The main topic for the markets nowadays is possible Middle East conflict escalation. It’s not the first year or even decade of this war for the oil influence. Saudi Arabia, Iran, Israel, Turkey, Russia, Great Britain and United States - this list is not even full of the countries interested in oil reach region. Trade war topics US - China eased and went out of the focus after Chinese official comments in the direction of negotiations. Syrian topic weighs on investors’ risk appetite and confidence, so we should not expect big gains in worldwide equities until the dust will settle.
The market players almost ignored Fed minutes, released on Wednesday. More hawkish rhetoric of the regulator caused some buybacks of the greenback versus major currencies, but gaines were very limited. Main reason of the support for USD, as for the worldwide reserve currency, remains geopolitical story. Most heavy volume traded pair EUR/USD eased off the weekly highs, coming back to H4 Simple Moving Average with 89 period. ECB meeting minutes to be released today, but we should not expect any major reaction from the market even if it will come out much more hawkish, than anticipated. EUR would continue bullish daily trend only in case of stable worldwide outlook and growing demand for stock indices.
Technically speaking, the intraday picture on H4 chart (below) is rather mixed, with first support at 1.2327 (SMA89) and local lower closing price at 1.2234 level. This 100-pips range is expected to play a supporting role, as the long-term (daily and weekly) trend is still bullish technically, and the market expectations for the ECB to start tightening are still strong. The best way to trade this pair is to wait for a bounce from the bottom of this support range and go long, using buy-and-hold strategy. Aggressive intraday traders could consider short-term longs in the range of 1.2300/25, but the stop-loss and take-profit orders in this case should be rather tight, together with the time restriction.
Another indicator of risk/fear barometer is USD/JPY. It’s been recovering from low levels after brutal sell-off in March recently, but as far as the fears of possible war escalation are in focus, the gains could be limited. We might see a sharp jump-in back to safe haven Japanese yen currency in case if the Middle East conflict will keep weighing on stock indices.
Key technical levels to watch: 107.40 and 107.80. This resistance range is rather attractive for bears and we do not expect the pairt to break through this range this week. Sell-highs strategy is likely with 106.60 target (Ichimoku cloud top-range) and 105.80/106.20 in extension. H4 chart is illustrated below.
One of the most attractive currencies and biggest gainers versus the greenback this week is Canadian Dollar. As long as the oil prices are rising on geopolitical tensions, Canadian housing market is strong and NAFTA negotiations are supporting factors for the loonie. We might see further currency appreciation despite some oversold signs on the technical picture intraday. Once NAFTA deal is released, the USD/CAD could dive below 1.2500 in a heartbeat.
There are also potentially interesting moves in GBP/USD and NZD/USD pairs, but it seems to be a bit early to make any conclusions and use wait-and-see strategy. Anyway, BoE Governor Carney’s speech on Thursday is definitely not to be missed especially in the scope of further BoE tightening.
