If anyone tried to describe last week's forex market movement, the single best word would be “volatility.“ Due to President Donald Trump's tariff announcement, markets ripped through numerous support and resistance levels as traders scrambled to reposition and adjust to these new conditions.
Equity markets sank, pushing key indices like the Nasdaq 100 into bear market territory. Currencies performed as expected, with the Euro strengthening and the Australian dollar sinking. This commodity-based currency declined against numerous other currencies, as the reality of weakening commodity exports materialized. Although the US buys only around 5% of what Australian businesses sell overseas, the complicated US relationship with China translates into a weaker Chinese appetite for Australian commodities, which make up 12% of the country's GDP.
The RBA kept interest rates at 4.1%, and a weakening currency doesn't leave much room for lowering them anytime soon. Furthermore, the next elections are a month away, and the results will clarify the country's foreign policy for the medium term.
Next week will bring more news from this region, as the RBNZ potentially lowers the rates by 25 bps to 3.50%. BOJ's Governor Uead might deliver further guidelines on Japan's monetary policy, while the FED releases the latest FOMC Meeting Minutes. CPI and PPI news will round out the week, which might see the currency market take a breather after starting Q2 with unprecedented volatility. Minor continuation moves with CHF and GBP are on our radar.
Key News:
Wednesday: NZD – Interest rate, JPY – Governor Ueda Speech, USD – FOMC Minutes
Thursday: AUD – Governor Bullock Speech, USD – CPI, Unemployment Claims
Friday: GBP – GDP, USD - PPI
Pairs In Focus
1. CHF/JPY
During the last week, this pair held above the key daily level of 168.120, which it retested on Thursday before sharply rebounding higher. The odds of a run at the trendline, which has been in play since last summer, are increasing, with a potential 200 pip move higher.
This is a long-term countertrend move in the larger picture, as the price still made a lower low in February. However, this is a trend move in the short term, supported by the contrarian retail positioning, which is nearly 70% short, making it a good candidate for a higher squeeze. Ideally, this setup would play out before BOJ Governor Ueda's speech, which could catalyze a bigger Yen move.
CHF/JPY Daily Chart, Source: Trading View
2. GBP/SGD
This pair flushed out long before significantly retreating back into the range in which it has spent the last two years. Overall, the trend is neutral, and the likelihood of price retreating toward a key level of 1.71500 is rising.
GBP/SGD Daily Chart, Source: Trading View
Notes:
- AUD/CAD: The bottom fell out after a break of the key level of 0.89700. The drop pushed the pair to the lowest level since August 2023.
- AUD/NZD: Dropped to a level from September 2024. Further movement will likely depend on the upcoming central bank decision.
- AUD/SGD: Dropped to a level from the 2020 Crisis.
- AUD/JPY: Took out the stops below the market and broke through the key weekly level of 90.
- AUD/CHF: Fell to the lowest point in 25 years, taking out the previous low from 2020.
- CAD/JPY: Swept the lows before retracing. It failed to establish a new low, so it might pull back and establish a range.
- EUR/AUD: It took out the yearly high and broke through the old key level from years ago at 1.78. It might pull back to that level before continuing higher.
- EUR/JPY: Dropped to test the March lows before retracing. It closed below the key level 161.135, so further downside is possible.
- EUR/NZD: Ripped higher, closing at a level higher than in March 2020—strong bullish momentum.
- GBP/NZD: Established a fresh high, reaching levels not seen in a decade. It should continue in the same direction unless a significant central bank policy shift occurs.
- GBP/JPY: Fell back in the range, but closed below the key support level at 190.130.
- GBP/AUD: Broke through the 2.08 resistance established in early 2020. Remains in the strong bullish trend.
- NZD/JPY: Broke support at 82.900, took out the previous year’s low. Pullbacks are possible, but the market will likely wait for the central bank’s decision.
- SGD/JPY: Broke the support at 109.200 and swept the September’s low.
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.
