Trade of the Week

EURAUD – On A Steady Rebound

It’s a big week ahead for the euro as volatility will pick up at the ECB meeting on Thursday.

In her first press conference as the new ECB president, Christine Lagarde is expected to address how the central bank will combat low inflation.

The euro could recoup some of the recent losses if there are meaningful tweaks in the ECB’s policy. The pair has found support at the 50% (1.6150) Fibonacci retracement level, as the RSI remains neutral.

A break above 1.6300 could trigger an extended rally towards 1.6400.

GBPJPY on a Correction Course

On the other side of the channel, the Brexit-focused election will keep traders on their toes. A Conservative victory could fuel the pound’s latest rally as it could pave the way for Boris Johnson’s withdrawal deal to be ratified as soon as January.

A different result, however, could lead to another stalemate and the pound could suffer from fading optimism.

We expect the pair to retrace towards 141.00 before a positive catalyst from the election could send prices to new highs.

USDCHF Could Find Strength from FOMC

While markets expect policymakers to leave the rates unchanged at the last Fed meeting of the year, the focus will be on projections for 2020.

Improvement in the labor market, with unemployment dropping to 3.1%, will be a strong argument against further easing. If the upcoming inflation figure is in the ballpark, the Fed could shift to a less dovish tone, giving the US dollar a chance to recover its lost ground.

0.9850 remains a major level to keep the greenback afloat, with strong buying interest boasting prices towards the parity.

WTI Upbeat on Deeper Production Cuts

The price of oil is carrying on its rally after OPEC and Russia agreed on further production cuts in Vienna last Friday. The extra curb of 500,000 barrels per day will bring the total output reduction to 2.1 million bpd, or more than 2% of global demand.

This has provided strong support to oil prices across the board and is likely to shift fundamentals to the upside as the year draws to an end. US crude is making its way up to the September high of 62, while 56 is a key support in case of a pullback.