A Look at the Week Ahead

 

22 May 2017 Market Commentary & What's in This Week's Calendar

Looking at the US Dollar Majors we are clearly looking at dollar weakness which all started 11 days ago due to the current political turmoil in Washington.

As with any turmoil Gold becomes a safe haven for investors and we are also looking at a bull run here.

Political analysts are logically predicting that this isn’t going to go away any time soon and, in fact, Mr Trump’s issues may worsen when he returns home.

If we switch from the 4 hour to the daily charts we can see that we are near the extremes for the month and on USDCHF we need to go back to November of last year to find similar dollar weakness.

On Cable we had consolidation in September of last year at these levels and on EURUSD, October. Ironically, this spike that we see here on a few charts was in fact the US Presidential Election from last November.

During times like these, technical opportunities are hard to come by and we must rely on fundamental analysis. That doesn’t preclude you, however, from monitoring support and resistance levels.

Here, for example, on USDCAD, we are at a key level of support which used to be a level of resistance earlier in the month and at consolidation in previous months. A break below $1.34.5 could see a significant move lower but, watch out for Wednesday’s Crude Oil inventories and an Interest Rate decision from Ottawa. As well, OPEC will be meeting all day Thursday and, if production cuts are on the table, the Loonie should strengthen even further.

On Oil, we are hovering around the $51 per barrel mark on WTI and, if OPEC cuts, we have room to move to this area of consolidation around $54 last seen earlier in the year.

If you are trading either the Euro or the Pound this week, fundamentals will be key as both governments are still arguing over the Brexit divorce settlement expected from Britain to the EU. This fight will rage on for a while and affect both currencies.

As well we have the German Business Climate report due tomorrow and Mario Draghi speaking at a Madrid Conference on Financial Stability Wednesday.

From London, Theresa May is speaking tonight on the BBC and investors will be listening to every word so be careful here as the Interview will be held after 7pm London time and therefore during a time of low market liquidity.

Keep in mind, the UK will be staging a general election on the 8th of June so expect a barrage of opinion polls and statements which may affect Sterling.

Tomorrow, we have UK Inflation Report Hearings and Quarterly GDP on Thursday.

Getting back to the US Dollar, we have FOMC minutes Wednesday, Unemployment claims Thursday and on Friday, we have monthly Durable Goods orders and Quarterly GDP.

Looking at the indices, we had successive bearish and bullish runs last week and we could be looking at a bit of stagnation until the dust settles in Washington. The FTSE however, seems to be on a nice upward march and, if Theresa May can keep a steady hand on the tiller with the UK economy, the general election campaign and Brexit negotiations, we may be looking at continued UK equity strength.

Last week’s dip in Global Equities preceded a similar drop in the price of copper. The good news is that copper has rebounded to levels from the beginning of the month. The price of copper is, of course, an important barometer for the global economy and for the Australian Dollar.

Looking at the Aussie, we are at a key level of resistance on both AUDUSD and AUDJPY and we can see Ascending triangles on their 4 hour and 1 hour charts respectively so let’s keep an eye on these in the next few days.

In closing, today’s tid bit: The Canadian Dollar isn’t called the Loonie because the currency is volatile; it is nicknamed that after the bird on the Dollar coin.

That’s all for now, happy trading and we will see you next week.