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Hump day and we're all about the currency crosses!

Take a look at this clear higher time frame resistance on the daily:

EUR/AUD Daily:

I've drawn this as a single line, but just by looking at the level, you can see it's much more of a zone.

Either way, it's obviously resistance and it's obviously holding.

Lets now zoom into the hourly:

EUR/AUD Hourly:

After the higher time frame rejection, we now look for an opportunity to get short and as always, it's pullbacks into previous short term support turned possible resistance that we're looking to use to enter.

Of course stops will sit above the higher time frame level for conservative traders.

Remember this EUR/AUD long setup from back in January? Yes it's inverted, but does it look familiar?

Up Down Turnaround

Global markets returned from various Mayday celebrations with a risk-friendly spring in their step and were rewarded as equities were buoyed by good US earnings results and had another run at making all all-time highs before retreating slightly. For the most part, markets continue to trade in tight ranges ahead of FOMC, NFP and the French elections later this week.The US dollar storylines remain numerous and shifting sentiment continues to pull the greenback in every which direction.

Japanese Yen

Price action in the US bond market with 30-year yields topping 3.02% saw USDJPY touch 112.30 before the 30-year yields faded post-Mnuchin's long end supply headlines after April US car sales plummeted. Supporting the headline USDJPY, there has been a focus on the EURJPY which broke its trendline resistance at 122.20/25. With French election surprise very unlikely, we could see a push higher on EURJPY which will underpin USDJPY. Overall, the headlining pair remains positioned for a move higher, and with equities and risk trading well, we should expect dips to stay supported.

As for trading tonight, FOMC should provide some interest but will offer little in the way of a surprise with the market more focused on the language surrounding June. Overall, I suspect traders are looking past tonight's release, preferring to focus on Friday's NFP as one of the key barometers for the Fed June rate hike.

Australian Dollar

Making 'Cents' of the Aussie dollar moves can be challenging at times, even more so with typical short-term indicators becoming notoriously unreliable, so we take what the market gives us and trudge on.

AUDUSD has been in the limelight post-RBA after the bank held base rates steady. Lately, expectations had shifted slightly to the dovish side expecting that the balance of likelihoods may see a cut as the next move from the bank rather than a hike. The RBA is sounding a tad more upbeat while maintaining the constant theme of a glass half full approach to growth and underlying inflation, was enough to convince the market that chances for a rate cut are very unlikely and the AUD pressed to .7750.

Traders are keeping an eye on .7550-75 levels as there may be some more AUD shorts to get unwound in the days ahead. This could be aided by how well the cross JPY pairs are trading, underpinning the AUDUSD headline pair.

Aussie bulls continue to bank on a rebound in risk, commodity prices as the AUD pairs have continued to lag the moves in global equity prices.With risk rebounding, the interest rate picture a bit more clear and commodity prices apparently basing, we could see an extension of the current moves.

FRENCH ELECTION TIMELINE

May 5 – [from midnight] Poll blackout

May 7 – Second round of French presidential elections. Last polls close at 19:00 BST / 14:00 EDT, with an exit poll result announced immediately.

May 11 – Official proclamation of the new President.

May 14 – [from midnight] End of Francois Hollande's mandate

June 11 – First round of legislative elections

June 18 – Second round of legislative elections.

The Canadian dollar is lower on Tuesday as mixed economic data and the fall in oil prices due to high supply expectations have depreciated the loonie to near 14 month lows. The woes of mortgage lender Home Capital could deflate the housing bubble even as the Canadian Finance Minister Bill Morneau plays down the links between Home Capital and overvalued assets in major cities.

Global think tanks and organizations such as the Organization for Economic Co-operation and Development (OECD), International Monetary Fund (IMF) and others had pointed out the disconnect between prices and value in Canadian real estate. The central bank had tried to push the message across with little success until first authorities in Vancouver instituted a foreign buyer tax that was replicated in Toronto last month.

The Bank of Canada (BoC) looks unlikely to change rates anytime soon and even though the U.S. Federal Reserve will probably hold in May, June is still in play for the US central bank. The BoC’s next move might be a rate cut if the economy doesn’t gather momentum this year. The change in rhetoric from US officials also hurt the loonie. Despite some rumoured assurances from high profile members of the Trump administration it is now alongside Mexico and China as targets of trade retaliation.

The USD/CAD gained 0.224 percent in the last 24 hours. The pair is trading at 1.3712 after oil prices depreciated the loonie versus the dollar. The Canadian currency is the worst performer against the USD. Even the Mexican peso which was the worst performer earlier this year as Trump’s rhetoric hit fever pitch is now stable. In a sense this is a catch up from the Trump effect the loonie was spared.

BoC Governor Stephen Poloz will be in Mexico City on Thursday where the topic of Nafta is sure to come up. US Commerce Secretary Wilbur Ross was speaking today about the trade agreement and he considers it his biggest priority to get the agreement on the right foot without starting a trade war.

The price of oil lost 1.781 percent during the trading session. The price of West Texas is trading at $47.53 ahead of the US weekly crude inventories to be released on Wednesday, May 3 at 10:30 am EDT. The number of barrels in storage is expected to contract by 3.3 million but gasoline and distillate supplies are expected to climb as refineries are processing more but weak demand from consumers is still pressuring the price of oil.

The Organization of the Petroleum Exporting Countries (OPEC) managed to agree to a production cut deal last year that went into effect in 2017. Non-OPEC members such as Russia and Mexico joined but as the 6 month term of the deal nears the end, there is talk of an extension scheduled for May 25.

The rise in US oil production has offset the impact of the OPEC cuts on prices, but the underlying demand has not grown which poses a threat to energy producers around the world.

Market events to watch this week:

Wednesday, May 3
4:30am GBP Construction PMI
8:15am USD ADP Non-Farm Employment Change
10:00am USD ISM Non-Manufacturing PMI
10:30am USD Crude Oil Inventories
2:00pm USD FOMC Statement
USD Federal Funds Rate
9:30pm AUD Trade Balance
11:10pm AUD RBA Gov Lowe Speaks
Thursday, May 4
4:30am GBP Services PMI
8:30am CAD Trade Balance
USD Unemployment Claims
4:25pm CAD BOC Gov Poloz Speaks
9:30pm AUD RBA Monetary Policy Statement
11:00pm NZD Inflation Expectations q/q
Friday. May 5
8:30am CAD Employment Change
8:30am USD Average Hourly Earnings m/m
8:30am USD Non-Farm Employment Change

Market to focus on Fed statement looking for June meeting clues

Central banks around the globe have kept on the sidelines as geopolitical risk clouds are still hovering above. The Federal Open Market Committee (FOMC) two-day meeting will end with the release of the policy statement on Wednesday, May 3 at 2:00 pm EDT. The central bank is not expected to raise interest rates with the CME's FedWatch tool showing a 95 percent probability of the range staying unchanged at 0.75 to 1 percent. Without a press conference by the Fed Chair or forecast updates the spotlight will shine solely on the text of the statement. Investors will be looking for insight into the FOMC meeting in June. The CME's Fed futures contract prices show a 67.4 percent probability of a hike on June 14.

The US dollar has been mixed against the majors ahead of the central bank statement. The greenback has advanced against the JPY, GBP and CAD but is lower against the NZD, AUD, EUR and CHF. The USD continues to get some support from the market anticipating language in the statement validating a rate hike in June. US fundamentals have been weaker in the first quarter but not enough to derail a rate hike. The Fed noticed ahead of its March meeting that the market was not pricing in a hike, so they turned up the rhetoric. It clear this year the Fed is not afraid to tip their hand if they think investors misunderstood their intentions.

Jobs data will also be released tomorrow with private payroll processor ADP releasing its non-farm employment change on Wednesday, May 3 at 8:15 am EDT. Job creation in the private sector has beat expectations since January, but the market has a conservative estimate of 178,000 which is inline with previous forecasts.

The EUR/USD gained 0.018 percent in the last 24 hours. The single pair is trading at 1.0908 after the first day of a two-day Federal Reserve rate setting meeting. Comments from U.S. President Donald Trump have kept the market on edge. Risk appetite had returned after a shutdown of the US government had been adverted thanks to a bipartisan vote, but Trump unhappy with the negotiations called for a shutdown in September as more republican votes would be needed.

The market impact of the US President's comments was not as big as yesterday's statements on his plans to break the big banks but it keeps the political risk high as his tactics intend to intimidate the Democrats into compliance.

The price of oil lost 1.781 percent during the trading session. The price of West Texas is trading at $47.53 ahead of the US weekly crude inventories to be released on Wednesday, May 3 at 10:30 am EDT. The number of barrels in storage is expected to contract by 3.3 million but gasoline and distillate supplies are expected to climb as refineries are processing more but weak demand from consumers is still pressuring the price of oil.

The Organization of the Petroleum Exporting Countries (OPEC) managed to agree to a production cut deal last year that went into effect in 2017. Non-OPEC members such as Russia and Mexico joined but as the 6 month term of the deal nears the end, there is talk of an extension scheduled for May 25.

The rise in US oil production has offset the impact of the OPEC cuts on prices, but the underlying demand has not grown which poses a threat to energy producers around the world.

Market events to watch this week:

Wednesday, May 3
4:30am GBP Construction PMI
8:15am USD ADP Non-Farm Employment Change
10:00am USD ISM Non-Manufacturing PMI
10:30am USD Crude Oil Inventories
2:00pm USD FOMC Statement
USD Federal Funds Rate
9:30pm AUD Trade Balance
11:10pm AUD RBA Gov Lowe Speaks
Thursday, May 4
4:30am GBP Services PMI
8:30am CAD Trade Balance
USD Unemployment Claims
4:25pm CAD BOC Gov Poloz Speaks
9:30pm AUD RBA Monetary Policy Statement
11:00pm NZD Inflation Expectations q/q
Friday. May 5
8:30am CAD Employment Change
8:30am USD Average Hourly Earnings m/m
8:30am USD Non-Farm Employment Change

Another 2% fall in oil prices on Tuesday contributed to the eighth straight day of USD/CAD gains. The New Zealand dollar led the way while the Canadian dollar lagged again. New Zealand jobs data is up next. The Premium video, focusing on gold, yen, USD & euro is posted below for subscribers. New trades are out ahead of Wednesday's FOMC.

The combination of worries about the housing market and a slump in oil prices sent USD/CAD above 1.37 on Tuesday for the first time in 14 months. The pair touched as high as 1.3758 as oil prices fell below the uptrend that started in November.

Crude oil traders are concerned about more supply after Libya's rival governments announced peace talks. Libya is exempt from quotas and has hundreds of thousands of barrels of idled production that could add to the global glut.

The market also continues to watch the drama surrounding embattled Canadian lender Home Capital and a new foreign buyer tax. Together they're seen as a major test of the red-hot market.

With most of the bad news priced in, the next leg of the USD/CAD trade may come from the US dollar side. The FOMC meeting is Wednesday and economic data continues to lead us to believe that caution will be the signal from the Fed either now or in June. US automakers roundly reported disappointing numbers on Tuesday and total sales fell to a 16.81m pace from 17.1m. It's another example of the divergence between soft and hard data.

Another currency that has been struggling lately is the New Zealand dollar. It touched an 11-month low last week before bouncing yesterday and today but a fresh challenge will come from jobs data to be released at 2245 GMT. The consensus is for unemployment to fall to 5.1% from 5.2% with participation steady at 70.5%. Earnings are expected to rise 0.7% in the quarter.

The long position entered in USD/CAD at 1.3430 finally met our indicated upside target at 1.3590 as the pair surged after finding renewed buying interest at 1.3411 (160 points profit was generated), price eventually rose above 1.3700 this week.

On the other hand, the short position entered in EUR/GBP at 0.8475 was stopped at 0.8515 as the pair edged higher early last week, however, euro met resistance at 0.8531 twice and has retreated again since.

No position was entered among other currency pairs.

In short, 2 positions were squared last week with total profit of 120 points and the positions are listed below.
 

24 Apr : USD/CAD - Long ar 1.3430, exited at 1.3590 (+ 160 points)
24 Apr : EUR/GBP - Short at 0.8475, exited at 0.8515 (- 40 points)
 

|                 AUD          EUR/JPY           EUR/GBP         CAD          GBP         GBPJPY
Jan             - 15             -275                - 35            -120
Feb           + 140            -17                  - 40             +11
Mar            - 20            +115                +132           - 19
Apr             + 30                                  - 40           +120                              + 45
May          
Jun           
Jul            
Aug          
Sep              
Oct           
Nov         
Dec                                                                                                                                               
Y-T-D        + 135           - 177               + 17            + 158                             + 45

The greenback traded in relatively narrow range against euro after opening sharply higher, we entered at long position at 1.0900, however, in view of the sharpness of the retreat from 1.0951, we exited the position around break-even and the pair slipped to as low as 1.0851 before rebounding again.

No position was entered among other currency pairs. 

In short, only 1 position was entered among all 4 currency pairs with total profit of 3 points and the position is listed below:

26 Apr : EUR/USD - Long at 1.0900, exited at 1.0903 (+ 3 points)

|                 JPY             EUR             CHF            GBP

Jan          + 167             - 85              - 10            + 50
Feb          + 200            +150             +93            - 59
Mar              -23              -70               -23            - 35
Apr             + 65            + 93             + 50            - 40
May         
Jun          
Jul           
Aug         
Sep             
Oct         
Nov        
Dec                                                                                               
Y-T-D       + 408            + 83               +110           -84     

USD/CHF - 0.9935

Most recent candlesticks pattern : N/A

Trend                                    : Near term down

Tenkan-Sen level                  : 0.9944

Kijun-Sen level                    : 0.9949

Ichimoku cloud top                 : 0.9944

Ichimoku cloud bottom              : 0.9929

New strategy  :

Stand aside

Position : -

Target :  -

Stop : -

Despite last week’s late fall to 0.9893, failure to penetrate this last week’s low and the subsequent strong rebound to 0.9961 has retained our view that further choppy trading above said support would take place, above 0.9969 would bring test of resistance at 0.9981 but only break of 1.0000-08 resistance would confirm a temporary low has been formed at 0.9893, bring retracement of recent decline to 1.0025-30 (61.8% Fibonacci retracement of 1.0108-0.9893) but price should falter well below resistance at 1.0067.

On the downside, below 0.9915-20 would bring another test of said strong support at 0.9893 but break there is needed to revive bearishness and signal the decline from 1.0108 top has resumed and extend weakness to 0.9865-70 (2 times extension of 1.0108-1.0008 measuring from 1.0067), however, support at 0.9831 would hold from here, bring rebound later. As near term outlook is mixed, would be prudent to stand aside for now.

GBP/USD - 1.2925

Most recent candlesticks pattern   : N/A

Trend                                 : Near term up

Tenkan-Sen level                 : 1.2897

Kijun-Sen level                    : 1.2899

Ichimoku cloud top              : 1.2926

Ichimoku cloud bottom        : 1.2915

Original strategy :

Buy at 1.2790, Target: 1.2910, Stop: 1.2755

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 1.2790, Target: 1.2910, Stop: 1.2755

Position : -

Target :  -

Stop : -

Although cable has rebounded after finding support at 1.2864 and consolidation with mild upside bias is seen or gain to 1.2937 resistance, however, a firm break above there is needed to signal the pullback from 1.2965 has ended, bring retest of this level later, bring retest of this level first, then towards 1.2990-00 (1.236 times projection of 1.2109-1.2616 measuring from 1.2365 and psychological resistance). If said resistance continues to hold, further consolidation would take place and another leg of corrective fall to 1.2840-45, then towards support at 1.2805 but reckon downside would be limited to 1.2790-95 (38.2% Fibonacci retracement of 1.2515-1.2965) and bring rebound later.

In view of this, would not chase this rise here and would be prudent to buy cable on further subsequent pullback as downside should be limited to 1.2790-95. A drop below previous support at 1.2757 would abort and signal top is formed instead, bring correction to 1.2740 (50% Fibonacci retracement of 1.2515-1.2965) first. 

EUR/USD - 1.0905

Most recent candlesticks pattern   : N/A

Trend                      : Near term up

Tenkan-Sen level              : 1.0905

Kijun-Sen level                  : 1.0905

Ichimoku cloud top             : 1.0903

Ichimoku cloud bottom      : 1.0900

New strategy  :

Stand aside

Position : -

Target :  -

Stop : -

Although the single currency rose to as high as 1.0948 late last week, the subsequent retreat after faltering below last week’s high at 1.0951 has retained our view that further consolidation below this level would be seen and test of support at 1.0883 cannot be ruled out, however, reckon downside would be limited to support at 1.0851 and price should stay above 1.0821 support, bring another rise later.

On the upside, above said resistance at 1.0948-51 would revive bullishness and signal recent upmove from 1.0340 low has resumed for headway to 1.0975-80 and possibly towards 1.1000 which is likely to hold on first testing due to loss of momentum. As near term outlook is still mixed, would be prudent to stand aside in the meantime.