The risk-on trading mode was dominant in the financial markets last week. The most significant growth was noticed in Emerging Markets as investors continued seeking high-yield assets despite concerns over the global economic slowdown. For instance, USD/MXN plunged almost 5% since the beginning of the month on the back of additional demand for high-risk currencies in general and Mexican Peso in particular. US stock indices continued climbing towards all-time highs printed in September last year. S&P 500 charted the third highest weekly close rate on record (+0.49% weekly change), paring all of the losses started in October 2018. NASDAQ added 0.55% to its price and finished the trading week above 7600 points. Dow Jones Industrial Average gapped down through the past weekend but remained almost flat compared to the previous week’s close. Japanese Nikkei 225 benchmark charted moderate gains of 0.25%, German DAX 30 was flat (-0.08%), while French CAC 40 climbed 0.48%. US 10-year Treasury yields gained 3.16% as the fixed-income market investors were selling bonds and safe-haven assets. Gold price tried to breach a crucial psychological level of $1300 per ounce but failed to hold gains and slipped back to $1290. WTI Crude oil added another 0.86% to its price, testing mid-week highs around $64.77 per barrel but the Bulls struggled to keep sustainable and robust momentum.
In the currency market, the US dollar index declined by 0.53%, sliding below 97.00 after two weeks of strength. EUR/USD charted one of the most energetic performances among majors, adding 0.73% to the exchange rate and approaching strong technical resistance level of 1.1300. The British pound was hovering around the same levels as in recent weeks. Japanese yen kept weakening versus the greenback, some of its cross-rates were among the most lucrative pairs. All of the commodity currencies gained strength on the back or demand for risk assets: USD/CAD -0.44%, AUD/USD 0.95%, NZD/USD +0.46%.
Euro had recovered not only most of its two-week losses but also reversed the technical sentiment intraday. The bullish divergence occurred on MACD slow indicator on April 2 and started to work out last Monday as both lines crossed the zero level. At the same time, fast RSI oscillator went above the 50% level, signalling bullish strength. EUR/USD struggled to breach the 89-bars simple moving average with the first attempt, hovering around that resistance curve during two days. However, after charting a long downside shadow of the candlestick on April 10, the pair accelerated growth and soared 100 pips in two days. The SMA89 curve worked as the support level during that bullish rally. Although EUR/USD bounced off the week’s high at 1.1322, we’re still bullish on the pair. There might be another test of the support curve coming around 1.1250 level, which should be used as an attractive depth for short-term entries. Talking about targets, the range of 1.1400/33 looks solid for the bulls to breach on one run. Therefore, we’d be cautious of holding buy positions for too long. Larger timeframes are still bearish, and more significant achievements should be charted before talking about the total reverse in the downtrend. Nevertheless, the recent price action points to further appreciation in the week ahead.
Dollar-yen charted a classic bounce-by-trend pattern on the daily chart below. The pair tested multiple support of Ichimoku’s Base Line and upper band of the Cloud, reversed and surged, breaking through several crucial technical levels. First, USD/JPY breached a psychological round-figure resistance level of 112.00. Second, the pair printed the highest daily close since December 19 2018. Ichimoku span widened its range, pointing to a bullish acceleration in the nearest future. The mid-term target is still placed at 114.07, the highest daily close rate noticed on November 18. Another confirming sign is that USD/JPY went back to the ascending green channel started this year. Although the channel’s angle is rather steep, the resistance line points to the same target for two- or three-week period. The buy-and-hold trading strategy is applicable, while conservative traders should consider seeking intraday depth to enter the market. Ichimoku’s Conversion Line should work as the nearest support curve, limiting daily close prices but not whipsaws.
As long as two major pairs are moving in the same direction, yen cross-rates are the most attractive for swing trading strategy. EUR/JPY surged 1% (126 pips) this past week, which is impressive for such a slow-moving currency pair. Although weekly Ichimoku Cloud indicator is still bearish on the long run, the pair managed to breach both resistance curves - Base Line and Conversion Line. The real challenge for the bulls is placed in the range of 128.50/129.00 where lots of postponed sell orders are hidden. The intraday technical sentiment is clearly bullish as the four-hourly chart below shows. The Ichimoku cloud indicator points to a bullish continuation, signs of a bearish reversal are absent. The only possible bearish action is to re-test support curves in the range of 125.77/126.00, which should be considered as a signal to trigger the buy-dips trading strategy.
Although Aussie bulls were stuck below 0.7200 last week, AUD/USD is back on track towards bullish recovery. The intraday 4-hours chart below has a mixed technical sentiment as the general pattern looks more like a consolidation widening formation. However, the bullish bias is evident as the sequence of higher lows, and higher highs are on the table. Technical indicators confirm that suggestion as ADX mainline (black) breached the threshold, pointing to strong momentum, and +DI line (green) is far above -DI line (red). Parabolic SAR is bullish with its dots far below the price. Another test of 0.7200 resistance is likely in the week ahead, although AUD/USD might bounce back south towards 21-bars exponential moving average around 0.7150. We would consider going long on the pair if that happened.
Mexican Peso was overperforming the currency market last week. The daily chart shows an extremely bearish sentiment with an essential technical long-term support line to be tested in the very nearest future. If the bears were able to break through the green bold trend line, a vast asymmetric triangle would be cracked, and USD/MXN might lose the ground. The only significant horizontal support level is placed around 18.0000 pesos per dollar, and a whole abyss is below it. The only concern is that the pair did not breach the bottom of the Bollinger Bands (21-days period). Therefore, a bullish bounce is possible. A range of 18.8500/8800 looks attractive for new aggressive short positions.
FinmaxFX is one of NAFD (National Association of Forex Dealers) initiators.
Trading Foreign Exchange (Forex) and Contracts for Differences (CFDs) on margin carries a high level of risk. Please, click here, to read full risk warning.
WARNING FOR HIGH RISK INVESTMENTS: Trading Contracts for Differences (CFDs) and Foreign Exchange (Forex) on margin it carries a high level of risk and is not suitable for all investors. Please click here to read full Risk Warning.
HIGH RISK INVESTMENT WARNING: Trading in Contracts for Difference (CFDs) and other leveraged products can result in losses that exceed deposits. Before trading clients must read the relevant risk disclosure statements on our Risk Disclaimer page.
Trading on margin is for experienced investors with a high-risk tolerance. You may lose more than your initial investment. Please ensure you fully understand the risks and take care to manage your exposure.
FinmaxFX is operated by Dilna Investments Ltd which is the primary service provider and website operator. Dilna Investments Ltd is acting on behalf of its mother company, Leadcapital Corp Ltd, a company which is authorised and regulated as a securities dealer by the Financial Services Authority (FSA) of the Seychelles.”