Currently there are no trades providing a sufficiently high probability, low risk profile. Thus we will monitor the news wires and key technical levels for any high probability trading opportunities.
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. Yesterday’s positive Building Permits and Housing Starts helped the USD trade back in line with fundamentals.
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 positions can cause an aggressive rally. If Greece fails to make any of their imminent repayments, the euro will be pressured.
GBP has weakened lately on the back of downward growth forecasts and yesterday’s deflation reading.
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. Inflation Expectations are higher than they were three months ago.
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. When there is no oil-related news, the oil price will move lower on USD strength, as was seen on Monday.
JPY remains weak due to QE 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%.
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Source:: Market Update – Forex Trading Tips