Three G10 currency pairs to watch

A technical analysis of three of the top trending G10 currency pairs: GBP/AUD, USD/CAD and USD/NOK.

Australian dollar
Source: Bloomberg

The GBP/AUD cross is looking increasingly interesting as we count down to the Brexit vote on 23 June. Ever since President Obama came out strongly supporting Britain’s ‘Remain’ group, the betting odds for the camp winning the referendum have been steadily increasing. The pound has been strengthening alongside the move in the betting odds. Conversely, Australia’s shock miss in its first-quarter inflation numbers have greatly increased market pricing for further rate cuts by the Reserve Bank of Australia.

The GBP/AUD downtrend has been decisively broken as we can see from the blue line (Tenkan-sen) crossing above the red line (Kijun-sen). However, the price is currently in the Ichimoku Cloud and one would be looking for the price to break through $1.9575 to confirm the GBP/AUD has moved into an uptrend.

USD/CAD is still in a robust downtrend as the oil price continues to gain and the US dollar remains relatively weak. The latest Federal Reserve meeting confirmed further rate hikes are still unlikely in the short-term. The weekly Energy Information Administration (EIA) data saw US oil production continue to slide, and there looks to be plenty of upside in the oil price. WTI looks like it could hit $48-$50 in the near-term if momentum holds. Given such a scenario, it is perfectly feasible for USD/CAD to drop towards its June lows of $1.2250.

USD/NOK is similarly being driven by the rally in the oil price. The NOK is also affected by the bizarre central bank policy the Norwegian Riksbank is following, where it has low unemployment, strong GDP growth, a house price bubble, weak inflation and negative interest rates. The Riksbank has the most negative interest rate of any central bank in the world, and the concern is the increasingly bubble-like housing market may prompt it to start moving interest rates up to zero. That would provide a significant upside driver for the krone, especially alongside the ongoing support from the rise in the oil price. USD/NOK looks like it can go a lot lower once it breaks through 8.80 kr.

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