With the FOMC meeting now consigned to history, and the currency markets now returning to ‘business as usual’ here is a round up for the Aussie, the British pound, the Canadian dollar and of course the euro in the currency futures market:
Starting with the AUD/USD, the overnight news from China once again brought the attempted recovery to a shuddering halt, with the pair failing to hold at the 0.9400 level and moving firmly lower once again to currently trade at 0.9325 at the time of writing. Should this candle hold during the remainder of the session, then the deep upper wick to the current price action suggests further downside momentum, and any move below the floor of current support in the 0.9275 region could see the pair once again waterlogged in long term congestion at this level.
Meanwhile, for the British pound it's interest rate decision day again, and whilst there is no prospect of a rate increase just yet, as always it will be any associated statement which holds the market’s attention. Cable has been in consolidation for some time testing and retesting the 1.7150 level, with volumes falling away as this price phase develops.
Any signal from the BOE today could be the catalyst for a breakout and move higher, but with Governor Carney having pulled back from some of his more hawkish statements of late, the pair may continue to remain in sideways motion for the short term. The longer term outlook for the pair remains firmly bullish and once the 1.7150 level is breached with conviction and rising volume, expect to see further gains for Cable in due course, which is yet to reach an overbought state on the currency strength indicator.
The euro single currency continues to remain bullish, and refuses to fall, with the ECB now coming under increasing pressure from many quarters to take action sooner rather than later and stop it rising further against the US dollar. The primary tool, as always, is quantatitive easing, which the bank is loathe to initiate. But with the clamour of calls for decisive action now rising and becoming louder, Draghi may be forced to act, with the ideal level for the pair seen as 1.20 to 1.25. From a technical perspective—and until the bank takes action—the bullish tone remains firmly in place as the pair builds a base in the 1.3600 region, with Monday’s pivot low suggesting further upside momentum. Over the short term, expect a test of the 1.3700 region where deep resistance awaits, which may be where the pair finally run out of steam.
Finally to the Canadian dollar, which as expected has started to show signs of exhaustion at the 0.9400 level, and move into a congestion phase at this level. The floor of support is now posted with the isolated pivot low at 0.9335. As the congestion phase builds, with further pivots above and below, this is now a key level for any bearish momentum.
On the currency strength indicator, the Canadian dollar is starting to roll over from the heavily overbought region, reflecting the change in sentiment on the daily chart, with the US dollar rising from an equally well defined oversold region.