Sample Category Title

Weekly



    •    Last Candlesticks pattern: Shooting star

    •    Time of formation: 5 Sep 2016

    •    Trend bias: Down

Daily




    •    Last Candlesticks pattern: Hammer

    •    Time of formation: 14 Mar 2017

    •    Trend bias: Near term up


 



NZD/USD – 0.6974




Kiwi found renewed buying interest at 0.6909 and has staged a strong rebound, retaining our view that further consolidation above recent low at 0.6890 would be seen and mild upside bias remains for test of indicated resistance at 0.7090 but break there is needed to signal another leg of rebound from 0.6890 low is underway to bring at least a retracement of recent decline from 0.7376 to the upper Kumo (now at 0.7131), however, break there is needed to retain bullishness and encourage for further subsequent rise to 0.7185-90 but resistance at 0.7247 should remain intact.

On the downside, whilst initial pullback to the Tenkan-Sen (now at 0.6981) cannot be ruled out, reckon downside would be limited to 0.6940-50 and bring another rebound later. Only a break of said support at 0.6890 would abort and revive bearishness for the fall from 0.7376 top to extend weakness to 0.6862, then towards 0.6775-80 (50% Fibonacci retracement of 0.6074-0.7486) but price should stay well above previous chart support at 0.6675.



Recommendation: Hold long at 0.6980 for 0.7180 with stop below 0.6940

On the weekly chart, as kiwi has rebounded after finding support at 0.6909 last week, retaining our near term bullishness for another bounce to 0.7090 resistance, break there would bring test of the Kijun-Sen (now at 0.7133), however, a weekly close above there is needed to add credence to our view that the fall from 0.7376 has ended at 0.6890 and encourage for further gain towards resistance at 0.7247. Having said that, as broad outlook remains consolidative, reckon upside would be limited to 0.7300-10 and price should falter below said resistance at 0.7376, bring retreat later.

On the downside, expect pullback to be limited to 0.6970-80 and bring another rebound. Only below said support at 0.6890 would abort and bring test of previous support at 0.6862, however, a breach of latter level is needed to retain bearishness and extend the erratic decline from 0.7486 top to 0.6780 (50% Fibonacci retracement of 0.6074-0.7486) and later towards previous chart support at 0.6675 which is likely to hold from here.

The Aussie dollar bounced in early Thursday's reading after strong two-day fall found support at 0.7490 and improving tone of stocks and base metals underpinned AUD's near-term recovery. Steep descend in past two days that took out important supports and weakened near-term structure, as bears approached key support at 0.7472 (lows of 10-12 Apr, reinforced by the base of rising daily cloud) loss of which would trigger fresh bearish extension of descend from 0.7747 high, towards 0.7453 and 0.7384 (Fibo 50% and 61.8% of 0.7159/0.7747 rally) respectively. Overall bearish structure sees limited recovery before fresh weakness, with falling hourly cloud (spanned between 0.7537 and 0.7556) reinforced by 200SMA (0.7549) expected to cap rallies.

Res: 0.7537, 0.7549, 0.7556, 0.7570
Sup: 0.7520, 0.7490, 0.7471, 0.7453

After recent news and market headlines were dominated by the UK snap general election announcement, the markets are now turning their attention towards the upcoming French presidential election. The outcome of the French presidential election will most likely result in heightened volatility for the Euro and European stock markets which look likely to be most affected by the introduction of the far-right candidate Marie Le Pen.

The first round of the French election will be held this Sunday April 23. Altogether there are eleven candidates. If none of the candidates gets more than 50% of the votes in the first round, the two winners will enter the second round of the vote will be held on May 7.

The consensus thus far is that the Centrist Macron and the far-right wing Le Pen are most likely to pass into the second round, with Macron being the favourite to win the final vote. But if the past year has thought us anything, polls do not always accurately gauge public sentiment and there is a possibility that La Pen could win the election.

The far-right wing Le Pen, and the far-left wing Jean-Luc Melenchon are the focuses of the election because of their extreme political stances, and Jean-Luc Melenchon is the only candidate among the four whose share of vote saw an increase recently.

Le Pen takes a similar stance to Trump, the focus of her policies are France first, including anti-globalization, anti-immigrants, trade protectionism, repealing the Euro and reusing the Franc, and most noticeably: making France leave the EU.

Many French voters are in favour of Le Pen's policies, due to France's high unemployment rate and recent terror attacks; provoking citizens' anti-foreigner sentiment. France and Germany are the EU's largest economies. If Le Pen wins, France might leave the EU, following the UK, and triggering a level of uncertainty that could well lead to the downfall of the single market.

Regardless of this weekend's outcome we can expect to see volatility across European markets as the election moves towards the second round of voting on May 7th.

Currency pair GBP/USD

The Members of the British Parliament have approved the Prime Minister’s plan yesterday to organise an early general election on June 8. The vast majority of the Parliament Members approved the motion (522 out of 650) clearing the bar of the two-thirds needed for accepting the plan.

The election news did not impact the GBP/USD as much as it did on Tuesday. The Cable currency moved sideways which is forming a bull flag chart pattern (green/red lines) in the meantime. Price is testing the 61.8% Fibonacci level of wave 4 (purple) and could show one more higher high if it breaks above the bull flag.

The GBP/USD retracement has reached the 38.2% Fibonacci retracement level at 1.2750 which could act as a bounce zone if price is indeed in a wave 4 (purple) correction. A break below the 61.8% Fibonacci level makes a wave 4 invalid. A break above the bull flag could see a wave 5 (purple) develop.

Currency pair EUR/USD

The EUR/USD has paused at the 50% Fibonacci retracement level of wave 2 (brown) but a continuation breakout could see price challenge higher Fibonacci levels.

The EUR/USD has retraced to the 38.2% Fibonacci level of wave 4 (pink). A break below the 61.8% Fib invalidates the wave 4 (pink) but otherwise a wave 5 (pink) within wave C (purple) is likely to develop.

Currency pair USD/JPY

The USD/JPY is building a potential wave 4 correction (orange), which would become invalid if price retraced above the bottom of wave 1 (red line). A break below the support level (blue) could indicate a bearish breakout and completion of wave 4 (orange).

The USD/JPY could be building an ABC (purple) zigzag correction towards the Fibonacci levels of wave 4 (orange) where a break above the resistance level (red) could spark a wave C (purple).

'…We have not yet seen sufficient evidence to materially alter our assessment of the inflation outlook – which remains conditional on a very substantial degree of monetary accommodation. Hence a reassessment of the current monetary policy stance is not warranted at this stage.' - Mario Draghi, European Central Bank

Consumer inflation in the Euro zone rose in line with analysts' expectations last month, official figures revealed on Wednesday. Eurostat reported that its Final Consumer Price Index came in at 1.5%, compared to the preceding month's gain of 2.0%. However, the March figure came in line with forecasts. Back in February, the headline inflation rate hit the European Central Bank's target, raising expectations of a major change in the Bank's monetary policy. Nevertheless, following the February release, the ECB President Mario Draghi noted that inflation was in large part boosted by rising oil prices, while core inflation growth remained subdued. Wednesday's data confirmed Mario Draghi's outlook and lowered the possibility of the ECB tightening its monetary policy. The Bank's QE programme is set to run until December. Policymakers turned their attention to the upcoming elections in France and the region's largest economy, Germany, which continued boosting uncertainty in the region. Therefore, analysts do not expect the ECB to act until the presidential race ends. The first round of the French presidential election will be held on April 23. Latest opinion polls showed that Emmanuel Macron and Marine le Pen would likely make it to the final round.

'A build to gasoline inventories is tilted a little bearish, although a build of 2.5 million barrels on the Gulf Coast was in response to higher refining activity.' - Matt Smith, ClipperData

US crude oil inventories dropped last week, whereas gasoline stocks rose unexpectedly, the Energy Information Administration reported on Wednesday. According to the EIA, US crude stocks fell 1.0M barrels in the week ended April 14, following the preceding week's decline of 2.2M barrels and meeting market analysts' expectations. Nevertheless, gasoline inventories climbed 1.5M barrels, falling behind a 1.9M-barrel fall forecast. Unusually high gasoline stockpiles raised concerns and sent the gasoline price 0.6% lower to $1.0701. The price of oil also dropped following the release. West Texas Intermediate futures fell to $52.24 per barrel, whereas Brent futures slipped to $54.75 per barrel. Refineries added 241,000 barrels per day in crude oil production, with the Gulf Coat contributing the most to the increase. Thus, the utilisation rate advanced 1.9% last week. Crude inventories at the Cushing, Oklahoma, dropped 778,000 barrels. Data also showed that distillate stockpiles that include heating oil and diesel decreased 2M barrels, compared to a 1M-barrel decline forecast. The EIA highlighted that distillate inventories hit their lowest levels since November 2015. Yesterday, the OPEC reported that it would meet with non-OPEC countries at its next conference on May 25 to discuss further oil production cuts.

'The core reading is still low and the trimmed mean is creeping back into the target band but it's still on the lower end. Inflation is still pretty soft by historical standards. For us, the RBNZ will probably just remain on the sidelines from here.' - Tom Kennedy, JP Morgan

Inflation growth in New Zealand hit its five-year high in the three-month period to March, surprising markets. Statistics New Zealand reported on Thursday that inflation rose at an annualised 2.2% rate in the Q1 of 2017, the highest level in five years. Thus, the inflation rate hit the mid-point of the Reserve Bank of New Zealand's inflationary target range of 1-3% for the first time in more than a year. On a quarterly basis, the Consumer Price Index climbed 1% in the March quarter, while market analysts anticipated a slighter increase of 0.8%. Therefore, annual inflation growth surpassed analysts' expectations for a 2.0% rise. Following the release, the New Zealand Dollar rose from 0.7000 to 0.7042 against its US counterpart. The Q1 inflation acceleration was in large part driven by higher oil and food prices and a tax hike on alcohol and tobacco. The housing market also provided a significant boost to inflation in the reported quarter. Nevertheless, New Zealand's Central bank is unlikely to change its monetary policy despite stronger-than-expect inflation data. The Bank's interest rates are also expected to remain unchanged at record lows of 1.75%. Excluding volatile items, such as petrol, alcohol and cigarettes, annual inflation climbed just 1.5% but remained within the Bank's target range.

'Twenty-five Nobel Prize-winning economists have united to warn far-right candidate Marine Le Pen against using their ideas to campaign against the euro and the European Union in her bid for the French presidency.' – John Follain, Bloomberg

Pair's Outlook

On Thursday morning the common European currency against the Greenback remained below the second weekly resistance, which stopped the pair's Tuesday's jump. The resistance level is located at the 1.0729 mark. It is possible that the currency exchange rate will retreat to the 1.0687 level, where the 20-day SMA together with the monthly PP are located at. On the other hand a break of the weekly R2 would free up the range up to the weekly R3, which is located at the 1.0780 level. However, most likely the pair will remain at the current levels, as the markets are expecting the French presidential elections.

Traders' Sentiment

Traders remain bearish, as 53% of open positions are short. However, 54% of trader set up orders are to buy the Euro.

'The USD side also looks supportive for further gains in cable, which reflects softer US data surprises, a longer timeline for fiscal reform and a shift in Fed pricing.' – TD Securities (based on FXStreet)

Pair's Outlook

As was anticipated, the GBP/USD currency pair underwent a correction on Wednesday, passing through only the immediate support, namely the weekly R3. According to technical studies, the Cable should continue to weaken today, with the upper Bollinger band and the weekly R3 now acting as a relatively strong resistance area. In case bears do take over the market, the Sterling would risk slipping under 1.27, despite the weekly R2 providing support around that area. Ultimately, a plunge towards 1.2620 is possible, as geopolitical factors keep weighing on the given pair. On the other hand, another leg up is unlikely to cause the 1.2850 mark to get pierced today.

Traders' Sentiment

Today both the market sentiment and all pending orders reached a perfect equilibrium.

'We still think the dollar is going to strengthen over time based on the outlook for US monetary policy... but for now, with markets not heavily focused on monetary policy, it could explain this consolidation (for the greenback).' – Wells Fargo (based on Business Recorder)

Pair's Outlook

The US Dollar managed to appreciate against the Yen on Wednesday, with the monthly S1 limiting upside volatility. Ultimately, trade closed in front of the 200-day SMA, but this level remains an unreliable resistance. Nevertheless, the Buck is still unlikely to post significant gains, as supply, represented by the monthly S1, is still intact. However, the RSI indicator suggests the Greenback is to keep recovering, thus, preserving the descending channel pattern. Overall, the majority of signals are bullish, despite other bearish signs. A lot of uncertainty is currently surrounding the USD/JPY, especially since political events and factors continue to pressure the US currency.

Traders' Sentiment

Nearly three quarters (74%) of all open positions are long today, whereas 57% of all pending orders are to acquire the Buck.