Currency markets are becoming more volatile, which has been good news for traders who participate in their multi-trillion daily volume. CVIX, the index of market-implied currency volatility, surged above 10 in April as most currencies gained ground against the US dollar.
As usual, doomsday headlines indicate that taking a contrarian stance and scalping the dollar on the upside, at least for the short term, might be a wise choice.
Last week's big central bank news went as expected, as the Bank of Canada held the rate steady while the European Central Bank cut yet another 25 bps. CPI news delivered another inflationary cooldown across the board, which will only be more stimulative for further rate cuts—but not yet for the dollar, due to hawkish commentary from the FED's Chairman Jerome Powell, which further reinstates the dollar's short-term strength hypothesis.
The week ahead will bring PMI news from multiple markets, Bank of England Governor Bailey will speak on Wednesday, and the Swiss National Bank Chairman Schlegel's speech will round up the fundamental news by Friday. The weekly focus will be on finding potential NZD weakness, EUR strength, or GBP strength.
Key News:
- Tuesday: EUR – ECB President Lagarde Speech
- Wednesday: EUR – French, German PMI, GBP – PMI, USD – PMI, GBP – Governor Bailey Speech
- Thursday: USD – Unemployment Claims
- Friday: GBP-Retail Sales, CAD–Retail Sales, CHF–Chairman Schlegel Speech
Pairs In Focus
EUR NZD
EUR NZD has potentially finished its pullback, finding some footing toward the end of last week and reaching key levels from last month. As long as price doesn't close below 1.90880 on the daily chart, doesn't establish a lower low, and keeps grinding higher—comfortably closing above the 1.92600 level, which is a key resistance on the hourly chart—the potential for an intra-week continuation is around 1.96250. Retail sentiment is 77% short, which reinforces the long thesis.
GBP JPY
GBP JPY has printed an inside weekly bar. The price tried to take out last week's low before failing and turning around. The anticipation for the next week would be for a rally that takes out last week's high, with a potential to go as high as 191.900.
Ideally, an early week's daily close above 190.130 would be a good opportunity to look for any follow-up pullback to set up the longs.
Notes:
- AUD/CAD: Pulled back into support at 0.88500. As long as the price stays under 0.88750, it is a good candidate for a short.
- AUD/NZD: Found some support around 1.07 but remains bearish.
- AUD/SGD: Similar price action to AUD/CAD – the pullback seems temporarily finished, and price action has
- AUD/JPY: Failed to pull back to previous support – currently in a ranging phase.
- AUD/CHF: Rejected the pullback, it might remain in a range for a while.
- CAD/JPY: Remains in a consolidation, but overall trend is to the downside.
- CHF JPY: Pulled back after a huge breakout. As long as it stays above 173, the trend is to the upside.
- EUR/AUD: The price has been compressing, and it will likely break out sometime soon. The bias is toward the upside.
- EUR JPY: It didn’t move as high as anticipated last week. Established support around 161.130 remains in play.
- GBP/AUD: Found support around 2.07150. It looks ready for a sustained move to the upside.
- GBP NZD: Pulled back to 2.25500 as anticipated, and made a new lower low on the daily. The key level to watch above is 2.25120.
- NZD/JPY: Staged a minor rally early in the week before crashing. Further downside movement is possible toward 82.900
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.
