Trading Opportunities for the Week Ahead – 8 Feb 2021

Wait EUR/USD – MT is Bear Normal

Daily chart.

Technical Overview: Price failed to hold at the 1.2070 support and ended the trading week below that level. Though this may suggest a continuation move down towards the secondary resistance level at 1.19, the formation of a bullish engulfing candle on the last trading day may signify that support around the 1.20 level may hold. I will only look to buy if the price breaks above 1.2170.

Fundamental Overview: There has been a mix of sentiment between the shared currency. The market was unfazed with the Eurozone Preliminary CPI data that came out better than expected and the pair continues to push lower. The European Central Bank (ECB) Vice President Luis de Guindos mentioned that the growth in the Eurozone in early 2021 to be weaker than initially projected. 

With the Non-farm payroll recorded to be below estimates but better than previous, this may gradually increase the demand on the dollar in the long run compared to the EUR. Market movers next week will be the US consumer price index, US jobless claim data, and data coming out from Germany. If the US data continues to show improvements, this will push the EUR lower in the long run. 


Buy USD/JPY – MT is Bull Normal

Daily chart.

Technical Overview: We saw a strong breakout of the descending trendline as we are now in a bull normal MT. I will wait for a level of support to be formed above 104.20 to continue buying the market with a good risk-reward ratio, aiming for the key resistance level at 106.80.

Fundamental Overview: The move was fuelled by the strong data out of the US and the pandemic situation in Japan. The Japanese economy Minister Yasutoshi Nishimura has confirmed that the government will extend the state of emergency until March 7. This has weighed on the Yen, leading the dollar to be the safe-haven currency of choice at the moment. 

The Bank of Japan (BOJ) continues to be accommodative towards their monetary policy and as quoted, “won’t hesitate to add easing if necessary”. With this in mind, any form of deterioration of the pandemic situation in Japan may spur the BOJ to take immediate action which will weigh in the Yen in the long run.


Wait GBP/USD – MT is Sideways Volatile

Daily chart.

Technical Overview: Price failed to remain below support after breaking thorough 1.3653. The downside was rejected and the pair is  currently consolidating. I do expect the market to break above the area of consolidation with a target level of 1.38. If price is rejected at 1.3746 or 1.38, we can expect a trend reversal of the overall bull market structure.

Fundamental Overview: The market remains sideways due to the strong data out of the US and the elimination of possible negative rates from the Bank of England (BOE). BOE has kept the rates unchanged and emphasized that a negative bank rate would pose more of an operational challenge than a zero bank rate. Andy Haldane, the Chief Economist of the BOE mentioned that the “latest BOE forecast points out to a “pretty strong” recovery both in the economic activity and inflation in 2021″. 

In the week ahead, attention will be on the BOE speech and the UK GDP readings. Should the data out of the UK be released better than expected, this will then support the BOE’s forecast and continue the overall bull market on cable. 


Wait AUD/USD – MT is Bull Normal

Daily chart.

Technical Overview: Price has broken support and remained below the key 0.77 level. With the overall bull normal market structure still intact, it will be best to wait for further confirmation on the direction. If the market rejects the key resistance level at 0.77, we will be able to expect a trend reversal with a target at the 0.74 level. 

Fundamental Overview: Despite the possibility of the Australian economic outlook being upwardly revised, the Reserve Bank of Australia (RBA) is widely expected to maintain its loose monetary policy stance. The RBA has decided to extend the Quantitative Easing program as a strategy. Even with no signs of negative rates, the AUD will still be under pressure, with RBA’s Philip Lowe mentioning that they will continue to be accommodative.  

With a quiet week ahead for Australia, the market will move primarily on the data coming out from the US.

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