Forex Market News
Bastille Day and Germany wins the World Cup in Brasil against Argentina. I think that is fitting as Germany had scored 17 goals in the cup to Argentina’s 7, although my heart was with the South Americans. On another note, I went to Suncorp stadium in Brisbane on Saturday night and watched the NSW Waratahs demolish the Queensland Reds. The Reds were woeful.
Back to economics and trading. The Canadians had a shocker of a jobs number. 1 figure does not create a trend but it certainly shunted the Loonie lower. However, that may just give us further buying opportunities. Speaking of buying opportunities, the pound “will remain a buy on dips but there’s a possibility we will see some more of these dips.”
I was discussing with the guys over the weekend the idea that low volatility is here to stay for some time. With central banks keeping rates low for extended periods keeps the lack of fund flow in the market. Add to that the huge injection of cash from QE in the US, Japan and UK and what we get is a market without direction, a market that is in a chase for yield. In normal conditions central banks use interest rates like an accelerator to slow or speed up an economy. This movement of rates gives us yield and also movements in the markets. Now, with QE and stagnant low rates, we have the yield chase and barely any movement or extended trends. Glenn Stevens has noted this in his recent releases and looks for some volatility as the US exit QE. However, even once QE is over, the Fed is now hinting at sustained lower rates for a long period of time. http://www.bloomberg.com/news/2014-07-12/dollar-falls-most-in-13-weeks-versus-yen-on-dovish-fed.html So, more range bound markets, more “carry trades”, more short term trend and more kneejerk reactions for safe haven trading from headlines. Headlines like this http://www.bloomberg.com/news/2014-07-11/gold-heads-for-longest-weekly-rally-since-march-on-haven-demand.html . This is what we can expect for the rest of 2014 and first half of 2015.
DATA HIGHLIGHTS TODAY – Draghi speaks.
AUDUSD – Thursday’s jobs data and Chinese trade balance pushed the Aussie about. We are still in buy mode but I would be trying to protect it as best I can. The only real reason it is up here is because of the carry trade. Otherwise it would be at 88c
EURUSD – Ema’s are all flat, price since mid May has had a 200 pip range either side of 1.36. And that is where we find ourselves today. This too should be lower, down to 1.32 area, but it is not and not because of carry trade, but because investors are looking for a recovery. It aint coming anytime soon so look for shorting opportunities. Not one present just yet.
GBPUSD – One of the few trendsetters out there (along with Loonie and Kiwi) but it is overdone and rolling over for a short term sell.
NZDUSD – An inside seller bar and despite my bearish view on this currency, the kiwi continues to rally. I will be right…one day.
USDCAD – Trade looking ok now, a strong bar and we are targeting the ema as our exit, then will look to short it again.
USDJPY – Finished the week on support and is hovering there. Still have little interest in this.
David Long/ Proprietary Trading Manager