
- EUR NZD: Rallied right into the resistance by the last trading day. The start of the week will show the intention, but it is more likely to fall back into the range than immediately take out the yearly high.
- GBP AUD: Remains in a range between support at 2.04600 and resistance of 2.07.
- GBP JPY: Failed at 199.700 resistance for the third time before crashing and finding support at July lows around 195.400.
- GBP NZD: Remains below the fair value line, which sits around 2.25, but there is no clear trend in sight.
Note: Any opinions expressed in this article are not to be considered investment advice and are solely those of the authors. Singapore Forex Club is not responsible for any financial decisions based on this article's contents. Readers may use this data for information and educational purposes only.
