A roundup of the key events in the market this week
One of this week's biggest gainers so far among currencies is the New Zealand dollar. The Kiwi dollar received a boost from the Reserve Bank of New Zealand's decision not to cut rates to 0.75% in the early hours of Wednesday morning. This decision, which went against all expectations, led to a period of strengthening for NZD against most major currencies.
Meanwhile in the USA, attention was on Donald Trump at lunchtime EST on Tuesday as he threatened more tariffs on China if the current talks reach an impasse. The American president told the Economic Club of New York 'If we don't make a deal, we're going to substantially raise those tariffs,' not what many traders had been hoping to hear. Indices and many emerging currencies reacted negatively to Mr Trump's comments.
Gold on the other hand might be set to make more gains
if trade tensions escalate again. The yellow metal had touched a four-month low
below $1,450 on Tuesday night GMT. The return of 'risk off' might well lead to
the bulls taking back control.
Kiwi dollar-dollar, four hour
NZD's rapid gains in the aftermath of the RBNZ's surprising decision to hold rates at 1% on Wednesday morning is evident on this chart. Price surged beyond three Fibonacci retracement areas as well as all three simple moving averages, challenging the 61.8% Fibo area.
The first period after the news also coincided with a spike in buying volume and a crossover of the slow stochastic. From a technical point of view, everything's there for the Kiwi dollar to enter an uptrend against the dollar. On the other hand, key data from the USA this week including annual core inflation might help to cut short gains for NZD if expectations are beaten.
Many traders will probably be looking for a close above 61.8% Fibo after Wednesday's American data for buying confirmation here.
Dollar-yen, daily
One of the more sensitive pairs to news of the Sino-American trade war, dollar-yen had generally been moving upward although with some volatility in recent months as an agreement to cut some tariffs seemed to be approaching. Now, though, momentum and volume have decreased significantly, and short-term approaches might be more appropriate.
The downward crossover of the slow stochastic here combined with three recent dojis on the chart itself seems to suggest a period of consolidation. Short-term selling is likely to increase over the next few days. However, a sustained movement below the 200-day simple moving average is not favourable unless there's a significant escalation in rhetoric around trade.
Dollar-Canadian dollar, daily
Apart from the latest meetings of central banks, dollar-loonie has been buoyed by somewhat weaker Canadian data at the end of last week. Traders also generally view CAD as being more vulnerable to trade disputes than its southern counterpart. The daily chart of USD-CAD reflects this factors fairly well although the slow stochastic's main line at 95 might cause us to question whether a consolidation is overdue.
The most favourable scenario here technically would be a retracement downward - possibly as far as 23.6% Fibo - before a resumption of movement upward. The biggest hurdle for the bulls to overcome is the 200 SMA. Beyond this, the area of the 61.8% Fibonacci extension around 1.333 might be a reasonable target. As above, though, data this week from the USA and Jerome Powell's testimony to Congress must be watched closely.
Gold-dollar, daily
Last week's false breakout downward on the daily chart of gold-dollar seems to suggest that the uptrend is set to resume emphatically sooner or later. Failure to move much below the key psychological support area of 1450 probably means that many short-term sellers have lost interest.
Long-term buyers of gold have the advantage in this area of a reasonable price for entry even if August and September's highs aren't tested again for some time. However, there are several important Fibonacci retracement areas which might challenge movement upward over the next few weeks. A confirmed upward crossover of the slow stochastic within oversold is what many traders are looking for to signal their entries as buyers.
Thank you for reading Exness' midweek roundup. If you want to read about a specific symbol next week, please leave a comment stating which one(s). We wish you responsible trading and many pips!
This article was submitted by Michael Stark, market analyst at Exness.
Disclaimer: any opinions made may be personal to the author and may not reflect the opinions of Exness.
