The year 2021 started on a hopeful note. however, the resurgence of Covid-19 new strain has made things murkier.
How the currencies will behave in the coming days, nobody knows. The global panic and the rush to get the vaccine is another area of concern to many economies. Some currencies have shown resilience and some bit of resistance however, the question that lingers to financial experts is, for how long they will hold. However, many currencies have lost a huge chunk of value.
How the pandemic will be handled, will determine what becomes of the currencies. Today we will be looking at the following currencies, AUD, CAD, NZD, and JPY.
Australian Dollar (AUD)
AUDUSD has broken the bottom level of the Uptrend line (Ascending channel) in the 1-hour timeframe chart.
EURAUD has broken the top level of the downtrend line (descending channel) in the 4-hour timeframe chart.
In the 1-hour timeframe chart, the Old Resistance level is converted into the new support level and the market is moving in an uptrend range which confirms the buyers are increasing on EURAUD.
The Australian Dollar currency has been dealt a huge blow by the restrictions of the third wave upsurge. The currency has been shaky and unstable since the beginning of the week. The market mood is becoming murkier by the day. As global investments are diversifying their portfolios to bonds, the AUD, continues to lose ground.
However, the currency has averted huge setbacks by capitalizing on the weaknesses of competing currencies such as the Pound, and EUR. The overall exchange rates for the EUR/AUD are still limited.
Traders are worried that the aftermath of the Coronavirus upsurge could be dire. They are reluctant to buy the pair. There have been mixed fortunes for the pair. However, acceptance or widespread use of the Covid-19 vaccine could see the pair picking up.
New Zealand Dollar (NZD)
The New Zealand dollar is moving in a strong downtrend after breakout and retest of the channel levels in the 4-hour timeframe chart.
The NZD has plummeted to the lowest slip of 0.7020 this year. The sharp decline could be attributed to the announcement by the government that it would tame or curb the housing sector prices.
Even though the economy has been on an upward trend since Covid-19 struck, the gains could be reversed if the government implements the plan.
Another effect of the decline is the severe floods that have hit New South Wales. Even though the currency has been among the world’s traded mediums, it has faced its stiffest downtrend.
It has dived to 165- pips low reminiscent to late 2020. The economic stimulus plan by the US government is another aspect that has seen the plummeting of NZD as opposed to USD.
Canadian Dollar (CAD)
USDCAD is going to reach the (lower high) of the downtrend line. we can expect a breakout or reversal from this top zone.
The Canadian Dollar has gained some ground. It was boosted by the government’s announcement that it would remove the short-term lending programs. The announcement was made by the Central Bank of Canada. The stoppage of purchasing bonds has also worked in favor of the CAD.
The Currency is fighting a bullish push by the USD. The low oil prices have also negatively influenced the CAD.
The trend has remained predominantly down for the last two months. Another critical aspect that has weighed more on the downside trajectory is the imposition of sanctions on Chinese government officials for violating human rights. The anticipation for more lockdowns slowed vaccine roll-out, and high rates of infections is another huge hindrance.
Japanese Yen (JPY)
USDJPY is making a ranging movement in a strong uptrend.
The JPY has been under pressure from its main challengers for the last few weeks. However, there could be some gains, if a continued risk aversion is maintained. Another issue could be the lowering of treasury bonds for both AUD and NZD because it could trigger some gains on the Yen.
To boost the economy further, the policymakers, are pushing to raise the minimum wage to approximately one thousand JPY, thereby boosting the purchasing power of the citizens. It would revitalize and boost the economy to counter the effects of Covid-19.
Even though the economy swung back after the initial Covid-19 disruption, due to many exports, soft consumption may reverse those gains.
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