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Awaiting News Flow – Forex Trading Tips
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Originally updated: 06:00
Trading Bias: Neutral
Currency Pair: –
In today’s trading session I will be awaiting news flow to provide opportunities to get into the market
Current Sentiment:
There is distinctly little tradeable sentiment in the market today, and given it’s Friday, we will not be looking to open new positions ahead of the weekend – unless new information arrives which produces a high probability opportunity.
Yesterday there was nothing in the European session that provided any news, furthermore Switzerland, Germany and France were on bank holidays.
In North American trade, US Producer Price Index came out worse than expected – below the lowest estimate – and yet it failed to cause a further sell off in the dollar. This may be partly to do with the dollar index having already fallen from 95.25 to support at 93.20 during the week and being somewhat extended. A break of this level will be the lowest level for the DXY since January 22. Weekly Unemployment Claims were released alongside PPI and came out better than expected. Soon after these releases, March Durable Goods Orders were revised higher, which further took the heat off the greenback.
In Asian trade today nothing noteworthy has occurred. BOJ Governor Kuroda spoke, reiterating that no further easing is necessary at present and the BOJ will not hesitate to adjust monetary policy if needed. As we expected, he did not communicate any new information.
Fundamentals:
The USD remains the strongest currency in the longer term, but the medium-term direction depends on data. The currency is verging on neutral in the short term and is extremely sensitive to negative data. This week marks another week of poor data.
The EUR remains fundamentally weak due to QE and the ongoing Greek debt issue. The EURUSD can easily get a boost on any USD weakness, and given the huge short positioning in the pair, any liquidation of these can cause an aggressive rally. If Greece fails to make any of their imminent repayments, the euro will be pressured.
GBP has regained its place as one of the strongest currencies however the Quarterly Inflation Report this week dampened expectations of a rate hike as growth forecasts were downgraded.
AUD is relatively neutral now there is no speculation of rate cuts in the near term. As such it will take most of its direction from the price of iron ore and economic activity in China. Movements in AUDUSD will largely be a function of USD sentiment. AUD enjoys a positive interest differential against all majors except NZD; fundamentally this is bullish for the currency.
NZD has a chance of decreasing interest rates in coming months. The Overnight Index Swap market is pricing a 46% chance of a June 10 cut. National Australia Bank says this is too soon. This week we saw some positive data from New Zealand.
CAD remains on the weaker side of neutral until we see more data or direction from the BOC. CAD will take most of its direction from any significant changes in the price of West Texas Intermediate crude oil.
JPY remains weak but the market will likely need a new bout of easing to sustain another fall. In the meantime, the sentiment on the JPY can turn bullish very quickly if there is uncertainty in the markets.
CHF is fundamentally a weaker currency given the SNB’s negative interest rates, however it is highly susceptible to volatility due to SNB potentially intervening to weaken the currency as it tends to strengthen on safe-haven demand. CHF often will take direction from the EUR with which its correlation over the last 50 trading days is 74%.
Technicals:
We will monitor the news wires and key technical levels for any high probability trading opportunities.
Other Market Moving News:
Again the European calendar is light. Switzerland release PPI early in the session.
In North American trade: Manufacturing Sales from Canada followed by Preliminary University of Michigan Consumer Sentiment and Inflation Expectations. Neither of these events are expected to cause a significant move unless they sufficiently deviate.
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