This week, investors will focus on the RBNZ meeting on Wednesday, where the central bank may raise the interest rate. The New Zealand economy is growing based on the last few economic releases, and the Reserve Bank should push the brake.
The New Zealand unemployment rate returned to the pre-crisis level while inflation rose with a surge in the housing market. Therefore, the overall economy is fully priced in until this week, and there is a 20% possibility of double the rate hike in this week’s meeting. Among other important releases, there are GBP & CAD CPI and the Australian Unemployment rate.
Coming to the western world, the latest retail sales data with the Fed’s speech on Tuesday will signify the US economy. After that, the central bank will release the minutes of the July meeting, pointing out how much progress the economy has made. The inflation data remains hot while the labor market is healing quickly. On top of that, the US government is planning for another multi-trillion spending scheme.
Forex Technical Outlook for 16 August 2021 to 20 August 2021
The US Dollar Index failed to break above the 93.20 barriers and pushed down with a strong bearish daily close at 92.52. The week kicked in with a bullish vibe as the price was hovering at the 93.00 area. However, after multiple attempts, the price could not breach the 93.20 level and moved with a broader US Dollar weakness on weekly closing.
Overall, after a corrective week, we have got several releases that may make this week interesting:
As expected, EUR/USD moved down to the 1.1710 key support level with a regular divergence with MACD. However, the price became very corrective at the bottom, pointing out less interest of sellers. As a result, bulls appeared and made a strong bullish daily close, breaking above the 1.1750 intraday event level.
The above image shows how the price made regular divergence with MACD lines. Moreover, the MACD histogram is bearish and squeezing to zero levels, indicating less interest by sellers. On the other hand, the price failed to close above the dynamic 20 EMA on the daily chart.
This week, we may expect the price to correct lower, and any rejection from the intraday event level of 1.1750 may increase the buying pressure towards the 1.1900 key resistance level. On the other hand, traders should closely monitor the US Retail sales release. Any surprising data with a bearish daily close below 1.1710 may resume the current bearish trend towards the 1.1600 level.
As per our previous commentary, GBPUSD extended its bearish correction between the range of 1.3898 to 1.3800 level. However, the recent bullish rejection from the 1.3800 is a sign of an upcoming bullish leg as it overcame both static and dynamic support levels.
In the above image, a Fibonacci line was drawn from 20 July swing low to 30 July swing high. Therefore, the price has been rejected and moved higher from the 61.8% Fibonacci retracement, besides the 1.3800 key support level. Thus, as long as bulls hold the price above the 1.3800 level, the buying pressure may extend towards the 161.8% Fibo extension level at 1.4230.
However, investors should closely monitor US releases this week, where any surprise from the Fed with an extreme bearish pressure below 1.3800 may invalidate the current momentum. In that case, the price may move lower towards the 1.3670 key support level.
AUD/USD remains interesting as sellers could not make a new low below the 0.7319 level, although there was strong resistance from the dynamic 20 EMA. As a result, the price became volatile and started to squeeze within a triangle.
Although the overall market trend is bearish, as per the above image, bulls have a higher possibility to rebound to the price above the 0.7415 area. In the indicator window, MACD histograms are bullish, and the extreme volatility with the support from MACD is a sign of buyers’ activity in the chart.
However, a break below the 0.7319 level with a bearish daily close may indicate sellers’ presence in the market that may take the price lower towards 0.7235 support level.
USD/JPY is passing through a corrective momentum and trading within the range between 110.57 to 109.00 level for a couple of weeks. Therefore, the price may extend the current correction until a breakout where a buying possibility is valid for this week.
The price made a sharp daily close from the 110.57 level that closes below the dynamic 20 EMA based on the daily chart. However, sellers failed to breach the significant 109.00 key support level. Therefore, any bearish movement with rejection from the 109.00 to 108.80 zone may influence buyers to join the price.
Moreover, the MACD histogram is supportive for bulls, but a daily close below the 108.80 level may alter the current market structure. In that case, the price may come lower towards the 108.00 key support level.
XAU/USD showed a perfect example of how exhaustion happens in the financial market. The price made a sharp drop to the 1677.94 support level by providing almost 900 pips to sellers. Later on, the price rebounded and recovered more than it had lost by breaching the weekly opening price.
The above image showed how the price rebounded after kissing the 1677.94 bottoms, followed by a regular divergence with MACD. Although the price closed bullish on Friday, it failed to break above the dynamic 20 EMA. Therefore, any bearish correction after the week opens may create an opportunity for bulls to take the price higher above the 1800.00 key level.
On the other hand, the MACD Histogram is still bearish, and any new low with a bearish daily close below the 1765.00 level may take the price lower towards 1740.00 and even 1726.00 level.
BTC/USD kept the promise by breaking above the 40,000 level with an intense bullish pressure that took the price near the 47,500 level. Considering the recent buying pressure, a correction is pending that may happen this week.
There are two possible scenarios for Bitcoin- the first one is the test of 50,000 key resistance levels and a 10% drop or a correction from the current price and breaks above the 50,000 level with an impulsive pressure. Moreover, there is a hidden divergence in play, which is also a sign of a potential bearish correction in the price.
Overall, this week’s main investors’ focus will be the RBNZ rate decision, along with US retail sales. The current projection for the US retail sales is lower than the previous report, and if the actual report comes below it, the US dollar would weaken against other currencies.
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