Forex Market News
The RBA is not expected to move rates today, a 2% chance of a decrease says it all. The big mover in recent weeks has been the greenback. The market has expected the US dollar to gain in strength off the back of the QE tapering and improving economic strength of the US. The market has been looking for a stronger greenback for months and finally has gotten it. Like all moves, it is not one directional, there will be pullbacks and retracements. This is seen to be happening overnight with all the majors performing better than Uncle Sam’s currency.
Overall though, on the Greenback I am bullish. I am still bearish the Euro, bullish the Pound, bullish the Loonie, ambivalent on the Aussie and bearish the Kiwi.
The Euro still has issues and despite the break through 1.35 and 600 pip drop from 1.40 I see the Euro lower to 1.30 and look for shorting opportunities down to there. Inflation in the Eurozone is still struggling, combine that with a banking sector that is toppling and Russia’s grip on their gas supply as it heads into winter will see Draghi make a stronger commitment to kicking inflation higher. The ECB meets Thursday and it will be interesting to see how he tackles this issue.
Over in the UK, they have had some bad data recently and that is to be expected, however, fundamentally they are still performing better than most of its peers. Funds are still flowing into the British economy and overnight construction data remained very bullish. Buy on the dips.
Loonie/Aussie/Kiwi are all commodity based economies and relatively influenced by China. China is still outperforming in all areas and the nay-sayers must be getting sick of being wrong on calling the end to the China run. Loonie is also hugely exposed to the USA growth and reliant on it for the majority of its export industry. As US grows, so does Canada. Therefore, I will buy any dips on the Loonie too. The Aussie is harder to pick. Our data is not bad but not great either. I have said before, the major reason we are this high is because of our high interest rates. Take that away and I suspect we would be at 88 cents or lower. I see the little battler as being range bound for some time yet. The Kiwi, like the Canterbury Crusaders has seen its run, its time is done. Wheeler over played his hand and I expect the next move on rates to be down, either late this year or early 2015. Sell any rallies.
DATA HIGHLIGHTS TODAY – AU Trade balance & RBA Interest Rate and Statement. UK Services PMI. US Non-manufacturing PMI.
AUDUSD – Stuck in the middle of the 200 pip range, heading back towards 94. Trade it if you like, with the RBA sitting on the fence today it could progress higher in coming days.
EURUSD – Inside buyer bar after a strong reversal bar. Looking for it to test 1.35 before the ECB on Thursday so I can get short.
GBPUSD – Very bullish bar off minor support of 1.6817. Another one of those and tomorrow will see a potential long entry.
NZDUSD – Finding support off the 200ema, and March lows of 8515. A retrace to the 50ema and resistance of 8650 will be the ideal area to get short from.
USDCAD – Inside bear bar, not enough to warrant an entry. Momentum is overcooked and it failed to break the significant structural high of June 5th, 1.0960. So, the downtrend of 2014 is still intact, at this stage.
USDJPY – Japan has not been in the headlines for several months and the currency has done nothing. However, with a surging greenback and Abe/Kuroda still wanting to kick-start their economy I look for this to be higher in coming months. Has broken the wedge formation that has dominated the last 7 months so I will be looking for buying opportunities. Today’s inside balanced bar is not an opportunity.