LAST WEEK SUMMARY
The RBA maintained its Cash Rate at 1.50%, and the statement by Governor Lowe remained relatively neutral, stating that “The outlook continues to be supported by the low level of interest rates. An appreciating exchange rate would complicate this adjustment.”
We do not expect the RBA to cut rate further in the near term unless the Australian Dollar appreciates too significantly.
The ECB also maintained its Minimum Bid Rate at 0.00%, with an overall slightly hawkish tone from Draghi. Read more about the press conference HERE.
THE WEEK AHEAD
This will be no doubt be a roller coaster week! If you simply look at the risk events calendar from Forex Factory, we have the 4 major central banks meeting and monetary policy decision this week.
On Wednesday, we have the US Core Retail Sales and Core CPI, both are expected to come in subdued from last month’s data. A significant miss in these data will put the US Dollar in more selling pressure going into the FOMC meeting later part of the day.
And Thursday will be the most active day of the week, with BOJ, SNB and BOE announcing their rate decision. We do not expect these central banks to change their current rates, but the tone and forward guidance from these banks will be crucial for the market.
Trading the market during such volatile week isn’t exactly the safest way to approach the market, but it is during these events that we get huge opportunities and movement in the market – if we know how to handle the risk and engage the market properly.
Based on our Elliott Wave Analysis, we are still expecting the Dollar Index to push one more wave higher towards 102.94 – 103.53 area.
However, the current move since the start of February 2017 has been very corrective in nature, and we remain cautious of longing the Dollar. Based on one of the wave principles, after the completion of the corrective move, 80% to 90% of the time, we will see an impulsive move in the opposite direction.
We will not be a surprise if we see the Dollar selling off post FOMC this Wednesday. Looking at the daily timeframe on the DXY, the fall in Dollar might extend towards the 96.59 – 97.67 area.
We will be monitoring the US Dollar closely this week, and definitely together with other major currencies including the GBP, CHF and JPY this week.
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