A week earlier we predicted the Australian currency will depreciate on the back of weaker-than-expected data from Oz labour market, and it was not a surprise that AUD/NZD continued downward rally almost hit a historic low at 1.0543. The main reasons behind another drop of 318 pips are the fact the Australian economy lost 22,000 in December, whereas New Zealand business confidence soared to 52 from 38 a month earlier. While the pair has recovered some of earlier loses during the second half of the week, it is unlikely that the Aussie will start appreciating against the kiwi in a longer term taking into account upcoming rate hikes from the RBNZ and a possible cut of the interest rate by the RBA. Therefore, the next strong support is located at 1.0496, represented by weekly S1. This week the pair can be even more volatile, as statistics offices in both countries will post CPI data, which has a huge impact on central bank's decision.
Two other major currencies worth paying attention this week, are the Pound and the loonie. While British economy is one the top performers now, the land of the maple leaf is still struggling to grow. Even though the Bank of Canada is unlikely to cut its key refinancing rate this week, manufacturing sales, retail sales and inflation are expected to deteriorate over the corresponding period. Taking into account U.S. Dollar's strength and a possible decline of the loonie, USD/CAD has a great potential to penetrate ascending triangle's resistance line, which can be found around a daily R1 at 1.099 and, hence, put weekly R1 at 1.1024 on the map.
The cable has been appreciating steadily since July 2013; however, after hitting 1.66 on January 2 the pair eased back to weekly S1 at 1.6316. This week, specially on Wednesday, the pair received another bullish impulse, as both claimant count change and unemployment rate are likely to show some positive trend, adding to signs the Bank of England will soon start raising rates. A key level for long traders is located at a weekly R1 and last week's high at 1.6514.