By Furqan Fakar
Buy EUR/USD – MT is Bull Normal
Technical Overview: A strong breakout above the key 1.20 figure, signifies increasing bullish pressure. I will wait for a dip to buy the pair, aiming for the key resistance level at 1.24. The bullish bias will be invalidated if the market starts to trade back below 1.20.
Fundamental Overview: There was positive data from both the EU and the US last week. With J&J’s Covid vaccine rollout resuming in Europe, investors are more optimistic about the recovery of the Eurozone. Along with falling US bond yields, this may increase the demand for the EURO in the week ahead.
This week, my focus will be on ECB’s president Christian Lagarde speech and the FOMC. Any mention of the currency being too high for the EUR from ECB’s Christian Lagarde may cap the rally.
Wait USD/JPY – MT is Bear Normal
Technical Overview: The pair continued lower breaking below the consolidation area. However, losses were capped by the monthly descending trendline. It is best to wait to see if the monthly descending trendline can provide support. If the price trades below, the pair may attempt a retest of the previous key resistance level at 106.80.
Fundamental Overview: The recent bearish market structure was supported by an overall weakness in the dollar and strong trade data coming out from Japan. However, with the recent pandemic situation in Japan as Japan’s Nishimura seeks a state of emergency in Tokyo and three other prefectures, this may lead to a weaker JPY.
The pandemic situation in Japan will remain my main focus in the week ahead. We are also expecting the BOJ’s and FED’s interest rate decisions which may contribute to the volatility of the pair.
Wait GBP/USD – MT is Sideways Normal
Technical Overview: The pair continues to trade within the area of consolidation. It is best to wait for a breakout to have more conviction on the overall market direction.
Fundamental Overview: Despite the overall weakness in the dollar and strong data coming out from the UK, the pound failed to make any significant gains. Cable is pressured by Covid-19 and tension with the EU.
Key drivers of the pair in the week ahead would be the pandemic situation in the UK and the FOMC. Any continued tensions between the UK and the EU will continue to cap gains on the pound.
Wait AUD/USD – MT is Sideways Normal
Technical Overview: Price remains within the range and is lacking volatility at the moment. It is best to wait for price to break out of the consolidation area to confirm the overall direction of the pair. A break above 0.78 is suggestive of a continuation of the overall bull market structure.
Fundamental Overview: Tensions between Australia and China continue to grow. The AUD failed to make significant gains over the USD, despite retail sales beating estimates. China’s Foreign Ministry has mentioned that “Australia should avoid making already strained bilateral ties worse”. Australia has recently scrapped two accords between Victoria state and China under Beijing’s flagship Belt and Road initiative. This may lead to a fresh sell-off on the AUD if China decides to retaliate and take action.