JPY and CAD in focus in week ahead

24 July, 2018

The USD has continued to surge against most of the majors today as it continued its run of good fortune on the back of markets betting that further rate rises are in the works. This comes on the back of positive economic data and a hawkish FED which continues to keep things ticking along. We did however see a slight downturn in economic data as US existing home sales m/m came in weaker at 5.38M (5.44M exp), but I feel that this is just a blip in the road given the market's reaction and also the fact that it's the holiday season will be weighing on home sales as well. Consumer data will be a much larger focus in the long run for traders rather than homes data.

One of the big movers though today has been the USDJPY which over the last few days saw some very strong bearish moves from Yen traders. The fall so far has remained bullish in the sense that the trend line has not broken, however the bearish nature of such a rapid fall will leave bullish traders jittery, for now though they've defended well. If the bulls are to regain control then a push to resistance at 112.033 is on the cards, with a possible further extension to 112.862, but only if the USD bulls continue to shine in this market. If we were to see a potential push lower then support levels can be found at 111.083 and 1104.04 as well, but these are looking quite strong despite the moves. The only other major fear I would be worried about is QE in Japan, as at present there has been talking of it being eased off, which would in turn lead to an appreciation in the Yen against the USD. For now though it has been hotly denied at all turns by the Central Bank of Japan.

The other key mover for me and that will be interesting this week is of course the USDCAD which has shown to be a strong candidate for a serious mover. One of the major reasons for this will be oil which is linked heavily to the CAD at present, but is coming under pressure as Trump and Iran have been exchanging words on a heavy basis which has created some nervousness in oil markets. Irrespective of that the USD continues to be a strong mover and there is potential for it to make up lost ground as well.

One the charts the USD has been moving upwards recently, but fell back under pressure recently caused by the oil moves. However with the trend line holding out things still remain bullish in the interim and markets may be looking to move back upwards towards resistance at 1.3206 with the potential to move to 1.3270 as well. This would be tough to crack given the double top we saw here so markets will be struggling I feel at this point. If the bears take a big swipe and the trend line breaks then support at 1.3041 is a likely target.


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