U.S. Brief, January 24 - Top Trade Setups in Forex – Canadian Retail Sales Under Spotlight!


The risk sentiment remains low as the Chinese government ordered a massive lockdown of Wuhan city in Hubei province, where the coronavirus originated, stopping any public transport--including flights--in and out of the town.

The AUD/USD marked a day-high of 0.6879 before retreating to close at 0.6840, down 0.1%. The official jobs report showed that the Australian economy added 28,900 jobs in December (+10,000 jobs expected), while the jobless rate fell to 5.1% (5.2% expected and in November). The USD/CAD was little changed at 1.3131. Canada's retail sales data for November will be released later today (+0.6% on month expected).

Later in the day, the trader's eyes will remain on the Canadain Retail sales figures, which are expected to drive some price action in the Canadain currency pairs. 

USD/JPY - Fibonacci Retracement In-Play

The USD/JPY was closed at 109.485 after placing a high of 109.860 and a low of 109.264. Overall the movement of the USD/JPY pair remained bearish throughout the day.

At 4:50 GMT, the Trade Balance from Japan's Ministry of Finance for the month of December showed a decline of 0.10T against the expected decline of 0.24T and came in favor of Japanese Yen. At 9:30 GMT, the All Industrial Activity for the month of November showed an increase of 0.9% from the forecasted 0.4% and supported the Japanese Yen.

The stronger than expected economic data from the Japan side gave strength to Japanese Yen against the US dollar and dragged down the pair USD/JPY on Thursday. Yen as a safe-haven currency was also in demand on Thursday amid the rising fears of coronavirus spread. The Chinese stock market suffered and fell near its eighth month lowest level because of rising concerns related to the virus and hence affected the global equity market as well.

However, on Thursday, the World Health Organization renewed its statement and said that it would be too early to declare the virus threat as a public health emergency. The risk sentiment in the market, which has emerged after the virus-related news came in the market, started to decline after the WHO statement and hence weighed on USD/JPY prices.  

Traders moved towards safe-haven assets like Yen in the time of increased uncertainty, and hence the downfall of pair USD/JPY accelerated.

USDJPY

USDJPY - Daily Technical Levels

109.56 109.99
109.40 110.26
109.13 110.42
Pivot Point: 109.83

USD/JPY - Daily Trade Sentiment

On Friday, the USD/JPY is has completed the 38.2% Fibonacci retracement at 109.250 and has bounced off this level. Right now, the pair is holding below 23.6% Fibonacci resistance level, which is likely to keep the USD/JPY currency pair under pressure. The crossing of the USD/JPY below 50 periods EMA also suggests the dominance of the bearish trend in the USD/JPY pair. 

The pair may now find immediate support around 109.250 and 108.940, while resistance continues to stay around 109.650 and 110. Let's consider taking sell trades below 109.83 today. 

USD/CAD - Retail Sales In Focus

The USD/CAD pair was closed at 1.31266 after placing a high of 1.31713 and a low of 1.31239. Overall the movement of the USD/CAD pair remained bearish throughout the day. In the early trading session of Thursday, USD/CAD pair surged above its multi-week high of 1.31713 amid the weakness of the Canadian Dollar after the dovish policy outlook from Bank of Canada on the previous day. But in the late trading session on Thursday, the pair USD/CAD started to drop on the technical correction.

The USD/CAD pair was high in demand on Wednesday after the Bank of Canada held its interest rates but gave a dovish outlook for its policy. BoC indicated that the doors for possible rate cuts were open if needed. 

It is worth mentioning that Bank of Canada was the only Bank that had not changed its interest rates last year when all the central banks included Federal Reserve and ECB cut their interest rates amid the US-China trade war impacts on global economic growth.

However, now that the economy of Canada has been affected by that and the Phase-one deal was signed between US & China to solve their trade conflicts, the Bank held its interest rates in hopes that the country's economy would benefit from that. The Bank would keep focus on its upcoming economic data releases to decide the future of monetary policy & interest rates.

Furthermore, the Canadian Dollar was also under pressure because of a fall in WTI Crude oil prices on Thursday amid the increased fears of coronavirus spread. The WTI Crude oil prices fell below its two months lowest level on Thursday to $55 and weighed on the Canadian Dollar.
The weaker Canadian Dollar gave a boost to the USD/CAD prices above 1.31700 level, which is the highest since December 23.

On the US front, the unemployment claims fell short of expectations of 214K and came in as 211K for the previous week and supported the US dollar. However, the CB Leading Index for November dropped to -0.3% and put pressure on the US dollar.

USDCAD

USD/CAD- Daily Technical Levels

Support Resistance 

1.3110 1.3160
1.3091 1.3191
1.3060 1.3210
Pivot Point: 1.3141

USD/CAD- Daily Trade Sentiment

The USD/CAD is trading in a new range after violating the sideways range of 1.3095 - 1.3040. For now, the fresh trading range is 1.3175 - 1.3095. On the 4 hour timeframe, the pair has printed bearish candle in the wake of bearish correction in the market. 

The USD/CAD pair is now holding at 1.3125, forming a bearish engulfing candle below a resistance area of 1.3175. The RSI value is still in the bullish zone, while the 50 periods EMA also supports the bullish bias among traders. I will consider taking buying trades above 1.3100.

AUD/USD – Descending Triangle Pattern

The AUD/USD pair was closed at 0.68457 after placing a high of 0.68784 and a low of 0.68289. Overall the movement of AUD/USD pair remained bullish throughout the day.

At 5:00 GMT, the Inflation Expectations for the month of December from the Melbourne Institute increased to 4.7% from the previous month's 4.0% and supported the Australian Dollar. At 5:30 GMT, the closely watched Employment Change from the Australian Bureau of Statistics came in as 28.9K against the expected 12.2K for the month of December and supported Australian Dollar. At 5:30 GMT, the Unemployment Rate from Australia for the month of December dropped to 5.1% against the expected 5.2% and supported Aussie.

The stronger than expected job data and unemployment rate from Australia gave strength to Aussie against the US dollar on Thursday and rose the AUD/USD pair above 0.687 level.

The Australian Dollar was already in demand after the rising trade optimism due to the US-China trade truce. The relations of the US & China are getting better, and it has provided the market with expectations that the ongoing trade war is coming to an end. 

The US Treasury Secretary Steven Mnuchin has said that trade negotiations between US & China about phase-two trade deal will begin soon without mentioning its deadline.

He also gave signals that these negotiations might include the tariff rollback as it might last beyond the US presidential election in November 2020. According to him, the tariffs were a big incentive for the Chinese to negotiate in order to reach additional parts of this agreement.

According to US President Trump, the recently concluded trade deals with China, Canada & Mexico were only possible because of the implementation of tariffs. So, Mnuchin acknowledged the statement of President Trump and said that actual tariffs or threat of tariffs played an important role in reaching a trade agreement. He also acknowledged that the President said that if they reach the phase-two trade deal with China, then he will remove tariffs.

These positive statements supported trade optimism and hence gave strength to the Australian Dollar. However, the pair started to fell in the late trading session on Thursday amid the robust job data from the American side.

The Unemployment Claims from the US for last week dropped to 211k against the 214k expectations and helped the US dollar to find strength against Aussie. However, the pair AUD/USD closed its day with a bullish trend on the back of Aussie power.

AUDUSD

AUD/USD - Technical Levels 

109.56 109.99
109.40 110.26
109.13 110.42
Pivot Point: 109.83

AUD/USD - Daily Trade Sentiment

The AUD/USD is trading at 0.6845 after examining the strong support mark of 0.6875. Right now, the 50 EMA and downward trendline are prolonging resistance nearby 0.6880. The formation of candles beneath trendline resistance is indicating the chances of selling bias. Today, I will be focusing on 0.6853 as under this, we can see a continuity of a selling trend unto 0.6825. Alternatively, the bullish breakout can continue buying until 0.6920. 

All the best for the New York session!

 


 

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