The Week Ahead: Bullish Hurdle

Signs of exhaustion might prompt correction

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AUDUSD Stays High as Risk Appetite Grows

After reaching a 23-month high, the Australian dollar’s bullish run sees no signs of exhaustion yet. The Trump administration’s banning of Chinese companies temporarily lifted the Sino-US tension as well as the greenback but fell short of denting investors’ risk appetite.

On the other hand, President-elect Biden’s $1.9 trillion package to jump-start the US economy signals there is no change in the fundamentals, but rather a doubling down on cheap liquidity, nothing but a call for continuation.

The Aussie’s uptrend will stay intact as long as it stays above 0.7500 along the moving averages. 0.7980 from February 2018 is the next hurdle.

GBPJPY Rallies as UK Vaccinations Speed Up

The pound gained strength after the Bank of England’s Governor expressed his reluctance to go into negative interest rates. With Brexit and a third nation-wide lockdown, the comment comes in as kicking the can down the road. Further easing may be needed soon.

As a matter of fact, markets merely pushed their expectation of negative rates from May to June, in line with hopes of economic recovery by this summer. For now, the bet is that a broader vaccination campaign could help see the turnaround.

A rally above 142.80 could lift the price towards 145. To the downside, 138.00 along the trendline is a key support level.

CADCHF Rises Ahead of BoC Rate Decision

All eyes are on the Bank of Canada’s interest rate decision this week as policymakers try to mitigate the impact from tightening economic restrictions. What is interesting is that Loonie buyers have remained unfazed by the expectation of a rate cut.

This is probably because the central bank would stop short of negative rates, and adopt a “micro-cut” of less than 25 basis points

Considering the low-interest-rate environment across the globe, this minor tweak is unlikely to change the course of the current price action.

The pair is testing the November high of 0.7050 and a bullish breakout could lead the rally towards 0.7200.

EURNZD Tanks as ECB Likely to Stay Cautious

The euro’s downtrend against the risk currency is yet to bottom out. The upcoming ECB meeting is unlikely to revert price action off course. The central bank is expected to stay on the sidelines.

There is very little the ECB can and would want to do, apart from observing the effect of the vaccine and economic reopening and adjusting the stimulus later on.

Traders will be looking into the forward guidance in regards to weak demand and low inflation, and a dovish tone may put the single currency under renewed pressure.

A drop below 1.6800 would send the price towards 1.66. On the upside, 1.7100 is the immediate resistance.

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