The Week Ahead: Herd Immunity

EURAUD Struggles to Keep High Ground

The euro is facing strong headwinds as the block struggles to come up with a concerted rescue plan. Calls for joint bonds to finance coronavirus-related policies have met resistance from Berlin, which deems it too early to be effective.

This week’s German inflation, jobs, and manufacturing data may shed some light on the extent of the adversity. Negative readings could add pressure on the single currency, though there could be a silver lining in the form of an EU-wide package sooner than later.

The euro is making a pullback towards the 30-day moving average (1.7600), where trend-followers are likely to add positions.

GBPCAD Rallies Amid Improved Sentiment

The pound sterling extended its rally across the board after the Bank of England steadied the ship in its latest policy meeting. The central bank kept interest rates unchanged at 0.1% after two emergency cuts earlier this month.

This came as a sign that the situation might soon come under control. Markets also found relief in the government’s fiscal stimulus after Finance Minister Rishi Sunak threw a lifeline to hard-hit businesses. The pound now has to test the 61.8% (1.7500) Fibonacci retracement level from the March sell-off.

USDJPY Meets Tough Resistance

The US dollar came to a halt as the world’s largest economy became the epicenter of the global pandemic. Economic repercussions can already be felt across the country. Last week’s jobless claims surged to record 3.3 million and investors fret that the worst is yet to come.

In the meantime, central banks’ efforts to boost the supply of dollars have eased the liquidity squeeze. This means that the greenback could see more downside in the coming days. The pair stopped short of the key resistance of 112.00. The 50% (106.50) Fibonacci retracement level is the immediate support in sight.

NZDUSD recovers as markets stabilize

The New Zealand dollar rallies as investor appetite for ‘risk-on’ assets makes a comeback. Unswerving commitment from major central banks has helped lift liquidity and keep sentiment afloat.

With China gradually going back to work, there is some kind of consolation across developed markets. Nevertheless, grim economic news still lags behind and policies will need time to have effects on the real economy.

This makes one wonder how sustainable the latest rally can be. The kiwi could face increasing selling pressure and the bearish trend line (0.6200) is the major level to cap its advance.