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The focus remained on the risk-off sentiment in the market this week with stock markets moving lower and safe-haven currencies and commodities gaining in strength. Gold and Silver gained again this week with no real signs of a reversal yet. We would need to see the risk-on sentiment come back to the market before considering going against these precious metals.
The RBNZ shocked the markets this week by cutting interest rates by 0.5% rather than the expected 0.25%. This led to the decline in New Zealand Dollar especially against the safe-haven currencies such as Yen and Swiss Franc. Despite this, the tone out of the RBNZ was hawkish as they are expecting this cut to boost jobs and provide higher wage growth.
In other central bank news, the RBA held interest rates at 1.00% which bought some strength back into the Aussie dollar. The continued USD weakness also helped support the Australian dollar with AUDUSD holding above the key lows.
The USD Index weekly chart closed bearish after the previous week closed below the key highs. The price will likely remain range-bound and head towards the key demand zone of 95.50. The trade war between the US and China will likely continue to put pressure on the USD which could be the new game plan from President Trump.
AUDUSD weekly close above the key spike lower suggests we could see some upside going into next week. In the market outlook, we expected the price to re-test these lows and now price is closing above we should see some Australian dollar strength re-enter the market. This could also be a sign of risk-on sentiment returning.
NZDUSD finished the week bearish however price remained above the key weekly lows of 0.6480. This is more likely due to the current USD weakness; price will likely remain bearish due to the rate cuts.
EURAUD is one to watch as price re-tested yearly highs. Typically, when this happens price reacts negatively and currently, price is rejecting the highs. If we start to see the Australian dollar gain strength this market is at an ideal level to short from.
EURGBP is another currency pair at key highs; GBP data this week remained poor helping this currency pair into the key resistance of 0.9300. A rejection here is unlikely due to the ongoing Brexit negotiations.
In the market outlook, we expected the SPX500 to re-test the trendline support and that is what we have seen and despite price breaking much lower, we have seen the week close back within this ascending wedge pattern. This could be a sign of another rally to come in the stock markets in line with more of a risk-on sentiment.