Weekly Analysis, May 15th-20th, 2017

Previous Week Overview

At the early beginning of the week we have seen the second round of the French elections ending by the winning of Macron. The result boosted the Euro to the highest levels before most of currencies, which was not seen since the US elections. The EUR/GBP pair was the less affected by French election results due to the strong bullish pound for more than consecutive 8 weeks. The pound was affected strongly by strong UK data since the beginning of the week. Mario Draghi speech in the Dutch parliament drove markets strongly, the speech was general and focused on different aspects for the EU economic progression. Also, we have seen a disappointment in the US inflation data, where CPI came 2.2% versus 2.3% expected and 1.9% versus 2.0% for the core CPI.

The Week Ahead Outlook

The current week’s economic calendar holds some motivational events that will give the markets some volatility after a while of stagnation. On Tuesday we have the UK inflation data; also we have the EU GDP. Next day the Japan GDP. By Thursday the Australian unemployment rate, and a speech by Mario Draghi in Tel Aviv University.

AUD/NZD

For those who trade hedge strategies, all the Aussie pairs are representing a good hedging opportunity. The AUDNZD pair is forming a symmetric triangle, with stochastic and seems as it’s breaking upwards. This is an indication towards a bullish pair towards the 23.6% level at the price 1.099. Otherwise, the pair may continue to retrace to the bottom line of the triangle at 1.033.

EUR/NZD

After the break of the falling wedge of this harmonious pair, the retracement resisting at 38% level currently. We believe that the price will start to go bearish from here on the short term to the level of 50% retracement (from the current bullish trend) at 1.5250. Moreover, the stochastic indicator on the daily chart is forming a clear divergence.

USD/JPY & Nikkie Futures

Here we come back to the hedging trades. Yen is the best currency when we want to talk about hedge trading style, accompanied with the Aussie and the Kiwi. The USD/JPY is well known that it moves along side with the Nikkie 225, as result I see that hedging the pair between the level 61.8% of the down trend at 115.6 and 38.2% at 109 are the prospective movements. Comparing the USD/JPY to Nikkie Futures, we will find the following: 1- the price chart is forming a continuation shooting star. 2- However number 1- the price had touched the upper Bollinger band and getting ready for retracement. 3- despite the fact that  I’m not relying too much on the stochastic indicator in  stocks analysis, the Nikkei stochastic and major indices such as S&P and Nasdaq are having the same signal.

My conclusion that the UDS/JPY pair might bull up for a week and then start medium term retracement which may take 4 weeks.