Top Trade Setups in Forex - A Day after Christmas!

The markets remained closed on Thursday in the wake of Christmas Holiday, which is why we do not have much on the fundamentals side. The US dollar remained under pressure on Tuesday amid weaker than expected macroeconomic data. The drop of Richmond Manufacturing Index to -5 from the expectations of 1 in December weighed on the US dollar. Here is what to expect in the market now.

 

USD/JPY - Sideways Sessions Continues 

The USD/JPY closed at 109.354 after placing a high of 109.440 and a low of 109.325. Overall the movement of USD/JPY remained bearish throughout the day. Ahead of holidays across the world, the USD/JPY pair dropped near the 2-day low point of 109.30 on Tuesday amid the thin market conditions.

The Monetary Policy Meeting Minutes from Bank of Japan was released on Tuesday in which several aspects related to its current monetary policy were discussed. According to a state bank, in order to be prepared for the next economic downturn, the bank should pursue cooperation with the government along with taking monetary policy actions.

The current cash rate of the Bank of Japan is -0.1%, which is at the lowest level where it pushes the inflation downward, and this is troublesome for the bank. This ultra-low cash rates also affect the profitability of Japanese financial institutions.

According to BOJ, the slowdown in overseas economies has affected the business sentiment and export of the country. However, the economics of Japan has been on a moderate expanding trend, even in these conditions.

The minutes gave a positive stance on Japan’s economy and made Japanese Yen stronger on Tuesday. The reliable Japanese Yen weighed on USD/JPY prices and moved them in the downward direction.

On the other hand, at 10:00 GMT, the Annual Core Consumer Price Index (CPI) from Bank of Japan was published where the actual value came in as 0.2%, which was less than expected 0.3% and weighed on Japanese Yen.

From the American side, at 7:59 GMT, the Richmond Manufacturing Index also dropped against the expectations of 1 when came in as -5 for December. The RMI figure weighed on the US dollar and dragged the USD/JPY pair further.

Besides, the President of the United States, Donald Trump, on Tuesday, said that the US & China would be signing the phase-one deal this month. From the American side, President Trump himself and from China President Xi Jinping have agreed to have a ceremony for phase-one deal signing at the end of this month.

 

USD/JPY - Daily Technical Levels

Support Resistance 

109.3 109.57

109.14 109.68

108.87 109.95

Pivot Point 109.41

 

USD/JPY - Daily Trade Sentiment

On the 4-hour timeframe, the USD/JPY extends to move in a tight range of 109.700 - 109.200. The USD/JPY has achieved the 38.2% Fibonacci retracement at 109.200. The corresponding level is now acting as support around 109.200. The 50 periods EMA is also supporting the USD/JPY pair above 109.200 level today. However, the RSI and MACD are staying in the buying region with values over 50 and 0, respectively. The idea is to stay bullish above 109.400 today.

 

USD/CAD - Downward Trendline In-Play

The USD/CAD closed at 1.31655 after placing a high of 1.31675 and a low of 1.31378. Overall the movement of USD/CAD remained bullish throughout the day. On a daily basis, USD/CAD showed an increase of 0.16% on Tuesday after moving sideways throughout the day.

On Monday, the data showed by Statistics Canada related to Gross Domestic Product (GDP) was contracted by 0.1% in October. This raised the USD/CAD pair to the high of 1.3177 on Monday.

Pair could not hold its gains as the Christmas breaks were ahead, and a thin liquidity scenario dragged down the prices.

On the other hand, the Russian Energy Minister Alexander Noval raised the hopes of easing oil output caps in the next meeting of OPEC and its allies, which is to be held in March 2020. This news put pressure on crude oil prices on Tuesday.

The weak Crude oil prices weighed on a commodity-linked currency – Loonie and raised USD/CAD pair further to place a high of 1.31675. Crude oil prices remained in a tight range near $60 per barrel on Tuesday.

Furthermore, the Energy Information Administration of the United States will release its Crude Oil Inventories data on Friday, which will give a specific move to the pair USD/CAD this week.

 

USD/CAD- Daily Technical Levels

Support Resistance 

0.6887 0.691

0.6875 0.692

0.6852 0.6942

Pivot Point 0.6897

 

USD/CAD- Daily Trade Sentiment

On Thursday, the USD/CAD is trading sideways, staying mostly below the triple top resistance level of 1.3175 area. The pair has settled a series of neutral candles on the 4-hour chart, followed by the bearish candles. Despite this, the candles hold below 50 periods EMA which is keeping the pair in a bearish mode. 

The USD/CAD's long term trend seems to be bearish while the pair has the next resistance at 1.3225. Breach of this level can assist us in delivering a buying opportunity unto 1.3165. But under 1.3170, the USD/CAD may trade in selling until 1.3125 is meet.

 

AUD/USD – Eyes on the Triple Top Resistance 

The AUD/USD closed at 0.69227 after placing a high of 0.69301 and a low of 0.69122. Overall the movement of AUD/USD pair remained bullish throughout the day.

On Tuesday, the Australian dollar was the best performer against the US dollar, which held its ground above 0.6900 level. As majority markets remained closed or showed null-movement ahead Christmas holiday, the Australian dollar was confined to a tight range that day.

The positive tone in Aussie was caused by the announcement of the phase-one trade deal signing ceremony to be held this month between the US & China. President Donald Trump and President Xi Jinping have agreed to sign the first step in trade truce this month I,e phase-one deal.

The trade war between both the largest economies of the world has been weighing on the global economy for more than a year, and the phase-one deal would be the first step to solve its issues. Two more stages are expected after this phase-one deal, in having a complete trade truce between these nations.

Australia supply most of the raw-material of Chinese companies and is directly linked with the Chinese economic condition. As the signing of a phase-one deal between the US & China is appositive news for China, it has similar effects on Australian currency as well. This is why AUD/USD pair surged for the 5th consecutive day on Tuesday. However, the gains of the AUD/USD pair remained below 0.6930 level as the markets were in a tight range on Christmas Eve. 

On the other hand, the US dollar remained under pressure on Tuesday amid weaker than expected macroeconomic data. The drop of Richmond Manufacturing Index to -5 from the expectations of 1 in the month of December weighed on the US dollar. The weak US dollar also supported the upward trend of the AUD/USD pair on Tuesday.

 

AUD/USD - Technical Levels 

Support Resistance 

1.3125 1.3177

1.3101 1.3205

1.3049 1.3257

Pivot Point 1.3153

 

AUD/USD - Daily Trade Sentiment

Bullish power of the Aussie has driven the buying trend in the AUD/USD, pushing the AUD/USD prices towards the triple top resistance level of near 0.6930. The AUD/USD has created a neutral candle below 0.6930 resistance area, which can be seen on the 4-hour chart. The formation of candles under this mark is increasing the probabilities of a bearish bias in the AUD/USD. 

The RSI and MACD are operating in an overbought zone, improving probabilities for a bearish repeal/ correction in the AUD/USD. We should consider lingering bearish beneath 0.6930 to aim 0.6900 and 0.6870 in the AUD/USD.

 

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