Global equities keep climbing
Although the main geopolitical concern of U.S.-China trade deal was not resolved this past week, global stock indices kept climbing on the back of risk-on traders’ sentiment. U.S. equities were traditionally leading the rally amid supportive macroeconomic data and corporate reports. What’s more, major U.S. indices renewed historical highs following the sustainable uptrend.
The S&P 500 index added +0.95% to its value and printed the highest-on-record weekly close rate of 3118.6 points. Tech-heavy NASDAQ 100 was not an exception in the bullish performance as the benchmark climbed +0.83% to 8315.9 points. The cost of 30 blue chips in the Dow Jones Industrial Average has also increased by +1.17% to 28004.9 points, the level never seen in the history of trading.
Japan’s Nikkei 225 had a mixed performance (-0.38%) as Asian investors were concerned about protests happening in Hong Kong. In contrast, European equity traders lifted both German DAX 30 (+0.10%) and French CAC 40 (+0.84%) indices. British FTSE 100 lost -0.84% of its value on the back of Brexit uncertainty, weak macroeconomic reports and upcoming elections in the United Kingdom.
The U.S. dollar retreat
Most of the major currencies were stronger than the U.S. dollar this past week. The overall trading volume and volatility were quite low as the economic calendar was not full of crucial fundamental events. The main driver for the greenback was the reversal price action of U.S. 10-year Treasury yields, which declined by 107 basis points or -5.5% after a strong growth noted in the previous week. As a result, the U.S. dollar index measuring the greenback’s strength versus the volume-weighted basket of six major currencies slid -0.41% to 98.00 this past week.
The single European currency was mainly supported by positive data from Germany as EUR/USD gained +0.29% bouncing off the psychological mark of 1.1000 dollars per euro. The British pound added +1.00% to the exchange rate versus the U.S. dollar. Both USD/CHF and USD/JPY were moving in the same direction with the weekly result of -0.74% and -0.43%, respectively.
Commodity currencies were mixed though. The Australian dollar dropped -0.57% but recovered part of its mid-week losses, while the New Zealand dollar appreciated the support by RBNZ, which hiked the interest rates this past week. NZD/USD was trading in the green, gaining +1.19%, which was the strongest performance among major currency pairs. USD/CAD remained almost flat (-0.04%).
The greenback’s weakness reflected the strength of emerging market currencies. USD/MXN failed to hold gains above 19.5000 pesos per dollar, and the pair slipped back to 19.1785. USD/ZAR declined by -0.97% to 14.7137 after a failed test of 15.0000 resistance. USD/CNH went back above the level of 7 yuan per dollar.
The price of gold was testing the strong support level at $1450 per ounce this past week but failed to breach it. Every time the price was sliding towards that mark, gold traders were opening long deals or closing short positions, which forced the rate to bounce off the support. As a result, gold finished the trading week at $1467.92 per ounce, +0.63% higher than Monday’s open. Silver had a similar price action (+1.01% to $16.9669 per ounce). WTI Crude oil added a modest +0.73% to the price and closed Friday at $57.76 per barrel. Brent oil price strengthened by +1.28% to $63.44 per barrel. The price of Palladium was in a bearish retracement for the second week in a row, losing -2.04% but remained above $1700 per ounce.
EUR/USD Weekly Technical Forecast: Neutral
This week’s price range was limited to 68 pips only (four-digit quotes) for the pair. EUR/USD was predictably sliding at the beginning of the past week. Tuesday trading session’s low was noted just 2 pips above the psychological round-figure support of 1.1000 dollars per euro. Since then, euro bears tried to breach that mark with several attempts but failed to withstand the growing demand for EUR/USD from buyers at around 1.0989. In the last two days of the trading week, counter-trend price action was registered as EUR/USD was in the upside swing, recovering previous losses. The pair closed the week at 1.10514, strengthening by +0.29%.
The technical sentiment is mixed with a slightly bearish bias, according to the daily chart below. The current rate is below three exponential moving averages, but they do not point to any direction. The MACD trend indicators histogram is negative and the signal line dropped below zero. However, the lack of any development might point to a consolidative range in the week ahead. 13-days fast Relative Strength Index bounced back up to the middle line, which is the threshold dividing the bullish and bearish phases. But there are no attempts to test the overbought or oversold level, thus the momentum is quite weak.
The wait-and-see approach looks more reasonable, while intraday signals and fundamental environment have to be monitored in terms of trading decisions. Both bullish and bearish scenarios are likely for the week ahead. The traders’ sentiment will reflect the general risk appetite, change in the U.S. 10-year Treasury yields and macroeconomic data in both regions. Pivot points include 1.1100 (resistance) and 1.1000 (support) while breaching any of those by a daily close rate would open the road further.
NZD/USD Weekly Technical Forecast: Bullish
The New Zealand dollar overperformed the rest of major currencies versus the greenback this past week. NZD/USD made a bullish breakthrough, adding +1.28% or 81 pips in a single day last Wednesday, following hawkish rhetoric by RBNZ. Such a price action caught short-sellers as a surprise because such a rate decision by the regulator was not expected. As a result, NZD/USD closed the trading week above 64 cents, the highest rate in two weeks.
The technical sentiment shifted towards long positions. Ichimoku Cloud trend indicator became bullish as the leading span had a bullish crossover and the surplus turned positive. The daily close rate went off the cloud's resistance on Friday, which might signal the end of uncertainty period. What’s more, the pair is above both Conversion and Base lines, which were acting as resistance curves. Fast Stochastic RSI oscillator went off the oversold territory, confirming the bullish crossover, and even breached the 50% level. Both lines are headed north with a positive range, so the bullish action is more likely.
We’d recommend going long on NZD/USD right on the market open on Monday, targeting 0.6465 at least. That level was noticed two weeks ago when the pair reversed the action, and the bulls should try their best to reach it in the week ahead. If the pair managed to breach the horizontal resistance, the road to 0.6500 and 0.6550 will be open. An alternative scenario suggests an initial counter-trend bounce towards the support range at 0.6372/53 and a bullish reversal around there. Thus, conservative traders should expect a short-term retracement before opening with-the-trend positions.