In this week’s Week Ahead Analysis we take a look at the key charts of the week with #USDIndex, #NZDUSD, #GBPNZD and more!
Watch the video to learn more…
Week Ahead Analysis
The high impact news this week contains multiple rate announcements as well as key inflationary data. The week starts with US inflation data with CPI numbers forecast to come in well above previous which again could put pressure on the Federal Reserve to hike rates more aggressively. The Fed has recently spoken of seeing inflation down towards the middle to the end of the year, to achieve this they will need to act more aggressively. Following on from this the RBNZ is expected to raise interest rates by 25bps to 1.25%. The Bank of Canada is also expected to raise interest rates but by 50bps as the Canadian dollar continues to strengthen further. Finally the ECB are set to leave rates unchanged as they wish to remain flexible in their monetary policy approach.
The strength meter this week shows that the NZD is weakening from the extreme highs offering reversal trading opportunities. The AUD remains high currently and would need to show more evidence of a reversal before offering those types of opportunities. The GBP continues to gain strength playing into its seasonal pattern well.
If the inflation numbers remain strong we could see a continuation of the bullish trend for the USD Index. Last week the price rallied and reached the key $100.00 level and looks likely to be tested again this week. If the price retests the previous swing highs and forms bullish price action we can look for long USD opportunities across the major forex pairs.
We featured NZDUSD last week as we expected to see the market reverse due to the currency strength meter analysis. The price of the NZDUSD formed a strong bearish engulfing candle on the weekly time frame showing that selling momentum is in the market. The 4hr time frame shows the price breaking key lows and if the price was to retest the supply zone and form bearish price action we can look for short opportunities.
With GBP getting stronger and NZD getting weaker we can begin to look for long ideas on GBPNZD. The weekly chart shows the price forming a bullish reversal candle after a period of low ranging candles as the selling momentum faded towards the bullish reversal zone. The RSI shows price moving from an oversold condition which can add confluence to a reversal opportunity forming. If the 4hr can form a higher low we can look for long ideas on the pair.
Finally, AUDJPY is on the watchlist this week as the two currencies are on the opposite sides to each other on the strength meter. Not only this but the recent weekly price action does suggest the bullish momentum looks to be slowing at these highs as the price fails to make higher highs. If the 4hr chart shows the price breaking trend or having a bearish rejection of the major highs again we can look for a short idea.
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