Asian Forex Overview (April 24-May 2)

The shorter trading week brought a minor volatility dip, as currency markets mostly ranged after explosive breakouts earlier this month. Equity markets recovered, triggering a risk-off positioning that saw a minor US dollar recovery and a minor gold cooldown after a historic $3,500 per ounce level was reached on Tuesday.

European PMI delivered underwhelming results, helping the US Dollar recovery, while Canadian retail sales surprised to the upside ahead of the Federal elections that will kickstart the week ahead and likely cause higher volatility for CAD pairs.

Australian CPI and Japanese interest rate will dominate the asian currency news this week, particularly the latter. The Bank of Japan is expected to hold the interest rates steady at 0.50%, and the latest CPI print for the yen, which came at 2.2% instead of a 2.4% forecast, tends to support the rate hold thesis. However, any remark by Governor Kazuo Ueda about further rate hikes could trigger a yen rally, especially connected to the tariff-influenced inflation.

Finally, Friday's Non-Farm Payroll news will deliver the latest snapshot of the employment market situation. Analysts expect a mild addition of 129,000 jobs in April, accompanied by a steady unemployment rate of 4.2%.

Key News:

• Monday: CAD – Federal Election
• Tuesday: USD – JOLTS Job Openings
• Wednesday: AUD – CPI, USD – GDP m/m, ADP Employment, Core PCE Price Index
• Thursday: JPY – BOJ Interest Rate,  USD – Unemployment Claims, ISM Manufacturing PMI
• Friday: USD – NFP, Unemployment

Pairs In Focus

1. GBP AUD

After a big rally early in the month, GBP / AUD has pulled back, spending over two weeks between 2.07 and 2.095. However, this big base will eventually break, presenting a potential move of 250+ pips.

GBP/AUD 4-hour chart, Source: TradingView

The long-term trend is bullish, and retail is overwhelmingly short (around 80%). Still, to get bullish, the price would first have to break and close above 2.09570 on the daily chart, opening the doors to a move to 2.12 or beyond. A valid breakout should be accompanied by rising volume, although due to its decentralized nature, forex volume can be hard to estimate correctly.

2. AUD / CAD

This setup is not for the faint of heart, as both countries will face general elections within the week, and the outcome of either could notably influence the markets. However, this pair has ranged over the last week, failing to break the overhead resistance around 0.88760. As long as the price stays below that level, there is a higher probability of downside, with a potential short-term target of 0.87260.

 AUD/CAD Daily chart, Source: TradingView

Notes:

• AUD/NZD: Rallied late in the week, but remains in a bearish trend.
• AUD/SGD: It remains in consolidation, but if it can't recapture a 0.84900 level, it will likely turn downside again.
• AUD/JPY:  Advanced higher like many other pairs against the yen. It hit the overhead resistance around 92, which remains the level to overcome.
• AUD/CHF: Moved higher, but remains in an overall bearish trend.
• CAD/JPY: Broke out higher, but it has to take out March’s high to reverse a long-term bearish trend.
• CHF JPY: It staged a late-week rally. If it can push through 174.08, it can move higher to challenge the early-month highs.
• EUR/AUD: Failed to break to the downside, raising the odds of an upside move to challenge resistance at 1.80.
• EUR JPY: It advanced higher, but remains in the long-term range with resistance at 163.850.
• EUR NZD: Failed to break through a key level and found support around 1.89300.
• GBP/JPY: Moved higher as anticipated, but too late in the week to take action. It is close to a key level of 191.900, which it needs to overcome to move higher.
• GBP NZD: Found support around 2.22 and could move higher to challenge resistance around 2.25.
• NZD/JPY: Broke above 84.780 owing to yen’s weakness. Further expansion to the upside could bring it toward 87.400.