A chaotic week is in the rearview mirror, as the US inflation numbers spooked the market – showing that the second wave might be underway. Historically, the second wave is around half of the first one. Thus, if inflation peaked at 9.1 percent in June 2022, the second way could reach around 4.5, a 50 percent increase from the current 3.0 level.
Last week also saw a pullback in the Australian dollar and the surprising strength of the New Zealand dollar—something that traders have to keep an eye on going into next week, which will be heavy for these two nations.
First, the RBA will issue a monetary policy statement on Tuesday. The market is pricing in one 25 bps rate cut, which would bring the rate down to 4.1%. Meanwhile, the RBNZ will deliver the statement one day later, with the market pricing in a 50 bps rate cut, down to 3.75%.
Key News
- Tuesday: AUD – interest rate, GBP – BOE Gov. Speech, CAD – CPI, USD- Trump Speech
- Wednesday: NZD – interest rate, GBP – CPI, USD – FOMC Minutes
- Thursday: AUD – employment, USD – employment, AUD – RBA Gov. Speech
- Friday: GBP – Retail Sales, EUR – PMIs, GBP- PMI, USD – PMI, CAD – Retail Sales, BOC Gov.Speech
Pairs In Focus
The pairs in focus for this week revolve heavily around pairs with the most significant fundamental news. In this scenario, it is foolish to take a position before the news hits but instead wait for the pullback opportunity—if it arrives after the news.
1. AUD SGD
AUD finally found its footing against the SGD after a flush lower at the beginning of the month. Now, the price has repeatedly been rejected from a support area around 0.84500, as long as this area holds a move higher to take out stops from the beginning of the year of 0.85600 and higher, potentially to 0.86300 is possible. The overshooting target for the longer term is 0.87200.
AUD SGD daily chart, Source: Trading View
2. EUR AUD
This pair made a clear lower low and a lower high. It will likely continue dropping as long as its daily close is below 1.64400. Then, the doors are open for a drop to 1.63200.
EUR AUD daily Chart, Source: TradingView
Retail Sentiment
The abovementioned AUD SGD has an overwhelmingly short retail sentiment (over 90%), boosting its odds for an upper breakout—although it is an exotic pair, and thus, the sentiment is not as reliable as it usually is.
Other notable retail sentiment biases are for GBP NZD (75% short), AUD CHF (79% long) and GBP CAD (79% short).
Notes:
- AUD CAD: Pulled back inside the range, has to break above 0.90500 to establish an uptrend.
- AUD JPY: Made a lower low and fell back in the range. Indecisive movement.
- AUD NZD: Fell back to support following the upper breakout. Support needs to hold for it to move higher and challenge 1.11700 resistance.
- AUD CHF: Broke upwards and support held. It is a good candidate for follow-up bullish movement.
- CAD JPY: After a lower low, it made a lower high, which suggests continued lower movement.
- CHF JPY: Retested the September 2024 low, and its support still held. It might continue to range.
- EUR JPY: Challenged 156.000 support which held once again.
- GBP NZD: Established a range between 2.19 and 2.22.
- GBP JPY: Made a lower low followed but a spring back up to 192.500, it is a good candidate for shorts and return to at least 190.100
- NZD JPY: Bearish, but support at 86.000 held for now.
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.
