The latest market news brought little surprise as European PMI data performed largely in line with expectations, while the ECB kept rates unchanged, citing stabilized inflation.
“Domestic price pressures have continued to ease, with wages growing more slowly. Partly reflecting our past interest rate cuts, the economy has so far proven resilient overall in a challenging global environment. At the same time, the environment remains exceptionally uncertain, especially because of trade disputes,” ECB President Christine Lagarde said at the press conference.
The FX market took a back seat as meme-magnitude volatility returned to equities. Both the S&P 500 and the Nasdaq rose, as retail-favored stocks gained momentum.
Opendoor Technologies, an e-commerce platform for residential real estate, surged more than 400% in July, while Kohl’s closed the week trading at $12.79 after reaching over $21 on market open on Tuesday. The struggling department store operator has nearly 50% of its float shorted, making it an excellent candidate for retail short squeezes.
"You're getting some of the meme trade," Thomas Hayes, chairman at Great Hill Capital LLC in New York, said for Reuters. "The big early move was a short squeeze and now this is residual short squeeze followed by people starting to come and chase the momentum."
Next week, the focus will return to the FX market and central bank decisions. The FED will decide on the interest rate, as will the Bank of Canada. Neither has a rate cut priced in, but surprises have happened in the past. The Bank of Japan is likely to keep the rate put as well, as there have been no whispers about a rate hike that could occur soon. Meanwhile, Friday will bring the latest non-farm payroll data.
Key News:
- Tuesday: USD – JOLTS Job Openings
- Wednesday: AUD – CPI, USD – Interest Rate Decision, ADP, GDP Q/Q, CAD – Interest Rate Decision
- Thursday: JPY: Interest Rate Decision, CAD- GDP, USD – Core PCE
- Friday: USD: Non-farm Payroll, Unemployment, ISM Manufacturing PMI
Pairs In Focus
1. AUD JPY
Australian dollar failed to break above the key level last week, but it stayed bullish after a healthy pullback. The premise for this week is the same – observe the momentum to 97.400, and look for a pullback after that.
AUD / JPY Daily Chart, Source: TradingView
The target level above stays the same, at 99.150.
2. EUR AUD
The Australian dollar may be gaining ground against the Japanese Yen, but at the same time, it appears to be weaker against the euro.
EUR AUD made a higher low after breaking through the 1.78645 level on Friday. A quick run to take out the previous week's high would solidify the thesis. Then, any further dips would provide a buying opportunity to aim for the July's high around 1.81
EUR AUD Daily Chart, Source: TradingView
Notes:
- AUD NZD: Fell into a range after establishing a new swing high. It might remain there for a while, but a long-term bias remains bullish.
- AUD CAD: Established a range between 0.88750 and 0.90. Until one of those levels decisively gives way, it may remain in a range.
- AUD CHF: Tried to break higher, but it failed at 0.52600. It may attempt to test the monthly support at 0.51800 next.
- AUD SGD: Made a push higher,r but it failed to sustain the momentum. A broader range has persisted since mid-April.
- CHF JPY: After a brief pullback, it continued moving to fresh highs, exceeding 185 once again.
- CAD JPY: Paused after a long rally, but failed to correct deeper. Support remains at 107.300, while the next target above the market sits around 109.650.
- EUR/JPY: After a few days of ranging, it broke to yet another high, exceeding 173.350. There is no weakness in sight.
- EUR NZD: The pullback found support around 1.94, before running into resistance at 1.95600. One of these levels has to give before the next big move.
- NZD CHF: After sweeping the lows, it turned to sweep the highs at 0.48120. However, it failed to sustain the momentum for a potential reversal.
- GBP AUD: Once again failed at 2.07 resistance before crashing to make a new close. The trend remains bearish.
- GBP JPY: After two failed attempts at 199.700 resistance, the price turned lower. A key support level should be around 197.800
- GBP NZD: After multiple weeks of ranging, it broke support at 2.24, signaling the potential shift in the trend to bearish.
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.
