Last Week’s Market Overview
Australian dollar has surged to a fresh high since September 2018 amid the optimism on the approval of some vaccines in different countries and the positive outlook on the economic recovery in Australia.
Firstly, it is highly possible to carry out vaccination in some countries like the US, UK and Euro zone soon. Furthermore, after the testification from the RBA Governor Phlip Lowe, the bullish sentiment on AUD triggered as he pointed out that the economy has turned the corner and he also strongly opposed to the negative interest rate.
Last but not least, Australia trade balance for October recorded AUD 7.456 billion surplus which is better than expected. The export would remain strong if the trade tension with China can be relieved in the near future.
According to the 4-hour CADUSD chart, CAD successfully broke out the strong resistance around 0.7730 at the beginning of last week. It was mainly attributed to the outstanding performance on economic indicators as both PMI and GDP showed a sharp expansion of economic output.
Apart from that, the OPEC members and Russia agreed to ease the oil production cut, but the expectations for a U.S. economic stimulus package and the possibility of a vaccine for the coronavirus overrode oil production increase, lifting the CAD to a new high since June 2018.
Market Change Last Week
Market Focus This Week
ECB Interest Rate Decision
The inflation rate and the core inflation have remained at -0.3% and 0.2% since September, so deflation is still a major concern. For the PMI, although the reading of manufacturing sector was 53.8, holding in the expansionary zone, the composite PMI fell sharply from 50 to 45.3 due to the contraction of services sector under the tightened pandemic containment measures.
The coronavirus cases continue climbing and it is much serious than the first wave, so the lockdowns and restrictions will be extended to late December or even January in some places. The ECB will hold a meeting on the coming Thursday and it has already signalled that there will be some forms of stimulus. The market expects ECB will extend the emergency measures and expand the bond buying program, but remain the interest rate unchanged this time.
US Dollar Index (H4)
After breaking the significant support around 92.00, the US dollar continued to plummet last week and the downtrend also accelerated, it is now trading below 91.00.
The two-line MA keeps facing downwards and expanding, signalling a continuation of downtrend. The RSI has left oversold zone too, so the reversal is expected not to occur soon.
In the coming week, it is likely to move to further south and challenge the psychological support level at 90.00. If the level is broken too, it might drop to below 89.00.
Support: 90.00, 88.50
Resistance: 91.20, 92.10, 93.15
The uptrend of the NZDUSD has lasted for more than three weeks and it currently settles at the highest point since June 2018.
However, both two-line MA and RSI do not support the continuation of uptrend as there was just a death cross and RSI has broken the 50 mark. These mean that the NZD is suffering from strong selling pressure and a reversal is anticipated to happen soon.
If there is a reverse, NZD might retrace to below 0.6950, but could be resisted around 0.6800 which is the start the uptrend.
Support: 0.6950, 0.6800, 0.6450
Resistance: 0.7350, 0.7500
The Nasdaq index set a historic high again last week. It is now trading above 12500.00 and seems to break out the consolidation zone confined within 10700.00 to 12450.00.
A golden cross of two-line MA can be observed and the MAs start to expand, indicating the accumulation of bullish sentiment. However, the RSI enters into overbought area, so it is highly possible to have a pullback in coming days first. The retracement might stop around 14500.00 and then the uptrend would be resumed, lifting the price to a fresh high again.
Support: 14500.00, 12500.00
Resistance: 12600.00, 12700.00
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