With the long awaited FED announcement now consigned to history, it’s time to revisit the major currency pairs in the light of yesterday’s more hawkish rhetoric, and to take stock of its impact on the daily charts for the Aussie dollar, the British pound, the Euro and the Canadian dollar.
If we start with the Aussie dollar, yesterday’s news drove the price action for the pair firmly through the potential support platform, which until that point had held firm in the 0.7174 area, before closing with a wide spread down candle on high volume. Yesterday’s price action merely reinforced the bearish sentiment of recent weeks which saw the rally to 0.7350 finally run out of steam earlier in the month. In overnight trading, and early in the session the pair had been trading just off yesterday’s lows, with the next level to be tested now likely to be in the 0.7020 area, with a possible move lower to the 0.6900 region in the longer term. The current weakness for the Aussie Dollar was firmly signalled on the 23rd October with the deep wick to the upper body on the daily candle which has since been validated over the last few days.
Moving to the the British pound and the 6B currency futures contract, here too we have seen a similiar reaction, with the pair selling off sharply yesterday, with a deep wick to the upper body also confirming the bearish sentiment now in play and the pair trading (at time of writing) lower at 1.5244. As with the Aussie dollar, this weakness was signalled several days earlier, with the failed rally to 1.5500 on the 22nd October sending a signal of weakness ahead which has been duly been validated. Longer term we can expect to see Cable test the platform of support now in place at the 1.5100 area, and with the volume point of control continuing to add its own downwards pressure the current outlook remains bearish.
For the euro, the twin effects of the FOMC and the ECB have combined to drive the pair lower on increasing momentum, as strength in the US dollar coupled with the prospect of further quantatitive easing have combined to provide the fuel for a sustained move lower. The first level to be breached was in the 1.1150 area, as denoted with the blue dotted line of accumulation, with the high volume node on the point of control at 1.1050 only offering short term respite before the next leg down in yesterday’s forex trading session, and with little in the way of meaningful support below, 1.0850 is now on the horizon.
Finally to the CAD/USD, and here the 6C the chart is similar to the 6A, with the recent bullish rally for the Canadian dollar having been snuffed out on the return of US dollar strength. The initial move through the 0.7700 area was significant, with the consequent test of the platform in place at 0.7570 now proving to be pivotal, but should this fail to hold then we can expect to see a test of the 0.7420 area in due course. Yesterday’s price action with the deep upper wick to the candle coupled with high volume confirms the bearish picture for the pair at present, with the decline in oil prices also adding further downwards pressure.
By Anna Coulling
Charts by NinjaTrader and indicators by Quantum Trading