From a technical point of view most
of the traded assets are now range bounded, waiting for a major event
to drive them forward, into trend. The Dollar index,
calculated against a basket of currencies closed the week stuck between
trend line support and resistance of 81.50 points. The non directional
week had an enormous impact on all the majors and the crosses, as
numerous pairs have now entered ‘sleep mode’, forming potential break-out setups.
One must remember that the Dollar is still showing a strong correlation
with the U.S stock market, as it continues to act as a safe haven. A
recent pause in stocks has been characterized by a stronger Dollar,
especially as investors are dubious regarding the continuation of the
equity market. Should equities break their range, one could expect a
weaker dollar and stronger counterparts.
This Upcoming Week
Even though the economic
calendar is a lot less packed compared to last week’s schedule, data
will continue to take its toll on the intraday sessions, causing
increasing volatility. The U.S will stand out this week as they are
expected to release an interest rate decision, their annualized GDP
result and consumption results, among others. While many are focusing
on the rate decision, one must remember that with a low rate of 0.25%
the Fed doesn’t have many alternatives that to help the economy via
further quantitative easing. Even though bonds are starting to price in
future rate hikes, the economic situation should prevent the Fed from
taking any irrational moves. Due to that fact one should look to other
results, for example housing data could be a potential candidate to
stimulate the break out. With a gloomy housing sector, could a
combination of Existing Home Sales and New Home sales spark the
break-out this time round?
Potential Break-Outs
(Please
note that even though we are pro bullish patterns the direction will
depend on the Dollar’s reaction to the U.S equity market)
USD/CHF
EUR/CHF
GBP/JPY
CAD/JPY
Check out our ‘charts analysis’ page, for technical charts.
