In this week’s Market Outlook, we take a look at the key charts of the week with #AUDUSD, #EURUSD, #NZDUSD and more!
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Hi, and welcome to this Blueberry Markets video update, with me, John Kibbler, Head Currency Analyst.
In this video, we will go through the currency heat map, and other points that I want to point out.
Strength and weakness table
So, looking at the strength and weakness table, we can see that the weekly change has sprung us a couple of opportunities that I’d love to take a look at next week.
One of those is that we’ve seen Kiwi start to weaken significantly last week, which has been talked about a couple of times. When the price starts hitting these high levels of strength, we’re either going to see a continuation or a reversal to that trend.
Now, for the past few weeks, Kiwi strength has pushed the trends higher. Now, we’ve seen the opposite, allowing us to start looking for the weakness to continue in the NZ Dollar and start taking advantage.
I quite like the opportunity on NZD/CAD. The price has started to change cycle on a daily timeframe, giving us some opportunities. The fact that CAD strengthening is something that I quite like the look of as well.
The Swiss Franc remains quite weak. It dropped even further on the strength and weakness table this week. Whether we’ll see any come back to that or not, we’ll have to wait and see.
However, the JP Yen has started to see some strength coming back in, and with the US Dollar strengthening as well, we could see the JP Yen start to pick up a little bit also. The JP Yen weakness could have been driven by the Bank of Japan, talking about the fact that they’re potentially going into further negative interest rates. That would’ve devalued the currency significantly. But, we could start seeing a little bit of strength coming in, especially against the weaker currencies such as Kiwi.
Now, the table behind is something I’ve been developing for a little bit, and I’ve been looking at applying the strength and weakness weekly changes into a nice formulaic graph.
So, we can see more of a visual move of strength and weakness. The purple line here is the Swiss Franc which has been declining for several weeks now. This led us to short the Swiss Franc, which has had nice moves lately. Also, we’ve seen other things like the GB Pound and NZ Dollar strength.
We can see the NZ Dollar, which is the yellow line, has peaked and it’s starting to drop back lower.
Now, I would like to look at currencies starting to peak and move higher.
We can see here in the red and green line. The red is the US Dollar, and the green line is the CA Dollar, and these two are pointing up now, looking for potential higher. The price is on the higher levels of strength, while Kiwi is starting to move against that. So, they’re diverging currencies at the moment. That could cross paths there, which is where potential changes of trend could happen.
Also, the JP Yen is starting to point up as well. It came into the low minus six figures, and it’s starting to move in a higher trend here according to the strength and weakness analysis. We could see some JP Yen strength starting to creep back into the markets as well.
The GB Pound is one to note because when we hit a minor six-level, we start to see weakness creep back into the market. For instance, we can see the JP Yen dip down; this was back in October 2020. The following weeks, we’ve seen the Swiss Franc top out as well, and they decided to drop a little bit low there, and the GB Pound is back into that minus six. Every time it comes back into that level. We’ve started to see a bit of a dip.
So, there’s potential as well, but I’m going to focus on major currencies this week or a chart of interest.
Starting with EUR/USD, this moved nicely, considering what we thought would happen last week; we spoke about the EUR remaining pretty flat line. The US Dollar is starting to gain some momentum, gain a bit of strength, and we saw that reaction from 1.2110, which is what we wanted.
Now, the price has fallen. We’ve got to look at what’s happening; the price is back into a key area here. We still have key areas down around 1.18, which was the original area we spoke about where we could see prices come into. I think we spoke about this when the price was back up into the 1.23s.
We know the price doesn’t move in a straight line. I mean, we did get these movements of potential pullbacks and complex pullbacks and whatnot.
So, we could see a little bit of downside momentum this week, and what I’m looking for, in particular, is some pullbacks.
Now, going into the four-hour timeframe, there’s a couple of areas that I like. The first one is going to be at this 1.2 level. I like this area because the price has found support here recently. I’d like to see that retested to continue the downtrend. Nice impulses like this would be good to look for around 1.2. Alternatively, wait for the break again of 1928. If we can get below, here, and continue below, here, that could be a good area to look for a short.
There is another level at 1.2070 that we’ve spoken about in the past that could retest. But, that’s quite a deep retracement. So, we’d have to be a bit wary about trading it to the 1.18 level if the price were to reject from this point.
Moving on to GBP, the GB Pound has continued to push lower. We started to get that lower high here. We have a nice high there, and a lower high. Are we going to continue down into the 1.3750 level? Which is a nice level on the GB Pound.
If so, I would be looking for continuations this week, and the resistance levels that I like is this minor resistance level at 1.3860 or the higher level up at 1.3910. I like 1.3910 because it was used as support a few times. So, I wouldn’t mind seeing the price aim for that area to continue down there; alternatively, 1.3860.
If the GB Pound is going to start to reverse, I would expect a reversal from that point into 1.3750s.
Aussie is another currency to look at because the weekly is pulling back. We’ve got a nice strong support level down at 0.7574, and that’s the level I would like to see the price come into.
The daily is starting to create a lower low here If we get a secondary close, that will be perfect for us. But alternatively, we’ll be watching these timeframes, these four-hour timeframes. As long as the trend continues to the downside, we should continue to see lower lows and lower highs.
So, the first level of interest is going to be 0.77. The price has found resistance, support, support in the past, a little bit of support. Are we going to continue to find resistance at this point? I’d like to see some sellers come back if the price can retest this area. Alternatively, 0.7770 was nicely used as resistance or a bit of resistance, a bit of support, breakthrough.
If the price can retest that, that would also be a great level to get short from.
With Kiwi, we’re looking at the bigger picture; there’s a nice false break out on the weekly, expecting some further downside into 7014s, and this is where the price found some support on the weekly timeframe numerous times. We can see it here on the daily in more detail.
I would like to see some downside here; there’s a couple of levels that I like now.
If this Kiwi weakness is going to roll over, then the pullback should be short. If the pullback is going to be short, 0.7180 is a good area for shorting opportunities because there was some seriously strong support here recently.
I wouldn’t mind seeing another jump back into here. If we could get a false breakout of this level, it would be good to see sellers come back in at that point. Alternatively, we have the previous structure lows, around 7210, which would be another good level to look for short.
Now, jumping into the week’s market that you could look at, we’re looking at a weaker currency against the stronger one, which is NZD/CAD. We can see that the price has been working within this channel, up here, and now it’s starting to break out of that.
A nice downside to potentially come on NZD/CAD. We have previous structure highs around 8940s, where we could see the price dip into. I would like to see a daily pullback in this chart and high volatility charts. You’ll want to trade a higher timeframe as well.
If we could get some low ranging candles, a shallow uptrend on the four-hour timeframe to trade from the 9120 area, where price has recently found some support; that would be a good level on Kiwi to CAD to get short.
Thanks for watching this video update. I hope you had a great weekend, and I’ll speak to you soon.
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