Trading Opportunities – Time To Trade Currency Pairs

EUR/USD Range Breakout Trade (8-Hour Candlesticks)

After weeks of headlines highlighting the tenseness of the negotiations between the Eurogroup and Greece, the deal reached in the 11th hour on Friday looks like more of an “extend and pretend” compromise. It was a serious blow to the Greeks that voted for change via a Government with the conviction to stand up to the Euro Area.  Instead a deal that will delay the inevitable was reached, to the detriment of all parties involved.  The deal failed to address the deteriorating situation in the Greek banking system as confidence in the system wanes.EUR/USD rebounded to the upside on Friday after falling earlier, but the rally was fairly muted as the pair continues to consolidate since bottoming at the end of January.

Today’s Greek bank holiday and limited economic releases will mean that EUR/USD will likely continue to trade within a narrow range until the major upcoming events including speeches on Tuesday and Wednesday from ECB President Mario Draghi along with German GDP data and Eurozone CPI figures.  These speeches could very well see the EUR/USD pair breakout from the range as Draghi attempts to soothe fears of the deflationary clouds spreading across Europe.  In the meantime, between support sitting firmly at 1.1276 and topside resistance at 1.1449, a 173 pip range is ripe for trading.  Optimal long positions are taken at the support line and short positions at the resistance line.  Any movement outside the horizontal range should be treated as a breakout with a reward target of 105-130 pips with entry points and downside exit strategy set at former support and resistance levels. Positive comments from Draghi and better reception of the newest arrangement from Greece could see confidence temporarily bounce in EUR/USD.  But any souring of the outlook could prove devastating for the Euro.

AUD/USD Ascending Triangle Pattern (4-Hour Candlesticks)

The Reserve Bank of Australia became one Central Bank of many to drop interest rates in the first months of 2015, responding to the continued slump in commodity prices.  Slowing demand from China has seen base metal prices tumble which directly impacts the Australian export economy.  The aggressive easing measures undertaken by the RBA have allowed exports to become more competitive despite the risks from the global economy.  As Australian Central Banker Stevens races to avert a GDP slowdown, his dovish policies have brought the AUD/USD exchange rate closer to his target of 0.7500. However, he must deal with the building bubble in the real estate sector and also work to contain rising unemployment as the mining and minerals sector braces for a global slowdown.

U.S. data might be more disappointing than the Australian outlook considering the worsening GDP forecasts and risks emanating from the U.S. energy sector.  Add to the uncertainty Federal Reserve Chairwoman Janet Yellen’s testimony and the conditions are ripe for more feeble growth. Considering consumer spending and discouraging housing data, the U.S. dollar might be ready to pullback against peers as the rate hike timeline is pushed further into the future.  The Fed’s “lower for longer” motto will probably see the AUD/USD rise to the upside in the near-term, above resistance at 0.7849.  A breakout could see a volatile move above the resistance level, with momentum leading to reward of between 120-150 pips.  Any move below the prevailing uptrend line in bullish ascending triangle pattern should be viewed as a reversal with the pair headed back towards support 0.7500.

NZD/USD Head and Shoulders Bearish Pattern (2-Hour Candlesticks)

The Reserve Bank of New Zealand remains staunch in its defense of interest rates, although the pressure for a dovish shift into monetary easing is building.  With some of the highest interest rates of developed economies in an environment of global rate cuts, sooner or later the Central Bank might be forced to ease monetary policy to combat sluggish trade figures. Upcoming trade balance data from New Zealand due on Wednesday will like show an increasing trade deficit, raising the stakes for the Central Bank to act to help keep the New Zealand economy competitive.  Although the U.S. outlook is not necessarily as bright, the dollar’s momentum higher might not yet be over, highlighting the possibility of continued pressure on the NZD/USD pair.  The U.S. continues to see monetary inflows from abroad on the basis of “least dirty shirt in the laundry” economics which could spell short-term downside for USD denominated currency pairs.

After bouncing off multi-year lows during a technical rebound, the rally higher in NZD/USD looks to be losing steam quickly and ready to retest the downside.  The head and shoulders bearish technical setup has a downward bias with support levels at 0.7507 and 0.7484 being the key areas to monitor.  Any move about the resistance level at the shoulders could be more symbolic of a reversal or consolidation in prices until a more important fundamental shift in conditions dictates a resumption of the longer-term trend downwards. Topside resistance is steady at 0.7554 and 0.7572 and any break above the right should resistance should be viewed as a breakdown in the pattern.  U.S. economic data and New Zealand trade figures could be the factors that drive NZD/USD lower as risks to the global economy grow.