Trading Opportunities for the Week Ahead – 22 Feb 2021

By Furqan Fakar 

Wait EUR/USD – MT is Sideways Normal

Daily chart.

Technical Overview: Price remains in an area of consolidation. After the failed breakout below 1.2070, I expect the market to push higher in an attempt to break 1.2170 and aim for our target of 1.24.  Will wait for the breakout above 1.2170 this week to have more conviction of the overall market direction. 

Fundamental Overview: The pair currently lacks clear fundamental direction as data out of both the EU and the US are mostly beating estimates. However, we have seen that Europe has not been as impacted by the current wave of COVID-19, even with partial lockdowns in place. Italy’s Prime Minister Mario Draghi highlighted that the priority is to fight the pandemic and this is a sign that they will take action with the current slow vaccination roll out in Europe. 

The continued weak job data coming out from the US may weigh on the dollar in the long run. Despite strong overall data, the DXY continues to trade lower signifying broad weakness in the dollar. Attention will be on ECB President Christine Lagarde’s speech and FED Chairman Powell’s testimony.


Cautious Buy USD/JPY – MT is Bull Normal

Daily chart.

Technical Analysis: The pair has continued to trend higher and is currently in a pull-back. I will wait for support to be formed on a lower timeframe to aim for the key resistance level at 106.8. With 3 consecutive bearish candles,it is best to be cautious as the pair may be in for a deeper retracement. 

Fundamental overview: Japan’s Financial Minister, Taro Aso mentioned that “Now is not the time to withdraw fiscal support” and the Bank of Japan (BOJ) Kuroda has no plans to permanently reduce or end ETF purchases. Though Japan’s exports have recovered to pre Covid levels, the BOJ is ready to ramp up ETF buying if required. This will weigh on the YEN in the long run. 

Coming into the week ahead, my attention will be on the data coming out from Japan. If the overall data performs below estimates, this will spur the BOJ to take further actions to support the economy and the bull market trend in the safe haven pair will continue.


Cautious Buy GBP/USD – MT is Bull Normal

Daily chart.

Technical Overview: Price has reached our target level and is now trading above 1.38. We can now expect the market to trend towards 1.42. 

Fundamental Overview: With talks of the UK opening up its economy from the lockdown, supported by strong data out of the UK last week, the pound has gained upside momentum. However, we should be cautious as UK could declare Brexit “water wars” with the EU which may lead to fresh selling pressure. 

The focus in the coming week would be any escalation of the “water wars”. Any tension that arises between the UK and the EU may lead to a deep correction to the current bull market type.

Wait AUD/USD – MT is Bull Normal

Daily chart.

Technical Overview: With the bullish corrective flag pattern broken and a formation of a strong bullish candle, we can expect the market to continue to trade higher towards our target of 0.80. I will wait for a level of support to be formed on a lower time frame to continue buying the market with a great risk-reward ratio.  

Fundamental Overview: Despite dovish comments from the Reserve Bank of Australia (RBA), the positive overall economic outlook is increasing demand in the AUD. The drop in the Jobless rate data shows resilience in the Australian economy amid the pandemic. Victoria is set to end lockdown and NSW to kick-off vaccine rollout in the coming week.

With uncertainty continuing to loom in the US economy, the pair is set to edge higher in the long run.


 

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