Australian dollar has been in the centre of attention today as the speech from RBA’s Lowe was just as hawkish as expected. He again promised there’d be further rate hikes which has supported the pair. Lower oil prices support the idea that inflation might be easing off which in turn supports the risky assets. Stocks attracted buyers yesterday and today as the dollar edged lower again. This has pressured gold as traders and investors are moving away from safe-haven assets. By reading further, you agree with our disclaimer at the end of this report and acknowledge that we do not provide investment advice.

In today’s report, I provide you with trade ideas, analysis and key technical levels on

  • GBPNZD
  • CADCHF
  • EURCAD
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AUDUSD – My trade idea is valid again as the pair is now above the threshold level of 0.6943 and AUDUSD has been reacting positively to Lowe’s speech. So, I’m interested in long trades above 0.6943. My T1 for AUDUSD is at 0.7030 and my T2 is at 0.7080. Alternative scenario: The market breaks the 0.6943 support and moves to 0.6890.

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GBPNZD has been over the recent days attracting buyers near to 1.9557. Now the market has been able to stage a rally which suggests there could be opportunities on the long side. I’m looking for long trades above yesterday’s low with my T1 at 1.9406 and T2 at 1.9435. Alternative scenario: Yesterday’s low doesn’t hold and the market trades down to 1.9152.

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CADCHF dropped down hard after the SNB rate decision last week. Now the market is trying to stage a recovery and is battling a resistance area at 0.7457 – 0.7471. If the area can be penetrated decisively the market could rally to 0.7550 (T1) and then later on perhaps to 0.7580 (T2). Alternative scenario: The market cannot penetrate the resistance area and falls back to 0.7395.

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EURCAD could be rolling over from a resistance area and if the market stays weak below 1.3636 we might have a short trade opportunity in this market. I’m looking for short trades in EURCAD below 1.3636 with a T1 at 1.3570 and T2 at 1.3520. Alternative scenario: The market rallies decisively above 1.3636 and trades to 1.3710.

Macro Drivers for the USD 

As the most followed, invested and traded markets for risky assets are priced in the USD it is helpful to understand what macroeconomic factors impact the other side of the equation, the USD. Whether we are trading EURUSD, XAUUSD or US equity CFDs the factors impacting the dollar, the nominator in the equation, have a significant role in the formation of all medium to long-term price action. The following table summarises the most important fundamentals.

The Federal ReserveFed hiked by 0.5% in May but according to Powell 0.75% hikes are off the table. 
StimulusThe Fed is looking to scale down its bond-buying program (QE) but has signalled that it be careful with tightening due to the war in Europe. 
YieldsThe US 10-year treasury yield has been drifting lower since early May as equity investors have moved over to T-Bonds in search of safety. 
EmploymentThe May non-farm payrolls increased by 390K (436K previous) while the participation rate was confirmed at 62.3% (62.2% previous). The unemployment rate remained unchanged at 3.6%. 
InflationThe US annual inflation growth for May accelerated to 8.6%. This was the highest reading since 1981.  Analyst consensus had expected the yearly rate to be 8.3%. The prices for energy (+34.6%) and food (+10.1%) made record increases. For food, this was the first increase of 10% or more since March 1981.

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 The Next Main Risk Events

  • CAD – Core Retail Sales m/m
  • CAD – Retail Sales m/m
  • USD – Existing Home Sales
  • GBP – CPI y/y
  • CAD – CPI m/m
  • CAD – Common CPI y/y
  • CAD – Median CPI y/y
  • CAD – Trimmed CPI y/y
  • USD – Fed Chair Powell Testifies

For more information and details see the TIOmarkets economic calendar here.

Trade Safe!

Janne Muta

Chief Market Analyst
TIOmarkets.com

Open a VIP Black account now at www.TIOmarkets.uk. We want you to be able to exploit trading opportunities in financial markets with 0 commission and tight spreads. Take advantage of the best trading account in the industry: Tiomarkets VIP Black. For more details on this truly exceptional offering see here.

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Risk warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. Professional clients can lose more than they deposit. All trading involves risk.

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