Last week brought no surprise in relation to the central bank actions, as the Reserve Bank of Australia cut the interest rates by 25 bps. The AUD dropped early in the week before recouping some losses despite the rate cut. This scenario shows that the downside breakout might take its time. Commodity prices helped AUD, as gold found its footing, strongly rebounding from a $3,200/ounce price level that might become an important support.
Japanese yen, traditionally a safe-haven currency, failed to gain strength on the equity market decline. Japanese long-dated government bonds fell to record levels last week as yields surged. Central bank governor Kazuo Ueda refused to comment on short-term developments.
"I would decline to comment specifically on short-term developments of interest rates, but of course, we will continue to monitor the market carefully," he said after a G7 meeting.
President Donald Trump’s tariff on the Eurozone, accompanied by a weak German PMI, contributed to the euro's weakness, as EUR/JPY reached our intra-week designated target. The British pound also surged, hitting our designated target against the Singapore Dollar—a currency which we’ll closely monitor in the week ahead.
Holidays in the US and the UK will kick off the week, which will be anchored around New Zealand’s central bank’s latest rate decision. The market sees a 25 bps cut, down to 3.25%. The Fed will release its latest minutes on Wednesday, while the Canadian GDP estimations will close the shortened week.
Key News:
- Wednesday: AUD – CPI, NZD – Interest Rate Decision, USD – FOMC Minutes
- Thursday: USD – Preliminary GDP, GBP – Governor Bailey Speech
- Friday: EUR – German Prelim CPI, USD – Core PCE Price Index, CAD – GDP m/m
Paris In Focus
CHF SGD
The Swiss franc has been showing signs of bottoming, signaling that the pullback that followed a massive rally against the Singapore dollar might be over.
For this thesis to hold, two scenarios have to play out. First, the support around 1.55200, which coincides with a 50% Fibonacci level, has to hold. Also, the price has to break and close above last week’s high of 1.57100. If that occurs, this pair could provide quality long setups, depending on shorter-term forex price action.
CHF/SGD Daily Chart, Source: TradingView
2. AUD CHF
This pair broke the bearish flag that had been in the making for over a month before staging a pullback alongside other AUD pairs. The odds are likely stacked to the downside, making this a good pair to follow the next week. The sentiment is 63% bullish, signaling a good contrarian retail opportunity.
AUD/CHF daily chart, Source: TradingView
A potential for a move lower is about 350 pips.
Notes:
- AUD/NZD: Declined to find support at 1.08150 before a minor rebound toward the end of the week.
- AUD CAD: Moved lower to test 0.88750 support, before a sharp rebound higher on Friday.
- AUD/SGD: Made a marginally lower low on the daily chart, but fell back into range. Owing to both pairs' anticipated weakness, it could remain in range.
- AUD/JPY: Made a fresh low before rebounding owing to fundamental news. Long-term bias is to the downside, but a prolonged ranging period is possible.
- CAD/JPY: Dipped lower, exhibiting increased volatility toward week’s end. The resistance to watch above is 104.200.
- CHF JPY: Remains ranging around the key level of 174.100. The big picture points to the upside, but short-term corrections are possible.
- EUR/AUD: Failed to sustain the bullish push from the early week. Strong resistance is at 1.76350.
- EUR JPY: Corrected as anticipated, hitting the 161.140 support in process. Likely to remain in this range.
- EUR NZD: Remains range-bound without clear price action.
- GBP AUD: Briefly broke above 2.08400, but failed to sustain the bullish momentum. The most likely outcome is more range-bound price movement.
- GBP NZD: Kept the bullish momentum despite the large correction on the last trading day. The pair remains bullish as long as it keeps above 2.25120.
- NZD JPY: The support just above the key level of 84.450 has held. A likelihood is that the price reverts and looks to move toward the long-term resistance above, which sits at 88.350
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.
