The Week Ahead: Imitation Game

Will global central banks follow the Fed’s lead?

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EURNZD Falls Back Ahead of ECB Decision

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The euro is likely to be in the spotlight this week as the Eurozone’s GDP data will be followed by the ECB’s monetary policy meeting.

Last week’s CPI has sounded the deflation alarm and already put the single currency under pressure. Should economy data show little sign of recovery, the ECB could be forced to step up its intervention.

Markets will certainly pay attention to the central bank’s guidance and whether it will follow the Fed’s way by keeping interest rates low for years to come. In that case, the pair may drop to the previous low of 1.7160 and a bearish breakout could trigger an extended sell-off in the coming weeks.

USDJPY Finds Bids as Shorts Cover

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The US dollar has held its ground across the board as bears unwound some of their positions. The latest non-farm payrolls were slightly off the target but solid enough to buy the dollar some breathing room.

Nevertheless, the sentiment is still far from being optimistic and rebounds are more likely to run into selling interests. The greenback will need more than just short-coverings to secure a meaningful U-turn.

In the case of USDJPY, a bullish reversal is only possible if there is enough momentum to lift offers around 107.00. Otherwise, 104.00 is the next target on the downside.

AUDUSD Retreats from 9-Month High

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The Australian dollar could be running out of steam as its US counterpart claws its way back. Upbeat sentiment backed by China’s stimulus and easing of lockdowns has fuelled the currency’s unrelenting rally lately.

As the Aussie hits a 9-month high, a 7% drop in national output in the second quarter came in as a reality check. While there is no sign of reversal yet, weaker fundamentals have prompted profit takings which could cap its advance in the next few days.

The pair has met stiff selling pressure at the resistance level of 0.7400. Immediate support may be found near the 30-day moving average above 0.7150.

CADCHF Recovers Ahead of BoC Meeting

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The Canadian dollar has rallied against the Swiss franc without much conviction as traders await a signal from the Bank of Canada this week.

Last Friday’s data painted a less gloomy picture with the unemployment rate falling to 10.2% from 10.9% previously. The BoC may adopt its neighbor’s approach with an ultra-loose monetary policy for an extended period of time. Compounded with a sell-off in the oil market, the loonie may see its recovery capped in the days to come.

The psychological level of 0.7000 is the key hurdle, and a failure to break out could lead to a retreat towards 0.6800.

How do you feel the CAD will fare in the coming weeks? Open your Orbex account and trade now! 

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