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Currencies Update – Forex Trading Tips
There is no trade call at present. We will be monitoring levels of support and resistance in unison with any impactful news and the underlying fundamentals in order to find a high probability trade.
Currencies Update:
The USD remains the strongest currency in the longer term. The recent NFP reading has reaffirmed USD strength amid speculation of a rate hike by September. Although we expect bullish sentiment on the dollar to remain in the near term, it is near its long-term highs against most counterparts and therefore may be susceptible to pullacks – such pullbacks will likely provide buying opportunities.
The EUR remains fundamentally weak due to QE and the ongoing Greek debt issue, however recent inflation and unemployment numbers have signalled that a recovery is on track, which has given the currency some positive sentiment recently. If Greece fails to make any of their imminent repayments, the euro will be pressured. Conversely, a deal with a solid resolution will precipitate a relief rally.
GBP is looking at a rate hike in the next 12 months and is therefore a fundamentally bullish currency in the long term. There is no clear sentiment on pound at present. We await some tier one data or central bank language to help guide trading decisions on the currency.
AUD: Low commodity prices and a slowdown in China has put bearish pressure on the AUD. Overall the bias for AUD is on the bearish side of neutral, until we see more data.
NZD has a new official cash rate of 3.25% after the RBNZ cut rates. They have left the door open for further easing and as such the Kiwi dollar is a bearish currency in the medium term.
CAD remains on the weaker side of neutral. CAD will take most of its direction from any significant changes in the price of West Texas Intermediate crude oil. When there is no oil-related news, the oil price will generally move with negative correlation to the USD.
JPY remains bearish due to QQE. Yen weakness has accelerated recently on the back of USD strength. Yen is at a 12-year low against the dollar. Sentiment on the JPY can turn bullish quickly if there is severe uncertainty in the markets. Language from the BOJ shows they believe a recovery is beginning and QQE is having its intended effect. Recent positive GDP readings have dampened speculation of any additional easing, and Kuroda’s recent comments have spurred strength in the yen.
CHF is fundamentally a weaker currency given the SNB’s negative interest rates. 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 approximately 75%.
Current Market Sentiment:
US trade was choppy on Thursday after Retail Sales came in better than expected but not good enough for the market to buy dollars on mass. Many participants were expecting a much better number, however the deviation was only slight.
Asian trade has been quiet. Some banks have downgraded their growth forecasts for New Zealand and China. Commodities are lower on the day.
The euro has seen downward pressure as speculation mounts regarding a Greek default.
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