The Pairs to Range Trade This Week - GBP/USD, USD/CAD, and EUR/NZD

Commercial Content Analysts
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The Pairs to Range Trade This Week – USD/CHF, USD/CAD and EUR/NZD



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Event Risk US and Switzerland

Trading Tip – A range can survive only so many tests. Looking at the 240-minute time frame, the USDCHF’s range seems rather mature. However, the more reliable higher time frames do not share the same feeling. Browsing through the US and Swiss economic calendars, there are few indicators that tout the ability to rally momentum, which skews the probabilities in favor of a range. Another condition to be aware of is a loose wedge that seems to have closed on spot. As of Friday, USDCHF is above the top node, but the entry and stop rules should keep risk/reward intact. At the same time, the rising trendline in the wedge should be monitored when taking profit and looking for a move to the range bottom.

US – Though the US doesn’t have a heavy week of indicators ahead of it, there are a few releases that could drive the currency market’s fundamental engine. First of all, Friday’s strong non-farm payrolls may not have actually been processed by the FX markets amidst the Good Friday holiday, so a flood of liquidity into the markets on Monday could send the US dollar reeling. After the weekend, traders will take in the FOMC minutes from the March 21st meeting. After the inflation concerns were upped in the statement, the minutes may generate a little more heat. Next Friday, the double feature of the February trade account and University of Michigan’s confidence survey will be the hottest day for data. The trade report has fallen flat in recent weeks, but the new tariffs on China may boost its appeal while traders will be anxious to see if geopolitical tensions and higher gasoline prices will weigh on consumer sentiment.

Switzerland – The Swiss economic calendar is almost a clean slate with only the unemployment rate on tap. The labor market in Switzerland has remained remarkably tight as economic expansion has ensued, and the month of March isn’t likely to show much deviation. As a result, the Swiss franc may see little in the way of volatility from fundamentals and may ride the current of the other major low-yielder, the Japanese Yen, which has been getting hit as the carry trade comes back in vogue. In fact, the USDJPY broke out above 118.50 during the week – a key level for the pair which could signal major impending weakness for the Yen and thus, the Swiss franc as well.

               [B]Data for April 8 – April        13[/B]
        [B][/B]
        [B]Data for April 8 – April        13[/B]
           [B]Date[/B]
        [B]US Economic        Date[/B]
        [B][/B]
        [B]Date[/B]
        [B]Swiss Economic        Data[/B]
           Apr        11
        FOMC Minutes (MAR        21)
        
        Apr        10
        Unemployment Rate        (MAR)
           Apr        13
        Trade Balance        (FEB)
        
        
        
           Apr        13
        Producer Price Index        (MAR)
        
        
        
           Apr        13
        U of M Confidence (APR        P)



USD/CAD (Update)


Event Risk US and Canada

Trading Tip – After three months of price action, two conflicting trend channels have converged in USDCAD. The longer, rising channel bottom is currently holding lows; and the shorter-term, falling channel has its own bottom in the same region. This doubles support for a bounce, though how big is a question that no one can answer. On the other hand, a number of dollar-based majors have easily breached serious levels of support and resistance, suggesting range activity could give way to breakouts. To relieve some of the risk, stops should be considered on a smaller time frame to avoid losses that accumulate on a breakdown when waiting for a daily bar close.

US – Though the US doesn’t have a heavy week of indicators ahead of it, there are a few releases that could drive the currency market’s fundamental engine. First of all, Friday’s strong non-farm payrolls may not have actually been processed by the FX markets amidst the Good Friday holiday, so a flood of liquidity into the markets on Monday could send the US dollar reeling. After the weekend, traders will take in the FOMC minutes from the March 21st meeting. After the inflation concerns were upped in the statement, the minutes may generate a little more heat. Next Friday, the double feature of the February trade account and University of Michigan’s confidence survey will be the hottest day for data. The trade report has fallen flat in recent weeks, but the new tariffs on China may boost its appeal while traders will be anxious to see if geopolitical tensions and higher gasoline prices will weigh on consumer sentiment.

Canada – The Canadian calendar is even lighter than that of the US over the coming week. The three reports due for release are scheduled one day after the next beginning with Wednesday’s Housing Starts report. Construction activity for the month of March is forecasted to rise with the annual pace of ground breakings to accelerate 3,800 units to 220,000. For the economy, housing is a vital component to the recent strength in consumer sending. On the other hand, the considerable drop in building permits reported last week may tell the market to be prepared for disappointment. The following day, the housing numbers continue with the monthly price index. Expectations are for a repeat of January’s cool 0.3 percent rate, though its impact on the market will likely be limited as the BoC has all but pushed inflation off of its plate. Finally, Friday’s trade balance could be the mover of the week, though the meek expectations for February’s report could diminish the action in FX.

                [B]Data for April 8 – April        13[/B]
        [B][/B]
        [B]Data for April 8 – April        13[/B]
           [B]Date[/B]
        [B]US Economic        Date[/B]
        [B][/B]
        [B]Date[/B]
        [B]Canadian Economic        Data[/B]
           Apr        11
        FOMC Minutes (MAR        21)
        
        Apr        11
        Housing Starts        (MAR)
           Apr        13
        Trade Balance        (FEB)
        
        Apr        12
        New Housing Price Index        (FEB)
           Apr        13
        Producer Price Index        (MAR)
        
        Apr        13
        Int’l Merchandise Trade        (FEB)
           Apr        13
        U of M Confidence (APR        P)

EUR/NZD (Update)



Event Risk Euro Zone and New Zealand

Trading Tip – Under no circumstances should a long position be taken in EURNZD while the downtrend is still intact! The suggested entry conditions are in place to confirm a close above the falling trendline and help to ensure that the month-long downtrend is over. While the entry on this is tight (as a move through the trendline could skip consolidation and go for a momentous breakout), it helps to retain a high level of risk/reward. If a break is not decided either way before the ECB’s rate decision, that one event should be monitored closely as it may be the trigger for the move.

Euro Zone – While the Euro faces a relatively full economic agenda next week, results that fall in line with estimates are not likely to spark much volatility. Nevertheless, the releases on tap will be important, as the German Trade Balance is estimated to narrow slightly on Tuesday to 15 billion euros as the stronger EURUSD likely quelled demand for German exports. On Wednesday, the final reading of 4Q GDP hits the tape. Should the figure be revised up or down from previous readings of 3.3 percent for the year, price action could become especially jumpy ahead of the European Central Bank’s interest rate decision. The central bank is predicted to leave rates steady at 3.75 percent, but given the encouraging economic reports and hot inflation numbers as of late, risks for the decision are to the upside. Wrapping up the week will be Industrial Production for the Euro-zone, which is forecasted to edge higher in February. Nevertheless, given the lagging nature of this indicator, the release may not be much of a market mover.

New Zealand – The New Zealand economic calendar is fairly thin next week, and the first indicator to hit the tape is the NZIER Business Opinion survey for the first quarter due Monday. Since it is a quarterly indicator that tracks an important sector of the economy, it can generate volatility. On the other hand, the report is typically overlooked as it is a sentiment gauge. Also, the market is aware that RBNZ monetary policy markets are more concerned with the consumer and housing sectors to pay too much attention to business sentiment. On Thursday though, retail sales can lead to big moves as market participants measure the strength of consumer spending – the main driver of inflation and economic growth. When all is done and said though, the appeal of high yields will likely dominate the kiwi’s landscape. If there is a resurgence in the market’s carry trade appetite, the kiwi will be a first responder. If the bulk of the market avoids the carry to avoid volatility traps, the New Zealand currency may then follow more natural flows.

Data for April 8 – April 13

Data for April 8 – April 13
Date
Euro Zone Economic Date

Date
New Zealand Economic Data
Apr 10
German Trade Balance (FEB)

        Apr        9
        NZIER Business Opinion        (1Q)
           Apr        12
        Euro-zone GDP (4Q        F)
        
        Apr        12
        Retail Sales        (FEB)
           Apr        12
        ECB Interest Rates        
        
        
        
           Apr        13
        Euro-zone Industrial Production        (FEB)
        
        
        

               Pair
        USDCHF
        USDCAD
        EURNZD
           Date        Added
        Apr-06
        Mar-23
        Mar-30

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