Last week was big with news; and therefore extremely volatile. Therefore, summing up the results we would like to note that correction to the growth of the USD, which started mid-April, has reached pivot point. The main driver of the movement in the market was the US news, although it was disappointing. A series of negative US news included industrial output statistics, capacity utilization and consumer confidence index Reuters/Michigan. Industrial output fell by 0.3% in April versus expectation of growth by 0.1%. Capacity utilization for the same period fell by 78.2% against the forecast of 78.4%. Consumer confidence index was also below expectations (88.6 against the forecast of 96.0). The USD sharply went down amid this news; however, by the end of the session it slightly regained lost positions.
This week, investors are waiting for the clear indication of the timing of interest rate increase from the US Fed. However, there is no definite information and besides it all, each member of the US Fed has his own opinion on the necessary measures, therefore, the timing for the rates increase is postponed until September. Negative US news do not give investors chances to open long positions in the medium-term.
There will be some important news in this week’s calendar:
On Tuesday 04:30 (GMT+3) the minutes of the meeting of Australian Reserve Bank will be released. Last week ARB announced the termination of the reduction in the interest rate in the current economic period and also the budget reduction in Australia. If the minutes will reflect the policy of renovations in the economy of Australia, the Australian dollar will grow despite the reduction in price of iron ore and slowdown if the Chinese economy. ( as it became known earlier, Chinese export fell by 6.4% against expectations of growth of 1.6%. Import have also decreased).
If we look at the daily chart of the pair AUD/USD and evaluate the technical picture, we will see that the pair is traded at the strong resistance levels of the corrective growth in the zone below the moving average lines of ЕМА144 (0.8080) and ЕМА200 (0.8325) at the level of 23.6% Fibonacci. On the four-hour chart indicators (OsMA and Stochastic , fast SDL) show sales in the pair (for aggressive strategies). Targets for these short positions are 0.7980, 07900 and 07870. More quiet sales of the pair can be considered at breakdown below the level of ЕМА200 (0.7870) with the target of 0.7750, 0.7710 and 0.7600.
Alternative scenario is sell after reaching a position above ЕМА144 (0.8080) with the target of ЕМА200 (0.8235), and further up to Fibonacci 38.2% (0.8290).
On Tuesday the head of the Bank of Canada Mr. Steven Poloz will give a speech.
Movement of the Canadian dollar in the pair USD/CAD will strongly depend on the oil price. The decline in oil price in the last 2 months has already led to the strengthening in the CAD versus the USD. According to the latest report of the International Energy Agency (IEA), production of oil outside the North America will grow steadily. In addition, it is worth paying attention to the OPEC meeting in June. It is not expected that quotes of oil production will be reduced, which will not increase oil prices, nor help strengthening in the CAD. Now price of Brent has consolidated at the level of 67.50-67.90 USD after the rise up to 69.90 USD.
Technically, on the daily chart the pair USD/CAD is in the zone of support levels of ЕМА144 (1.2040), Fibonacci 38.2% (1.1965) andЕМА200 (1.1870). Indicators (OsMA, Стохастик) give the buy signals. Targets of the long positions are 1.2135, 1.2180, 1.2000 and 1.2280. However , it is unlikely that downward correction will terminate soon. Short positions can be opened after consolidation of the pair below Fibonacci 38.2% (1.1965) with the targets of 1.1900, 1.1870, and 1.1710.
On Wednesday, important news will include annual data on Japanese GDP (02:50 GMT+3).In order to support economy in the country monetary easing policy is maintained by the Bank of Japan. In case of negative economic statistics interest rate can be lowered, which will push up the pair to the new levels. At the moment the pair is in the zone of moving average lines on the four-hour chart with the price level of 119.50–119.70. The price is likely to remain in the range of 117.00–122.00 (wide channel) и 118.50–121.00 (narrow channel).
For Wednesday, voting of the members of the Monetary Policy Committee of the Bank of England will take place (11:30 GMT+3). It is expected that the policy will remain unchanged. There is no ground for changes in trend for the pair GBP/USD despite moderate assessments of the UK economic situation by the Bank of England including inflation and GDP growth. Nevertheless, Mark Carney the head of the Bank of England has already said last Wednesday that strengthening in the Pound inhibits the growth of the British economy.
On the daily chart as part of the upward correction the pair GBP/USD has broken down resistance levels 1.5230 (Fibonacci 23.6%), 1.5385 (ЕМА144), 1.5540 (ЕМА200) and 1.5595 (Fibonacci 38.2%) and is moving to 1.5900 (Fibonacci 50%). Long positions are recommended after the signals from the indicators OsMA and Stochastic on the four-hour chart. At the moment they demonstrate short positions on the Pound. Buy positions are advisable from the levels of 1.5650 and 1.5595 with the targets of 1.5790, 1.5900 and 1.6000. Short positions can be opened if the pair breaks down the level below 1.5385 with the targets of 1.5230 and 1.5065.
On Thursday (18:30 GMT+3) and Friday 11:00, 16:30 (GMT+3) Mario Draghi, a head of ECB will make his speeches.
The pair EUR/USD is in the upward correction moving to resistance levels corresponding to the moving average lines with the periods 144 and 200 and price levels of 1.1540 and 1.1785. The level of 1.1785 also coincides with Fibonacci 38.2%. If the decline in the pair EUR/USD resumes, the zone between these two levels will be a good opportunity for opening short positions for the conservative traders. In case of breakdown above these levels, the pair can go to 1.2185 (Fibonacci 50%).Now, the pair is traded 1.1380, near the level of 1.1295 (Fibonacci 23.6%). Indicators OsMA and Stochastic give sell signals. If the price goes below 1.1295–1.1260 short positions can be opened with the targets of целями 1.1150, 1.1095, 1.1020 and 1.0975. In case of downtrend the targets will be at the levels of 1.0725 and 1.0565.