This was a strange week that we had to endure, all the talking heads out of the Fed were chiming in with their opinions on the US economy. Most of them were more dovish compared to Fed Chair Yellen and the consensus is that we could potentially only see one more interest rate hike this year, the market has initially seen this as a bad thing and the dollar came under pressure for most of the week. It is no secret that I was hesitant to expect any more interest rates this year, and contrary to the market I am actually now a little more upbeat on the dollar. The reason for my sudden turnaround despite the slightly dovish tone is twofold, the fact that even the doves expect the US economy can take another hike is big for me and secondly they are all certain that unwinding of the balance sheet will start in September – that’s good news in my opinion.
I have a funny feeling that the market could start to support the dollar this week, and despite the extreme volatility that we faced this week – the closing prices are actually not too far from their opening prices which is telling. A look at the economic calendar for next week looks ridiculous, there is an Economic Forum in Portugal and so we have more central banks talking multiple times next week – Draghi speaks 4 times next week. There are also Fed Members scheduled to speak next week, most of them spoke last week, the market will wait on Yellen to look for some direction. I don’t think that the market will pay much more attention to the rest – they have said what they had to say.
You all know my feelings on the EURUSD and the GBPUSD – I am hesitant to trade either pair until there is more clarity around Brexit, both sides are a little more tolerant than what was the case 4 weeks ago and that could change in an instant.
I continue to concentrate my focus to the commodity currencies for now, a look at the commodity prices around the world will tell you that this sector is in some deep trouble – regardless of the whether the metal prices are hard or soft. The commodity pairs and in particular the NZDUSD, USDCAD and USDZAR seem to be in denial, the AUDUSD is also slightly overbought in my opinion but not to the same levels as the other three.
The AUDUSD battled to break above the 0.7600 level for most of the week and even the retracement found strong resistance at 0.7583 on Friday, this is confirmation for me that price has stalled here and we could resume the downward price action next week. The NZDUSD was the cause for much anxiety this week, but despite the massive volatility the pair only gained 30 pips over the entire week and like the AUD it was unable to break major resistance at 0.7300 last week – despite all the odds stacked in its favour. It seems inevitable that South Africa will cut interest rates and with US expected to raise again it seems as though there is divergence between the dollar and commodity currencies.
I mentioned last week that I am a little weary around the USDCAD, the overly hawkish tones that were delivered by the BOC came as a surprise and what it has done is raised the relevance of future economic data. This was evident on Friday when soft inflation data saw the pair jump by almost 100 pips. I don’t think that we will see an interest rate hike in Canada next week and so the risk is that the pair undoes the move we saw last week.
Weekly Ranges 26/06/2017 – 30/06/2017
Majors
EURUSD
Resistance 1.1220 – 1.1250
Support 1.1130 – 1.1110
GBPUSD
Resistance 1.2760 – 1.2800
Support 1.2640 – 1.2620
AUDUSD
Resistance 0.7590 – 0.7610
Support 0.7530 – 0.7510
NZDUSD
Resistance 0.7270 – 0.7290
Support 0.7210 – 0.7180
USDCAD
Resistance 1.3300 – 1.3320
Support 1.3180 – 1.3160
USDJPY
Resistance 111.60 – 111.80
Support 110.70 – 110.50
USDCHF
Resistance 0.9750 – 0.9770
Support 0.9680 – 0.9660
Rand
USDZAR
Resistance 13.0600 – 13.0880
Support 12.8050 – 12.7500
EURZAR
Resistance 14.5825 – 14.6225
Support 14.3555 – 14.3250
GBPZAR
Resistance 16.5900 – 16.6350
Support 16.2600 – 16.2000
Minors
AUDCAD
Resistance 1.0090 – 1.0100
Support 1.0000 – 0.9950
AUDJPY
Resistance 84.50 – 84.70
Support 83.70 – 83.50
EURCHF
Resistance 1.0900 – 1.0920
Support 1.0850 – 1.0830
EURGBP
Resistance 0.8800 – 0.8820
Support 0.8700 – 0.8690
EURJPY
Resistance 124.50 – 124.70
Support 123.70 – 123.50
GBPJPY
Resistance 141.90 – 142.00
Support 140.40 – 140.20
GBPCAD
Resistance 1.6940 – 1.6960
Support 1.6720 – 1.6700
GBPCHF
Resistance 1.2390 – 1.2410
Support 1.2290 – 1.2270
Indices
DE30
Resistance 12860 – 12900
Support 12730 – 12710
UK100
Resistance 7530 – 7550
Support 7420 – 7400
US500
Resistance 2430 – 2450
Support 2400 – 2370
US30
Resistance 21400 – 21450
Support 21370 – 21350
SA40
Resistance
Support
Commodities
BRENT
Resistance 47.80 – 47.90
Support 45.40 – 45.20
XAUUSD
Resistance 1270 – 1290
Support 1250 – 1230
XAGUSD
Resistance 16.70 – 16.90
Support 16.30 – 16.10
