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Current Market Update – Forex Trading Tips
Today we will be monitoring levels of support and resistance in unison with any impactful news and the underlying fundamentals in order to find a high probability trade. Support and resistance includes previous highs and lows (horizontal s/r), trendlines, moving averages, Fibonacci retracements, daily pivot levels and round numbers. These levels of support and resistance are most effective when there are several of them converging at the same area (confluence).
Current Market Update:
The USD remains the strongest currency in the longer term, and the short-term sentiment now matches this bullishness. The recent CPI reading has reaffirmed USD strength amid speculation of a rate hike by September. This week’s NFP will be vitally important.
The EUR remains fundamentally weak due to QE and the ongoing Greek debt issue. If Greece fails to make any of their imminent repayments, the euro will be pressured further.
GBP is looking at a rate hike in the next 12 months. We will need further data to assess short term sentiment.
AUD has changed to a downward bias after the poor Capex data. This may weigh on the upcoming GDP reading. The RBA may consider further cuts this year. Recent strength in USD combined with low commodities prices forecasts will likely weigh on AUD in the weeks ahead. Several banks have raised their expectations of further easing by the RBA. The ASX 30-Day Interbank Cash Rate Futures show a 4% chance of the RBA cutting again this year whereas the OIS market prices a 19% chance.
NZD has a chance of decreasing interest rates next week. The Overnight Index Swap market is pricing a 51% chance of a June 11 cut. Several major banks predict a cut in both June and July, while NZIER expects the RBNZ to remain on hold for at least the rest of the year, as they believe the central bank cannot afford to boost the overheating housing market.
CAD remains on the weaker side of neutral. GDP last Friday was weak, prior to that CPI and Retail Sales were also weak. CAD will take most of its direction from any significant changes in the price of West Texas Intermediate crude oil. When there is no oil-related news, the oil price will generally move with negative correlation to the USD.
JPY remains bearish due to QQE. Yen weakness has accelerated recently on the back of USD strength. This move is expected to continue. Sentiment on the JPY can turn bullish quickly if there is major uncertainty in the markets.
CHF is fundamentally a weaker currency given the SNB’s negative interest rates, however it is highly susceptible to volatility due to SNB potentially intervening to weaken the currency as it tends to strengthen on safe-haven demand. CHF often will take direction from the EUR with which its correlation over the last 50 trading days is 74%.
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