The Federal Reserve speeds up its quantitative tightening, and this is certainly bullish news for the USD. At the same time, this is a negative factor for the American stocks, which have entered their seasonally worst month.
Weeky Market Outlook: February 18-22
The week is anticipated to be tough for the US dollar. Mr. Trump signed the Declaration for a National Emergency to address the national security and humanitarian crisis at the Southern Border. Trump is prepared to issue the first veto of his term if Congress votes to disapprove of his declaration. Investors need to follow news on this issue to be up to date because the direction of the USD will affect other markets as well.
As usual, Monday stays calm and doesn’t offer important events to trade. But other days will give interesting opportunities.
On Tuesday, the Asian session will bring monetary policy meeting minutes by the Reserve Bank of Australia. The Australian dollar managed to gain momentum last week. The positive reading will support the currency even more. Later that day the British Average Earnings Index will determine the direction of the pound.
On Wednesday, the Federal Reserve will publish its meeting minute. The US dollar needs “not that cautious tone” to move up. Moreover, the day will cause volatility in the Brasilian market. Brazilian pension proposal will be sent to Congress that day. The reform is a key element of the new elected president. As soon as it approved by the Congress, the Brazilian real will be boosted.
On Thursday, we anticipate a lot of events to trade on. Australian jobs data may loosen the Australian dollar. Last time the releases appeared to be more optimistic than the forecasts. However, this time, the forecasts are not that shiny. American core durable goods orders will affect the USD. In the evening, the market will wait for the speech of Mr. Poloz, the Governor of the Bank of Canada. Last week, the Canadian dollar was quite encouraged by rising oil prices. Higher oil and the optimistic governor will push the CAD up.
On Friday, Canadian dollar’s traders will get an opportunity to trade on the retail sales data. Also, we anticipate speeches of the governor of the Reserve Bank of Australia and the president of the ECB. As always, the hawkish tone will support domestic currencies.
Let’s consider market moves.
Will USD/CAD resume the upward movement?
On the weekly chart, we see the doji candlestick that signals uncertainties for the market moves. On the daily chart, the pair has been trading sideways. The further direction will depend on the strength of the USD and economic data for Canada. Up to now, the pair is below the middle pivot level that increases risks of the further decline towards 1.3179, 1.3115 and 1.3035. However, trend indicators give some hope for the recovery. Parabolic SAR keeps forming dots below the price. Also, the pair is in the upper range of the Bollinger Bands oscillator. As soon as the pair closes below, chances for the fall will increase. Until then key resistances are at 1.3259, 1.3323 and 1.3403.
Will AUD/USD form the “Head and Shoulders”?
On the daily chart, it seems like the pair has been forming the “Head and Shoulders” pattern. The economic data are not anticipated to support the Australian dollar this week, however, the situation may change. As soon as the pair breaks above 0.7208, the pattern will be canceled and the further surge will be more likely. However, the pressure may increase due to weak economic releases. In this case, 0.7173 will become a point of the reversal and the pair will start suffering targeting levels of the pattern. Supports will lie at 0.7078, 0.7044, 0.7019 and 0.6984.
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