Forex Weekly Review

28 January 2017 – Dean Weekend Forex Market Review

The first week of the Trump term has come and gone, and just like his campaign President Trump continues to polarize opinion – it seems as though you either laud him or loathe him, and that there is nothing in between. He is definitely proactive, and he has started delivering on some of his campaign promises already, but he is also starting to soften on others. I am a little decided on how I feel, for me I haven’t heard the how he is going to implement his economic plans and so I guess I am just going to have to be patient for now – it is still very early days.

As expected, the US data this week was a mixed box of chocolates, economic data is always stronger towards the end of a presidential term and this corrects itself when the new administration comes in. The US is in an advanced stage in its recovery and so things like exports will be lower because of the expected strong dollar, the surprising thing yesterday was that consumer sentiment is at a 13 year high – for all the protests in the wake of President Trump’s inauguration, the US consumer is confident.

Just like the economic data, the dollar is a mixed bag against its major peers, and again this can be largely expected. It is weaker against the funding currencies (EUR and CHF) and the commodity currencies (AUD, NZD and ZAR), whilst stronger than the rest (GBP, JPY and CAD.) The ranges however have been relatively narrow which means that performance has been marginal at best.

The EURUSD ended the week trading in a 125 pip range, which is the most narrow it has been in the last 2.5 years. The key levels to watch next week are the 1.0700 and 1.0725 which is the 100 hour MA, it does remain resistance for now and if we stay below this level it will be bearish. A candle close above this level however may open up the flood gates for the bulls to enter.

The GBPUSD is still the tough one for me – on Wednesday the price levels closed above the 100 day MA for the first time since Brexit. It is also finding a lot of support on every pull back which indicates that the market is starting to pick a bottom in this pair. PM May was the first foreign leader to visit the White House in the President Trump era, which means that there is the possibility of strong bilateral trade agreements between the pair. There is a lot of good news, but I am hesitant as to what will happen after Article 50 is triggered, 1.2800 signifies the top of the range since the October Flash crash and so I will wait to see how price behaves up there before I consider dipping my toes into Sterling again.

The USDJPY has encountered a good run this year, it stayed above the 100 day MA last night which comes in 114.70, for the first time since the first week of January. The 50% fib is trading at 115.50 and the 200 hour MA is trading at 115.80, this will be the key level to watch next week, I suspect that we may see the sellers enter the market at those levels.

The USDCAD was rather volatile this week –it seemed to be hit by the trifecta with dovish Canadian Central Bank comments, a stronger dollar and uncertain oil prices. We saw the pair recover after headlines that Trump will continue with the Keystone project. I am cautious in this pair as we still have to see a possible renegotiation of NAFTA which will affect the CAD.

Executive orders out of the US will start to slow down, and the “cleansing” of the establishment in Washington will also start slowing down. It won’t be long until the markets get back to normal, until that happens I continue to remain cautious and trade off the longer time frames. For now I am just enjoying the political circus in the US.

Enjoy the weekend!!

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