Market Overview | 07 August

Technical Corner

Currency market


NZDUSD: The New Zealand Dollar over 2% in hitting its lowest level against the US Dollar since January 2016, at 0.6377, and trading at near seven-year lows in the case against the Yen. This followed a more aggressive than expected 50 bp rate cut by the RBNZ to an all-time low 1.00%, which was pinned on flagging growth conditions as a consequence of simmering trade tensions and a global economic slowdown. Meanwhile, technically Kiwi entered oversold territory today with RSI at 25 suggesting that correction or a bit of consolidation might be seen today before another attempt lower. Overall outlook remains strongly negative with Next Support levels at 2015-2016 low territory, i.e. 0.6346, 0.6290 and 0.6235. Resistance set at 2019 lows, at 0.6487 and at 0.6585,  which is week’s peak and the November 2018 up to April 2019 Support which has not turned into Resistance.

AUDUSD fell in sympathy, with the RBA, after cutting rates in June and July, having signalled yesterday that more rate cuts could be in the pipeline. The pair smashed through the early January flash-crash low on route to printing a 10-year nadir at 0.6677. AUDJPY also dove into 10-year low territory.

Elsewhere, the other main currencies traded in relatively narrow ranges:

USDCAD rallied to a 7-week high at 1.3315. USDCAD climbed as the pairing reportedly found buyers from Canadian names, returning from the Monday holiday but also because of oil prices which declined sharply over the last week, with the WTI crude prices having  dropped by over 8.5% from week-ago levels, reflecting the air of pessimism in global markets with regard to the consequences of the ratcheting-up trade warring between the US and China.

Sustained oil prices swings impacts Canada’s terms of trade, which in turn affects the valuation of the Canadian currency.

Interestingly, the pair is into its 4th bullish week, while it retests the 20-week SMA at 1.3295. A close this week above the latter could suggest further bullish bias in the medium term, and attention could turn to 1.34 area.

In the meantime, immediate Resistance is at 1.3345 for today. USDCAD immediate Support comes in at 200-day EMA, at 1.3236, while further down Support could be at 1.3207-10 (50-day EMA).

USDJPY: The Yen lifted against the Dollar and Euro, though remained below highs seen earlier in the week. USDJPY posted a low at 105.93, extending the retreat from yesterday’s 107.09 high. It is currently traded below the midpoint of yesterday’s movement, as daily and weekly lower BB lines are extending lower, suggesting the continuation of the bearish outlook for USDJPY. Intraday though, the 3 consecutive 4-hour candles below 20-period SMA and 50% Fib. level along with the flat RSI suggest that the asset entered a ranging market in the near term.

EURUSD has made a slow descent under 1.1200, coasting towards 1.1180 after skirting to a high of 1.1219 earlier, during the Asian session. This puts in some space from the near 3-week high seen yesterday at 1.1249, which was the culmination of four consecutive sessions of ascent as the pair rebounded from the 27-month seen last week at 1.1027. Intraday, as the price is moving southwards below the 20- and 50-period SMA and as the  50-period SMA looks ready to cross above 20-period SMA, further decline is expected. RSI is sloping towards 30 barrier, while MACD eliminated and looks ready to turn negative.  Immediate Support stands at 1.1160-1.1165 and Resistance comes in at 1.1200-1.1250.

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Andria Pichidi

Market Analyst

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