David Long

No Selloff in the Aussie Dollar as you Would Expect- Forex Trading News – June 4th 2014

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Forex Market News

OK, where are the markets and what are they doing? In the FX world, it seems that we are just marking time (there’s an old cadets saying). Interest rate yields are fluctuating wildly, stocks seem to have peaked – for the time being – and commodities are still leaking value. There have been many articles out of late discussing the low volatility and even lower volumes with brokerage houses doing it real tough. I worked for 20 years in brokerage houses so have little sympathy but some empathy. That said, with price action subdued due to the low volatility it makes it hard for anyone to make a dollar, us included.

The selloff in both soft and hard commodities hasn’t had a selloff in the Aussie dollar as you would expect, but it has done to our bond market. Interestingly our currency has held up and I would attribute that to China but more so the carry trade, where investors buy high yield currencies and sell low yielding currencies. China has conflicting signs but I am not seeing anything rotten in their economy. Down Under, Stevens sees no major issues around him but wants to keep the accommodation as it is, and for some time. This is probably the best option he has available at the moment, but I would prefer to see him a little more pro-active in the next cycle and not be so far behind the curve.

Speaking of behind the curve! Draghi has watched over the situation in Europe, and well, it is stagnation for months now. So Thursday will see the ECB act, how much they do is the key. Not enough and the Euro will rally, odd as that sounds. Reason being is that the market has priced in a rate cut and other options available to Draghi, however, because he has left it so long, what is required is more than just a rate cut. He needs to go deeper and further. If he does that, he will get the desired result of a selloff in the currency and a kick start to the economic bloc.

DATA HIGHLIGHTS TODAY – AU GDP. UK Services PMI. US Trade Balance & Non-manufacturing PMI & Beige Book. Canadian Trade Balance & BOC Meeting and Interest Rate Policy.

AUDUSD – Really not going anywhere as it tracks along the flat ema’s. Staying away until it decides to make a move in a direction, any direction.
Resistance: 9460/9522
Support: 9200/9085/8900

EURUSD – I thought it would rally a bit this week, but it seems that it too, like the Aussie, wants to go nowhere, until the ECB is over I would safely say.
Resistance: 13890/14050/14260/14320
Support: 13565/13488

GBPUSD – Similar to the Kiwi, the cable has broken the uptrend for now. The BOE is also out tomorrow, so, come Friday we might have a shorting opportunity here.
Resistance: 1.70/1.7060/1.7370
Support: 1.66/1.63

NZDUSD – No real retest of the break, and now we are in oversold territory. No sign of buyers either so, if not in, wait for the retrace/retest now. Do not FOMO trade it.
Resistance: 8745/8842
Support: 8523/8434/8090

USDCAD – Tonight’s BOC meeting will be interesting to hear. Whilst commodity prices have tumbled recently I still see the Canadian economy as at the bottom of the cycle. Last meeting, Poloz did not agree and saw some more downside left and so left rates on hold and a negative stance. I would like to hear him now move to a neutral or positive stance. We shall see. So, the Loonie has weakened with the commodity falls and as I wrote weeks ago, this will be range bound for some time.
Resistance: 11170/11233
Support: 10802/10715

USDJPY – Is now clearly trending and we are still in the trade. With two buyer bars stops can and should be moved to capital protection (ie, breakeven) or even profit protection as momentum is starting to peak already.
Resistance: 105.57/108.35/110.50
Support: 101.40/100.62/100/99.80

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