With a plethora of central-bank statements ahead of us this week there’s likely to be no shortage of price movement across the majors.
The first FOMC statement of 2017 will no doubt take center stage but rate decisions from the BoJ (Tuesday) and BoE (Thursday) are sure to add their fair share of volatility.
In what’s set to be a pivotal week for dollar bulls, let’s take a look at how the majors are shaping up:
EUR/USD
In last week’s update, we noted that EUR/USD was heading into a key ‘zone’ of resistance defined by November’s highest close and highest high. It therefore came as no surprise to see the market tap the zone and beat a hasty retreat.
Our attention now turns to the ascending support line, which broke Monday morning, signalling that the bears are back in charge.
Monday’s close will be significant. Failure to mount an intra-day fight back would open the door for a much larger sell-off -- potentially down to the 2016 lows.
GBP/USD
Cable completed the A,B,C,D harmonic-move pattern that we highlighted last week.
It is important to note that completion of the ‘measured-move objective’ is not sufficient to call a top on this market. As it stands, the short-term trend remains bullish and probabilities favor an advance into the 1.2750 resistance zone.
That said, any break below 1.2400 -- previous resistance/new support -- would change our view on this market.
USD/JPY
USD/JPY’s prolonged period of retracement finally came to an end last week. The market double bottomed at 112.50 and rallied higher with conviction, breaking its descending retracement line.
With short-term momentum now realigned to the dominant trend, we are back in ‘buy-the-dips’ mode.
AUD/USD
The Aussie’s run of four consecutive weeks of gains came to an end last week as the market succumbed to a rebound in the greenback.
Prices have now entered a period of consolidation, which should see the market chop sideways in a relatively tight range between 0.7500 and 0.7600. This market will only become of interest if we start to see evidence of volatility contraction (tightening ranges). We’ll keep you posted.
