This week we expect movement in the currency market bearing in mind major elections are going to be held in major economies. We have Chancellor Merkel in Germany who look likely to be re-elected for a fourth consecutive term. In New Zealand, things look sticky for the ruling party and as such a grand coalition is on the cards as the incumbent are facing strong opposition from the Labor Party.
Elsewhere in the UK, PM May is supposed to hold a press conference and provide a vision of their preferred relation with Europe going forward. Given past comments from Trump, a stronger Europe in their view is what is important and therefore building and a maintaining a strong alliance with individual EU countries is paramount for the Eurozone to strive. Germany as an economic powerhouse and Merkel obviously has the influence and power to change or relieve tensions in the EU if called upon.
Other than Europe and New Zealand affairs, US-North Korea tension seems to be easing and helping the greenback to reverse from their multi-months low. With Treasury yields bouncing back, many investors unwound their short USD positions and even look to be dumping Gold in preference for the yield bearing treasuries and the riskier equities. Tomorrow, we expect important forecast on matters US economy and steps taken to recalibrate the already bloated $4.5T balance sheet. Chances are the Feds will fuel expectations and probably warrant a further rate hike before the end of the year. Without a doubt this will trigger a USD rally.
I will however look to buy NZD as the week closes as this currency offers better entry opportunities. Last week candlestick closed higher and formed a double bar reversal pattern with a buy signal printed by the stochastics. Further, with the range bound behavior over the past 92 weeks, it will look like CAD strength is fading and providing a good opportunity to enter long in the daily chart.
I will trade as follows:
Stop Loss: below 0.88
Take Profit: 0.94, 0.97
Have a good trading day.