Weekly Outlook for January 6th, 2014

January 6, 2014

AUD/USD

Summary:

The Aussie dollar has looked to consolidate over the new year period as markets have been relatively slow and technical support has been found in a bearish market. Overall though, Australian credit markets looked weak with the latest data showing negative growth in the private sector.   

The week ahead looks to be heavy for the Australian dollar, as economic data on the current trade balance, as well as job vacancies are expected to be released.  All in all, it is expected that the trade balance will shrink as imports fall. However, job vacancies may take a hit if the market did not pick up as much as anticipated after the new year. Additionally, retail sales will be due out on Thursday and are expected to be gloomy despite the holiday period.  

Current resistance levels can be found at 0.8965, 0.9031 and 0.9137; with major resistance found at 0.8965 as the pair rises higher. Current support levels are also found at 0.8889 and 0.8850 as the pair has recently looked to consolidate these levels and will likely be tested in the coming weeks as the RBA will likely look to reverse the consolidation and try and push the dollar a little bit lower to its original 0.85 target.

EUR/USD             

Summary:

The Euro has fallen sharply after pushing through its current trend line, causing a massive break out amongst traders – despite positive economic data out of the Euro-zone. Overall though, the market will be watching closely over the next weekend as markets become more active and fundamentals may be restored again as currently, technicals are in charge and it looks unlikely to change.    

It’s a busy week ahead in the Euro-zone when it comes to economic data, with Services PMI, Retail Sales and the Unemployment Rate due out. All will have major impacts on the EURUSD pair and all other Euro pairs. Unemployment is expected to stay tight at its current 12.1%, however, a drop is possible given the recent positive economic data. 

Current technical movements show that the EURUSD has turned from bullish to very bearish in the wake of breaking its current trend line. Current resistance levels are at 1.3653, 1.3696 and 1.3747; with major resistance likely to be found at 1.3653. Support levels can be found at 1.3585, 1.3535 and 1.3483; with major support likely to be found at 1.3535. Overall though, the current trend is very bullish, with the market likely to consolidate over the next 24 hours, before economic indicators take effect.

GBP/USD                             

          

Summary:

The Pound fell over the new year period as investors exited after it climbed to highs not seen since August 2011.  Markets will now be looking to see if the positive UK economic sentiment can be extended further as monetary policy remains strong and as economic data remains upbeat.   

The markets are certainly looking busy for the Pound as the Trade Balance is set to be released on Thursday, which will prompt heavy trading in the UK currency. Additionally, the Asset purchase facility and interest rates are likely to be reviewed on the same day and it is expected that positive sentiment will likely be talked up about the UK economy and its continuing recovery.

Current market technicals show that the Pound has recently pulled back after being heavily overbought. Current resistance levels can be found at 1.6440 and 1.6548; with major resistance found at 1.6548 and looking unlikely to break in the next week. Current support levels can be found at 1.6346, 1.6262 and 1.6158; with major support found at 1.6346 as the market drifts lower.

NZD/USD                      

                  

Summary:

The New Zealand Dollar is ranging heavily after going through a heavy consolidation period as the holidays have left technicals in charge with little fundamentally able to move the Dollar in any direction. With a strong NZ economy, and a weak Australian economy dragging, it looks certain that the NZD may remain within the 80 cent range for some time.

Traders in the coming week will have little to chew on, as only one light piece of information is due out on new home builds in the country. Instead, the focus will be on US market data, as well as Australian economic data, which is expected to be heavy for the economy.

Market technicals show that resistance can be found at 0.8316, 0.8374 and 0.8433; with major resistance at 0.8316. Current support levels can be found at 0.8211, 0.8151 and 0.8083. Overall though, current market sentiment remains bullish, but consolidation is more likely than large rapid movements.

USD/JPY                  

                      

Summary:

The Yen has hit a wall at the start of the new year as it touched on the 105 level against the USD before falling back downwards and starting to consolidate. This new high is likely to remain for some time though, as further upward trending looks to have been broken by the recent trend line breakthrough.  

The week ahead looks likely to show further strengthening of the Yen, as the US is likely to have a mixed bag of data. However, the breakthrough may be fake and it could resume upwards if we have a case of strong US economic data. Either way, traders will likely look to use the new top as heavy resistance.   

Looking at market technical, we can see that current resistance is at 104.820 and 105.311; with the hard level of resistance at 105.311 as it forms a new high after 2 years. Current support levels at 103.936, 103.072 and 102.463; with the hard level of support at 102.463. Overall the RSI shows a pullback from the insane buying pressure for the USD over the Yen, so we could be in for Yen strengthening or just consolidation for the pair.

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The report provided by Blackwell Global Investments Limited ("Blackwell Global") is meant for informative reading and should not be relied upon as a substitute for extensive independent research . The information and opinions presented do not take into account any particular individual's investment objectives, financial situation, or needs, and hence does not constitute as an advice or a recommendation with respect to any investment product. All investors should seek advice from certified financial advisors based on their unique situation before making any investment decisions and should tailor the trade size and leverage of their trading to their personal risk appetite.

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By Alex Gurr
Currency Analyst
research@blackwellglobal.com

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