Currency futures point the way forward for EUR, CAD, AUD and GBP

Currency matrix - futures daily chart
Currency matrix – futures daily chart

As markets pause ahead of this evening’s FOMC meeting, time to take a look at the technical picture for four of the currency majors, namely the Aussie, the British Pound, the Euro and the Canadian dollar. The analysis is based on the daily chart for the September futures contract.

The release of this morning’s BOE minutes took the market somewhat by surprise given Carney’s recent remarks which had hinted at an early interest rate rise. Instead the market was treated to a 9.0 scoreline which sent an emphatic statement that the doves remain firmly in control on the committee, at least for the time being. As a result the futures contract sold off from the highs of the session at 1.6992 to trade, at time of writing, at 1.6933. This temporary weakness was further reinforced by the isolated pivot high closely aligned with the 1.70 area and suggesting that this is going to provide a short term barrier in an otherwise longer term bullish trend which ultimately will be driven by interest rate differentials. The pause for the pair was not unexpected given the associated volume profiles of the last few days which saw a market rising strongly on falling volume. However, given the strong platform of support which extends from 1.6850 to 1.6550 this is only likely to be a temporary set back, so expect to see cable breach 1.70 and move higher in the next few weeks.

Moving to the euro, the single currency continues to build a platform around the 1.3520 price point as it looks to recover the 1.3670 region of two weeks ago which saw the strong buying support at that level. Should the 1.3670 region be breached then the pair should continue higher. However, there is deep congestion ahead extending from 1.37 through to 1.3850 and beyond. Only consistent and rising volume will be sufficient to drive this pair higher.

The Aussie dollar has also reached a key technical area following an extended phase of price congestion which has seen the currency future flip flop between 0.9150 to the downside and 0.9375 to the upside. This latter area has been tested once again, in the last few days, with the pair rolling over adding further strength to this level. The recent reversal was signalled last week by the doji candle and above average volume, although longer term expect to see the Aussie driven higher once again by interest rate differentials. This should take the Aussie through the 0.9400 in due course.

Finally, the Canadian dollar which has been struggling for some time to breach the 0.9250 price region and appears to be struggling once again in today’s trading session. To the downside the platform of support is firmly established in the 0.9100 zone, and in the short term we may see a reversal back towards this region as the current consolidation phase continues. This short term weakness was first signalled last Thursday by a narrow spread candle and high volume and further confirmed by Monday’s long legged doji. For the pair to move higher back towards the 0.9250 price point will need to be breached with confidence, and well above average volumes. If the breach is achieved we can then expect to see the pair continue to move higher in the longer term.

By Anna Coulling

About Anna 1036 Articles
Hi – my name is Anna Coulling and I am a full time currency, commodities and equities trader. I have been involved in both trading and investing for over fifteen years and have traded many different financial instruments, from options and futures to stocks and commodities. I write and publish articles ( mostly for free ) for UK and international publications on a wide variety of financial issues, and in particular I enjoy helping others learn how to invest and trade.

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