Originally updated: 08:00
Trading Bias: neutral
Currency pair: –
There was no major news yesterday – typical of a Monday. So today we are awaiting news for trading opportunities.
Yesterday we saw both GBP strengthen and NZD weaken exactly as we had predicted in our trading bias. GBPNZD was 10 pips shy of a 600 pip rally on the day. This extension contrasts with an ADR in the pair of 350 pips.
Early in tomorrow’s Asian session we have the RBNZ Stability Report. Then in Europe we have two big events from the UK: Jobs then Inflation Report accompanied by a speech from Mark Carney. It may be ideal to save your bullets for these events.
The USD remains the strongest currency in the longer term. However the medium-term direction depends on data. Last week’s NFP number abated the bearish sentiment on the currency to a degree. We await data this week for more direction. Watch out for deviations on Retail Sales.
The EUR remains fundamentally weak and the Greek debt issue is ongoing. The Euro can easily get a boost on any new USD weakness, which was witnessed a fortnight ago. As speculation mounts of a Greek debt default we can expect Euro to be pressured against fundamentally bullish currencies.
GBP has regained its place as one of the strongest currencies now that the Conservative government remains in power. A degree of uncertainty has been erased. The Inflation Report this week should provide solid direction.
AUD is relatively neutral with a downside bias. The rate cut has passed and there is little speculation of imminent cuts. China’s rate cut shows that the PBOC are acknowledging the slowdown in the economy, which has the potential to weigh on AUD if demand for commodities decrease further.
NZD has a greater chance of easing monetary policy since the poor employment figures were released. We will watch data to indicate the chance of a cut in the near-term. The OIS is now pricing a 46% chance of a June 10 cut. NAB says this is too soon. We may see weakness in NZD leading into the event.
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. Last week’s BOJ meeting minutes provided little in the way of insight.
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%.
We await news flow to provide entries around strong support and resistance levels.
Other Market Moving News:
Later today we have UK Manufacturing Production. This data may increase bullish sentiment if it comes out above the high estimate.
After that, we have the Australian Federal Budget which, if contains any major surprises, may move the AUD.
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Source:: Awaiting News – Forex Trading Tips