After the disappointing GDP release in Quarter 1, the Fed made it clear that they would want to see signs of improvement in the second Quarter to justify further interest rate hikes later in the year. We already know that employment is strong in the US, but it has to be close to cooling and so this meant that the retail sales data and CPI inflation data took on more relevance as per usual.
I have often been a lone voice in my doubts that we will see another 3 interest rate hikes, and truth be told, I would not be surprised if we only see 1 more hike this year. Both the economic data readings on Friday missed expectation, and predictably the dollar starting losing ground against all the pairs. Although overshadowed, but arguably more important were headlines this week that the ECB will start to taper off the QE bond purchases after the summer, this will no doubt come after Brexit.
This news was exactly what the EURUSD ordered and this allowed the pair to trade higher than the 200 hour MA at 1.0915 after a push lower in the week found support at 1.0835. The MA at 1.0920 will be the pivotal level to watch next week, a sustained move above 1.0930 will see the buyers gain the confidence to push this pair higher.
The GBPUSD was a bit choppy this week and although it took a breather, it still found support at 1.2860 this week. The good news for the sellers is that the pair closed the week below the 1.2900, and this in a week when cable looked as though 1.3000 was on the cards. It would seem as though the pair is caught in a range between key support at 1.2860 and key resistance at 1.2900, I will be looking for a break either way on Monday.
The USDJPY is respecting support and resistance levels nicely of late, and despite the sell-off on Friday it would seem as though there are some keen buyers sitting at support at 113.18. We have key support levels all the way down to 113.00 and I suspect that may be our next target. Get below this key level and the sellers will join in aggressively, but if support holds above 113.00, then the hour MA at 113.78 will be the obvious first level of resistance.
The USDCAD continues to be the most frustrating currency to trade at the moment, we had a 125 pip trading range this week that on the surface looks reasonable but the speed at which the extremes were reached did not give realistic chance to take advantage. It spent most of the day chopping in the middle of the weekly range and was influenced by both the dollar and the oil price. The narrow range feels like it is trading between 1.3695 – 1.3715, my strategy is wait for the break and then trade in the direction of the break.
It has been a tough couple of weeks for technical traders, it is one of these things that come with the territory though. Patience is the key here as the tide will turn, enjoy the weekend and hoping that all mothers are celebrated on this Mother’s Day weekend.
