The Week Ahead: Tension in the Air
Geopolitical events and US jobs data will keep investors on their toes
Trade of the week
GBPUSD stays in range before NFP
The pound sterling is currently in a narrowing consolidation range between 1.2900 and 1.3280. This reflects the market’s indecision as MPs head back to the UK Parliament after the Christmas recess.
Things will spice up as we approach the formal departure date of 31 January and trade talks with the EU are about to kick off. In the meantime, we expect cable to pull back towards the rising trend line, where 1.2960 will be a major support level to maintain the upbeat mood.
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NZDUSD drifts lower from July’s high
Improved trade prospects have driven up bids for commodity currencies like the New Zealand dollar. The pair came just short of last July’s high of 0.6790. As buyers started to take some chips off the table, the kiwi is likely to continue its retreat before the US non-farm payrolls stir up volatility again.
The psychological level of 0.6600 around the daily moving averages will likely see interests bid up the price. However, should the pullback deepen, 0.6580 will be a key line of defense for the bulls.
AUDCAD falls back in hopes of support
Tensions in the Middle East may well give a boost to the Canadian dollar. As the world’s fourth-largest exporter of oil, Canada is well positioned to reap the fruits of surging prices. Meanwhile, risky assets like the Aussie could take a hit from nervous global sentiment.
This divergence means that the pair could stay under pressure for the days to come. After lifting offers around the strong resistance level of 0.9130, the pair gave up most of its gains and is now back to the support of 0.8980 where a failure to recover could lead to a sharp sell-off.
WTI flames up on renewed tensions
The New Year started with a bang for oil prices. While the WTI crude was treading water under last September’s high of 63, the price skyrocketed following the news of the killing of a top Iranian commander by a US air strike in Iraq.
Concerns over an escalation and its repercussions on the supply chain could drive the price further up. Markets will stay nervous that more fuel might be poured onto the fire. The bullish momentum could carry the price beyond April’s high of 66, which may trigger an extended rally.
