After what has been a volatile two weeks which has left the market recovering from a bout of anxiety, we hope that financial markets will finally find a dose of “normality” next week. That being said, it is hard to define “normal” these days. The Fed meeting was certainly the highlight of the week, although the BOJ ran a close second. In truth, both meetings left a mixed landscape and neither did much to ease the pent up tension. The Fed left rates on hold, but did hint of a probable hike before the end of the year. With the November meeting coming mere days before the US election, it is likely that this will be in December – although I would not treat any hike as guaranteed just yet.
A lot of the pairs attempted to do a round trip this week, as the dollar made healthy gains leading up to the FOMC, only to give most of it back after the meeting.
The CAD was probably the most volatile of the pairs this week and was impacted on by not only Central Banks, but also oil prices. After staging a dramatic recovery on Wednesday and Thursday (aided by the Fed and rumours of a possible favourable deal at next week’s OPEC meeting) it was all undone on Friday as the Saudi’s dispelled rumours of a deal which rocked oil prices. We then had surprisingly horrendously weak retail sales and inflation data, which led to further weakness. The USDCAD seems to have formed a range of 1.3100 – 1.3250 for now and it will be interesting to see if it manages to break next week.
GBPUSD was a one way street this week and there are real concerns that we could see a “hard” Brexit. We traded at monthly lows, but we did see a bounce late last night. Cable closed below 1.3000 and this could be a bearish signal, with the next major support level being around 1.2865. This will certainly be one to watch next week.
Keep an eye out for the NZDUSD next week, as this could be the highest probability trade – the market was not prepared for the dovish tone that the RBNZ delivered and it was hit like a ton of bricks on Thursday and Friday. In truth, the NZD probably needed a little bit of a shake out after testing multi- year highs and we are currently sitting around numerous major support levels. From a technical perspective if we are able to hold support around 0.7230, we could see a nice bounce.
The USDJPY had another attempt at 100 but found some immediate support there, the BOJ are going to be targeting long-term interest rates going forward, as opposed to QE targets. I am not sure what the outcome will be, but I interpret from this change of policy that BOJ is perhaps running out of options and have finally thrown the kitchen sink at the problem.
The EURUSD has become an incredibly boring pair to trade and it seems that neither buyer nor seller holds any strong conviction, leaving the pair in a bit of a tight range. One gets the feeling that there is going to be some sort of fire cracker out of somewhere needed to move this pair.
Bar numerous GDP data being released next week, the economic calendar looks a little light. Don’t allow this to lull you into a false sense of security, as there are bound to be countless talks and speeches made from Central Bankers this week and we all know how these bankers moved the market two weeks ago.
Our only task for now is to celebrate our heritage – happy braai day!
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