Sunday, May 11, 2008
Massive Bank Losses And Write Downs Drag Risk Appetite And Carry Lower
The high end of the yield curve has taken a significant hit over the past week; and carry trades have suffered the consequences. The DailyFX Carry Trade Index sunk $298 dollars since last Friday after failing to over take a descending trendline that has been directing the basket since risk appetite was tripped up by the subprime meltdown last summer. In turn, a breakdown in USDJPY and other yen crosses has weighed on risk reversals, which show a greater demand for puts. However, during this reversal, the outlook for a BoJ hike over the coming year has eased and volatility cooled, suggesting this will be a more orderly (and perhaps short-lived) carry unwind.
US Dollar Consolidates As Oil Tops $126
The US dollar was mixed as raging oil prices above $126/bbl pressed on investors, but led the Canadian dollar to pick up the biggest gains. The Australian and New Zealand dollar however, depreciated the most against the US dollar, sparked by a rise in risk aversion. On the other side of the spectrum, the low yielding Swiss franc and Yen continued to climb against the greenback as the pairs traded at 1.041 and 102.9, respectively. Mixed sentiment for the European currencies sway the British pound to inch lower to 1.952, while the Euro picked up to trade in the 1.548 range.
On the economic front, the Canadian Net Change in Employment index held up for the fourth consecutive month as it rose to 19.2K from 14.6K, with the International Merchandise Trade index adding to the mix as the surplus widened to C$5.5M from C$4.8M due to a surge in energy exports. Looking at the US, the trade deficit narrowed to $-58.2B from $-62.3B as imports declined to a six year low, but did not help the US dollar as exports dipped for the first time is seven years.
The stock markets landed in troubled waters as AIG posted a $7.8B loss, with Citigroup heightening bearish sentiment as they plan to sell $500B in assets. As a result, the DJIA fell 120.90 points to 12,745.88 points, with 24 of the 30 components declining. The broader S&P500 dipped 9.40 points to hold off at 1,388.28 points, with 208 stocks falling to a new 52 week low.
Increased volatility in the stock markets has improved the appeal of US Treasuries, and spurred demands for long-term bonds as the financial markets continue to face downside risks. As a result, the benchmark 10-Year yield fell to 3.775 percent from 3.782, while the 2-Year yield rose to 2.247 percent from 2.227 percent.
Looking ahead, we expect limited event risk for the US dollar on Monday as the Monthly Budget Statement is the only scheduled release for the US, but expect to see increased volatility in the British pound as the Producer Price Index and the Trade report is due out for release at 8:30 GMT.
On the economic front, the Canadian Net Change in Employment index held up for the fourth consecutive month as it rose to 19.2K from 14.6K, with the International Merchandise Trade index adding to the mix as the surplus widened to C$5.5M from C$4.8M due to a surge in energy exports. Looking at the US, the trade deficit narrowed to $-58.2B from $-62.3B as imports declined to a six year low, but did not help the US dollar as exports dipped for the first time is seven years.
The stock markets landed in troubled waters as AIG posted a $7.8B loss, with Citigroup heightening bearish sentiment as they plan to sell $500B in assets. As a result, the DJIA fell 120.90 points to 12,745.88 points, with 24 of the 30 components declining. The broader S&P500 dipped 9.40 points to hold off at 1,388.28 points, with 208 stocks falling to a new 52 week low.
Increased volatility in the stock markets has improved the appeal of US Treasuries, and spurred demands for long-term bonds as the financial markets continue to face downside risks. As a result, the benchmark 10-Year yield fell to 3.775 percent from 3.782, while the 2-Year yield rose to 2.247 percent from 2.227 percent.
Looking ahead, we expect limited event risk for the US dollar on Monday as the Monthly Budget Statement is the only scheduled release for the US, but expect to see increased volatility in the British pound as the Producer Price Index and the Trade report is due out for release at 8:30 GMT.
Japanese Yen Pairs Primed for Volatility, JPY May Gain Further
Implied volatility is one of the most tried and true methods for objectively measuring expected volatility in the spot market. Derived from currency options with different maturities, implied volatilities are used to help predict potential movements in the spot market and is one of the most popular strategies of systems traders and other professional hedge funds.
At its most fundamental, the basic and intuitive interpretation of this implied data is often the most telling for traders. Taken alone, a steady rise in the longer-term implied volatility (the red line) is indicative of a strengthening trend; while inversely, a decline often reveals that a period of range or consolidation in spot is ahead or already in place. Additionally, the histogram or spread between the shorter and longer-term implied volatilities (the blue colored bars) tells a different perspective. As the histogram rises, volatility is expected to pick up faster in the near future relative to the longer-term range. Ultimately, this increases the probability of a breakout scenario in the underlying currency.
At its most fundamental, the basic and intuitive interpretation of this implied data is often the most telling for traders. Taken alone, a steady rise in the longer-term implied volatility (the red line) is indicative of a strengthening trend; while inversely, a decline often reveals that a period of range or consolidation in spot is ahead or already in place. Additionally, the histogram or spread between the shorter and longer-term implied volatilities (the blue colored bars) tells a different perspective. As the histogram rises, volatility is expected to pick up faster in the near future relative to the longer-term range. Ultimately, this increases the probability of a breakout scenario in the underlying currency.
Forex Video - USD/CAD Tumbles, How Will Inflation and GDP Numbers Impact Currencies Next Week?
Written by Terri Belkas and John Kicklighter, Currency Analysts
· Canadian employment data beats expectations, leads to Loonie rally.
· Heavy event risk looms next week - which indicators do you need to watch?
Stories to watch on DailyFX
· Heavy event risk looms next week - will Tuesday's US Retail Sales report be surprisingly strong?
· USD/CAD fell on Friday, but is the Canadian dollar ready to fall across the board?
· Canadian employment data beats expectations, leads to Loonie rally.
· Heavy event risk looms next week - which indicators do you need to watch?
Stories to watch on DailyFX
· Heavy event risk looms next week - will Tuesday's US Retail Sales report be surprisingly strong?
· USD/CAD fell on Friday, but is the Canadian dollar ready to fall across the board?
US Dollar: US Retail Sales Could Get A Surprise Boost on Tuesday - Why?
Advance Retail Sales are expected to fall back 0.2 percent after showing a surprising 0.2 percent gain during the month prior, but given the current economic scenario, this figure could prove to be even more disappointing when announced at 8:30 EDT.
What Are The Markets Facing?
Advance Retail Sales are expected to fall back 0.2 percent after showing a surprising 0.2 percent gain during the month prior, but given the current economic scenario, this figure could prove to be even more disappointing when announced at 8:30 EDT. Indeed, consumer confidence is rapidly deteriorating and energy prices continue to skyrocket. During the month of April, the University of Michigan consumer confidence survey plunged to a 26-year low of 62.6 while the Conference Board’s measure dipped down to a 5-year low of 62.3 on a gloomy combination of jittery financial markets, a collapsing housing sector, and oil rocketing to record highs. There is little doubt that retailers are contending with difficult circumstances as they are forced to offer the biggest discounts possible in order to draw customers, which will negatively impact profit margins. However, there is potential for the Advance Retail Sales index to actually show a positive increase as the result of prices, namely, sales at fuel stations. Indeed, this index is not adjusted for inflation and average gas prices rose above $3.50/gallon during the month and have only continued to rise.
Bonds – 10-Year Treasury Note Futures
A daily chart of Treasuries highlights the break above trendline resistance and the subsequent advance toward resistance at the confluence of the 100 SMA and 38.2 percent fib at 116-20. While we are likely to see a test of this resistance level on Monday, Tuesday’s release of US Advance Retail Sales provides significant event risk for the contract. Indeed, retail sales are forecasted to slump, which could support the case for additional Treasury gains. On the other hand, if rocketing gas prices lead the headline retail sales index to deceptively rise, the contract could pull back toward support near 115.
What Are The Markets Facing?
Advance Retail Sales are expected to fall back 0.2 percent after showing a surprising 0.2 percent gain during the month prior, but given the current economic scenario, this figure could prove to be even more disappointing when announced at 8:30 EDT. Indeed, consumer confidence is rapidly deteriorating and energy prices continue to skyrocket. During the month of April, the University of Michigan consumer confidence survey plunged to a 26-year low of 62.6 while the Conference Board’s measure dipped down to a 5-year low of 62.3 on a gloomy combination of jittery financial markets, a collapsing housing sector, and oil rocketing to record highs. There is little doubt that retailers are contending with difficult circumstances as they are forced to offer the biggest discounts possible in order to draw customers, which will negatively impact profit margins. However, there is potential for the Advance Retail Sales index to actually show a positive increase as the result of prices, namely, sales at fuel stations. Indeed, this index is not adjusted for inflation and average gas prices rose above $3.50/gallon during the month and have only continued to rise.
Bonds – 10-Year Treasury Note Futures
A daily chart of Treasuries highlights the break above trendline resistance and the subsequent advance toward resistance at the confluence of the 100 SMA and 38.2 percent fib at 116-20. While we are likely to see a test of this resistance level on Monday, Tuesday’s release of US Advance Retail Sales provides significant event risk for the contract. Indeed, retail sales are forecasted to slump, which could support the case for additional Treasury gains. On the other hand, if rocketing gas prices lead the headline retail sales index to deceptively rise, the contract could pull back toward support near 115.
Tuesday, May 6, 2008
Yen Crosses: Corrections Continue but Larger Trend Still Down
The choppy decline since the October high at 91.42 may be a series of 1st and 2nd waves. Under this count, the NZDJPY needs to remain below 88.11 for a C wave decline that will eventually come under 74.25 to remain on track. An alternate count treats the entire drop from 91.42 is an ending diagonal (similar to the EURJPY). Under this alternate, a wave 2 correction is underway towards fibo resistance in the 84/85.80 area. A rally through 88.11 would make this the preferred count. In both cases, lower prices are expected. The outcome would be delayed under the alternate count.
CHFJPY Range Bound Following Break in Bullish Trend
Trading Tip – A common cliché among traders holds that “the trend is your friend.” When applied to range trading through periods of consolidation in an otherwise trending market, this means only entering a trade in the direction of the trend. In particular, we will opt not to buy CHFJPY even though the pair is trading close to the bottom of the range because the direction of the recent breakout was to the downside. We would rather miss out on a trade and lose nothing than get long counter-trend if CHFJPY simply sinks lower from here without oscillating to the 50% Fib.
Note – Today’s market environment is not conducive to a range-bound approach with most pairs trending. Finding a range trading opportunity often means relying on exotic crosses and thereby contending with higher volatility levels. Conservative traders that are intent on following a range-bound approach should be mindful of this when evaluating these trade ideas.
Event Risk for Switzerland and Japan
Switzerland – With Consumer Price Index figures out of the way, the Swiss calendar has become substantially lighter for the rest of the week. The only remaining item on the docket is Thursday’s jobs report. Expectations are for the rate to remain at a consistent 2.5%. Traders will be wary of this ticking higher as the Euro zone exports the effects of the US malaise to the mountain nation.
Japan –Friday’s release of the preliminary estimate of the Leading Economic Index for March is the only substantial release from Japan this week. Expectations are for a sharp decline as the Japanese economy suffers high oil prices and the loss of vigor in the US export market.
Note – Today’s market environment is not conducive to a range-bound approach with most pairs trending. Finding a range trading opportunity often means relying on exotic crosses and thereby contending with higher volatility levels. Conservative traders that are intent on following a range-bound approach should be mindful of this when evaluating these trade ideas.
Event Risk for Switzerland and Japan
Switzerland – With Consumer Price Index figures out of the way, the Swiss calendar has become substantially lighter for the rest of the week. The only remaining item on the docket is Thursday’s jobs report. Expectations are for the rate to remain at a consistent 2.5%. Traders will be wary of this ticking higher as the Euro zone exports the effects of the US malaise to the mountain nation.
Japan –Friday’s release of the preliminary estimate of the Leading Economic Index for March is the only substantial release from Japan this week. Expectations are for a sharp decline as the Japanese economy suffers high oil prices and the loss of vigor in the US export market.
Dollar Trades Lower As Risk Aversion Recants Bullish Outlook
Dollar Trades Lower As Risk Aversion Recants Bullish Outlook
Despite a quiet economic calendar, the US dollar was on the retreat Tuesday against most of its major counterparts. For those majors that weren’t caught up in cross fundamental currents, the greenback selloff was partly a carry through on the single currency’s ongoing reversal of last week’s strong rally. There was also a more active component to the decline in the form of a general souring in risk appetite – but more specifically, American risk. Ben Bernanke and his fellow Federal Reserve policy makers have made a remarkable effort to head off a recession and stabilize the broad financial markets with a cumulative 325 basis points of rate cuts and unusual means for injecting liquidity into the frozen credit markets. In fact, after last week’s quarter point cut from the FOMC, the market is pricing in an 86 percent chance that the Fed Funds rate will be left unchanged at 2.00 percent. However, recent data has offered little reason to suspect financial conditions are improving nor that the economy would avoid a contraction in the second quarter. Today, an article on Bloomberg News quoting a study from Jupiter eSources LLC revealed bankruptcy filings among businesses rose 49 percent in the year through April – the most in a year. With individual filings included, the rise over the same period measured 31 percent. This highlights an often overlooked concern: that the Fed’s efforts haven’t been passed through to the consumer – a necessity if growth is to recover. Looking ahead to tomorrow fundamental activity picks up modestly with March pending home sales and credit spending. Both indicators have little market moving precedence.
Despite a quiet economic calendar, the US dollar was on the retreat Tuesday against most of its major counterparts. For those majors that weren’t caught up in cross fundamental currents, the greenback selloff was partly a carry through on the single currency’s ongoing reversal of last week’s strong rally. There was also a more active component to the decline in the form of a general souring in risk appetite – but more specifically, American risk. Ben Bernanke and his fellow Federal Reserve policy makers have made a remarkable effort to head off a recession and stabilize the broad financial markets with a cumulative 325 basis points of rate cuts and unusual means for injecting liquidity into the frozen credit markets. In fact, after last week’s quarter point cut from the FOMC, the market is pricing in an 86 percent chance that the Fed Funds rate will be left unchanged at 2.00 percent. However, recent data has offered little reason to suspect financial conditions are improving nor that the economy would avoid a contraction in the second quarter. Today, an article on Bloomberg News quoting a study from Jupiter eSources LLC revealed bankruptcy filings among businesses rose 49 percent in the year through April – the most in a year. With individual filings included, the rise over the same period measured 31 percent. This highlights an often overlooked concern: that the Fed’s efforts haven’t been passed through to the consumer – a necessity if growth is to recover. Looking ahead to tomorrow fundamental activity picks up modestly with March pending home sales and credit spending. Both indicators have little market moving precedence.
Saturday, May 3, 2008
Japanese Yen May Continue Falling on Low Market Volatility
Implied volatility is one of the most tried and true methods for objectively measuring expected volatility in the spot market. Derived from currency options with different maturities, implied volatilities are used to help predict potential movements in the spot market and is one of the most popular strategies of systems traders and other professional hedge funds.
At its most fundamental, the basic and intuitive interpretation of this implied data is often the most telling for traders. Taken alone, a steady rise in the longer-term implied volatility (the red line) is indicative of a strengthening trend; while inversely, a decline often reveals that a period of range or consolidation in spot is ahead or already in place. Additionally, the histogram or spread between the shorter and longer-term implied volatilities (the blue colored bars) tells a different perspective. As the histogram rises, volatility is expected to pick up faster in the near future relative to the longer-term range. Ultimately, this increases the probability of a breakout scenario in the underlying currency.
EURUSD
Implied volatilities on EURUSD options have fallen significantly off of their multi-month peaks, as a general recovery in risk appetite and a slowdown in price moves have lowered options premiums on aggregate. Such developments suggest that the extreme price moves we have grown accustomed to as of late will die down through short-term trading—especially as the shorter-dated implieds are trading 55 basis points below their longer-term counterparts. What this tells us is that markets are expecting volatility to be lower in the coming week than in the month as a whole.
At its most fundamental, the basic and intuitive interpretation of this implied data is often the most telling for traders. Taken alone, a steady rise in the longer-term implied volatility (the red line) is indicative of a strengthening trend; while inversely, a decline often reveals that a period of range or consolidation in spot is ahead or already in place. Additionally, the histogram or spread between the shorter and longer-term implied volatilities (the blue colored bars) tells a different perspective. As the histogram rises, volatility is expected to pick up faster in the near future relative to the longer-term range. Ultimately, this increases the probability of a breakout scenario in the underlying currency.
EURUSD
Implied volatilities on EURUSD options have fallen significantly off of their multi-month peaks, as a general recovery in risk appetite and a slowdown in price moves have lowered options premiums on aggregate. Such developments suggest that the extreme price moves we have grown accustomed to as of late will die down through short-term trading—especially as the shorter-dated implieds are trading 55 basis points below their longer-term counterparts. What this tells us is that markets are expecting volatility to be lower in the coming week than in the month as a whole.
Carry Trade On The Rise As Volatility Cools, Rate Differentials Improve
Through there is growing concern as to how long high yielding currencies like the New Zealand and Australian dollars can keep their rates at record highs, interest in the carry trade has still improved over the past week. The DailyFX Carry Trade Index rose $296 since last week with help from a modest cooling in currency market volatility and a general improvement in the outlook for the yen crosses.
• Carry Trade On The Rise As Volatility Cools, Rate Differentials Improve
• Fed And BoE Boost Risk Appetite By Widening Their Collateral Nets
• Caution Still In Place As Market Questions High Yielders Buoyancy
Through there is growing concern as to how long high yielding currencies like the New Zealand and Australian dollars can keep their rates at record highs, interest in the carry trade has still improved over the past week. The DailyFX Carry Trade Index rose $296 since last week with help from a modest cooling in currency market volatility and a general improvement in the outlook for the yen crosses.
There has been a tangible rebound in risk appetite over the past few weeks; and the carry trade has been one of the primary benefactors. Considering the thawing in credit markets recently, it seems that the cooperative effort by global central banks to revive liquidity is paying off. In fact, even with conditions improving, the Bank of England and Federal Reserve have upped their efforts to put financial markets on an even keel once and for all. Both the Monetary Policy Committee the Fed announced it they were widening their definitions of acceptable collateral for access their respective liquidity injections. These efforts must be potent indeed considering volatility has cooled and the carry basket has rallied over the past few weeks despite headlines of further writedowns from big banks and warnings from the BoE that falling UK commercial property values may trigger considerable defaults and another wave of massive losses for banks. And, while conditions seem to be improving for the carry trade, the mood is still one of caution. While pairs like USDJPY, USDJPY and GBPJPY have put in for a tentative trend change, the higher-end of the yield curve is actually starting to fall as traders expect the central banks with high benchmark rates will eventually be forced to ease like the Fed, BoE and BoC.
• Carry Trade On The Rise As Volatility Cools, Rate Differentials Improve
• Fed And BoE Boost Risk Appetite By Widening Their Collateral Nets
• Caution Still In Place As Market Questions High Yielders Buoyancy
Through there is growing concern as to how long high yielding currencies like the New Zealand and Australian dollars can keep their rates at record highs, interest in the carry trade has still improved over the past week. The DailyFX Carry Trade Index rose $296 since last week with help from a modest cooling in currency market volatility and a general improvement in the outlook for the yen crosses.
There has been a tangible rebound in risk appetite over the past few weeks; and the carry trade has been one of the primary benefactors. Considering the thawing in credit markets recently, it seems that the cooperative effort by global central banks to revive liquidity is paying off. In fact, even with conditions improving, the Bank of England and Federal Reserve have upped their efforts to put financial markets on an even keel once and for all. Both the Monetary Policy Committee the Fed announced it they were widening their definitions of acceptable collateral for access their respective liquidity injections. These efforts must be potent indeed considering volatility has cooled and the carry basket has rallied over the past few weeks despite headlines of further writedowns from big banks and warnings from the BoE that falling UK commercial property values may trigger considerable defaults and another wave of massive losses for banks. And, while conditions seem to be improving for the carry trade, the mood is still one of caution. While pairs like USDJPY, USDJPY and GBPJPY have put in for a tentative trend change, the higher-end of the yield curve is actually starting to fall as traders expect the central banks with high benchmark rates will eventually be forced to ease like the Fed, BoE and BoC.
Friday, May 2, 2008
Euro Inches Higher As Markets Await Payrolls
Traders squared up their positions ahead of US Non Farm payroll data due to be released at 12:30 GMT today and EURUSD climbed back towards the 1.5500 figure after a day of battering yesterday that saw the unit lose nearly 200 points against the greenback. The buck has been strengthening all week on the assumption that the US economy may not be nearly as weak as analysts had previously thought, but today’s NFP report could prove to be the moment of truth that resolves the argument of whether the US is in the midst of a serious recession or simply in a slowdown.
Our pre NFP analysis Will Non-Farm Payrolls Recover provides inconclusive evidence with 6 leading indicators pointing to further deterioration in the labor market while 3 hint at improvement. The NFPs are notoriously difficult to predict for a host of reasons including the birth/death model which makes monthly adjustments to the number as well as the possibility that public sector hiring may have increased in April and therefore mitigated some of the negative effects of the recent spate of private sectors layoff announcements.
Our best guess is that the number today will likely print better than –100k loss and we base that assumption mainly on the improvement in the four week jobless claims average. Nevertheless, the possibility of a surprise either way appears to be quite strong today and the post news reaction may be typically volatile. Therefore as always we prefer to stand down ahead of the number.
In other economic news Australian Retail Sales printed better than forecast rising 0.5% vs. 0.3% expected indicating that the economy Down Under continues to grow at a healthy pace. If the bulls are indeed correct that the worst of the credit crunch crisis is behind us and global economy will continue to expand at 3% pace or better, Australia becomes the strongest beneficiary of such an outcome piggybacking on China’s voracious growth.
While RBA may have ended its rate hike cycle for now, it is unlikely to begin easing if economic conditions in Australia maintain their current levels. If RBA stands still, the Aussie with its 7.25% yield will remain a magnet for global investment flows and AUDUSD could hit parity if global risk environment remains benign.
Our pre NFP analysis Will Non-Farm Payrolls Recover provides inconclusive evidence with 6 leading indicators pointing to further deterioration in the labor market while 3 hint at improvement. The NFPs are notoriously difficult to predict for a host of reasons including the birth/death model which makes monthly adjustments to the number as well as the possibility that public sector hiring may have increased in April and therefore mitigated some of the negative effects of the recent spate of private sectors layoff announcements.
Our best guess is that the number today will likely print better than –100k loss and we base that assumption mainly on the improvement in the four week jobless claims average. Nevertheless, the possibility of a surprise either way appears to be quite strong today and the post news reaction may be typically volatile. Therefore as always we prefer to stand down ahead of the number.
In other economic news Australian Retail Sales printed better than forecast rising 0.5% vs. 0.3% expected indicating that the economy Down Under continues to grow at a healthy pace. If the bulls are indeed correct that the worst of the credit crunch crisis is behind us and global economy will continue to expand at 3% pace or better, Australia becomes the strongest beneficiary of such an outcome piggybacking on China’s voracious growth.
While RBA may have ended its rate hike cycle for now, it is unlikely to begin easing if economic conditions in Australia maintain their current levels. If RBA stands still, the Aussie with its 7.25% yield will remain a magnet for global investment flows and AUDUSD could hit parity if global risk environment remains benign.
German Retail Sales Fall, Is The Euro Bull Run Over?
Fundamental Headlines
• AUDUSD – Australian retail sales rose 0.5% in February from -0.1% the month prior. Food sales jumped 1.7% from 0.3% in February, on the back of record prices. A robust labor market and wage growth have enabled Australians to absorb the price appreciation. Inflation continues to rise and remains a concern for the RBA, but a global slowdown is expected to keep the MPC from raising rates at next weeks policy meeting. For more news and resources, visit our Australian Dollar Currency Room.
• EURUSD – German retail sales unexpectedly declined for a second month in March, as rising energy and food costs curbed consumer spending. Seasonally adjusted sales fell 0.1% after a 0.7% decline in February. The German labor market remains strong and consumer confidence is up, but if inflation doesn’t abate, shoppers may continue to tighten their wallets. Discuss the topic and your trade ideas in the EUR/USD Forum.
• GBPUSD – The U.K. construction PMI index fell to 46.1 in April from 47.0 the month prior. The sector has started to shrink weighed by the housing slump and tight credit markets. The BoE recently infused £50 billion in liquidity into the market in an attempt to loosen lending standards and promote housing demand. Discuss the topic and your trade ideas in the GBP/USD Forum.
• AUDUSD – Australian retail sales rose 0.5% in February from -0.1% the month prior. Food sales jumped 1.7% from 0.3% in February, on the back of record prices. A robust labor market and wage growth have enabled Australians to absorb the price appreciation. Inflation continues to rise and remains a concern for the RBA, but a global slowdown is expected to keep the MPC from raising rates at next weeks policy meeting. For more news and resources, visit our Australian Dollar Currency Room.
• EURUSD – German retail sales unexpectedly declined for a second month in March, as rising energy and food costs curbed consumer spending. Seasonally adjusted sales fell 0.1% after a 0.7% decline in February. The German labor market remains strong and consumer confidence is up, but if inflation doesn’t abate, shoppers may continue to tighten their wallets. Discuss the topic and your trade ideas in the EUR/USD Forum.
• GBPUSD – The U.K. construction PMI index fell to 46.1 in April from 47.0 the month prior. The sector has started to shrink weighed by the housing slump and tight credit markets. The BoE recently infused £50 billion in liquidity into the market in an attempt to loosen lending standards and promote housing demand. Discuss the topic and your trade ideas in the GBP/USD Forum.
Euro Decline Still Has More to Go
The EURUSD has fallen nearly 600 pips (to the low) from its 1.6018 top. So, is it possible that the pair is entering one of the strongest (and maybe the strongest) portions of its decline since the top? In a word; yes. As long as price remains below 1.5643, the short term structure is bearish and support does not begin until 1.5230.
Thursday, May 1, 2008
FOMC Cuts, Outlook Unclear
The dollar was mixed following the FOMC’s announcement to cut rates by 25-basis points to 2.0%. The Fed reiterated that economic activity remains weak, while “household and business spending has been subdued and labor markets have softened further”. The Fed expects lingering tight credit conditions and the “deepening housing contraction” to weigh on growth over the coming quarters. Nonetheless, the statement did not give a clear indication of whether the Fed would continue easing policy over the coming months. The FOMC said that uncertainty about the inflation outlook remains high, but does expect it to moderate in the coming quarters. While it was unclear from the policy statement, we anticipate the Fed will leave interest rates unchanged for the remainder of the year.
Economic data from the US earlier in the session was better than expected, with the advanced reading of Q1 GDP unchanged at 0.6% -- beating out calls for a drop to 0.2%. The Q1 core PCE prices declined to 2.2% from 2.5%, while GDP sales posted a 0.2% drop versus a 2.4% increase in the previous quarter. The April ADP private sector payrolls number also reported better than forecast, posting a 10k increase, compared with estimates for a 60k decline and improving slightly from 8k in March. The April Chicago PMI survey improved from March, rising to 48.3 from 48.2.
Economic data from the US earlier in the session was better than expected, with the advanced reading of Q1 GDP unchanged at 0.6% -- beating out calls for a drop to 0.2%. The Q1 core PCE prices declined to 2.2% from 2.5%, while GDP sales posted a 0.2% drop versus a 2.4% increase in the previous quarter. The April ADP private sector payrolls number also reported better than forecast, posting a 10k increase, compared with estimates for a 60k decline and improving slightly from 8k in March. The April Chicago PMI survey improved from March, rising to 48.3 from 48.2.
Dollar Mixed Ahead of Fed
The greenback was mixed in the Tuesday session, advancing versus the euro while relinquishing gains against the sterling and the yen. The economic calendar saw the release of the April consumer confidence survey, which declined to 62.3, albeit less than expected, from 64.5 from March.
The major currency pairs will likely trade within range ahead of the FOMC policy decision tomorrow afternoon. We expect the Fed to ease policy by 25-basis points to 2.0% while maintaining a downbeat outlook on the economy similar to its previous statement. Nonetheless, we anticipate the Fed to leave policy unchanged for the remainder of the year after this week’s rate cut given the aggressive easing that has already materialized.
The major currency pairs will likely trade within range ahead of the FOMC policy decision tomorrow afternoon. We expect the Fed to ease policy by 25-basis points to 2.0% while maintaining a downbeat outlook on the economy similar to its previous statement. Nonetheless, we anticipate the Fed to leave policy unchanged for the remainder of the year after this week’s rate cut given the aggressive easing that has already materialized.
USD Edges Higher Ahead of Key Week
The week ahead offers a barrage of economic news for currency traders to digest, with the key highlights coming from the US. Markets will focus closely on the FOMC monetary policy decision on Wednesday afternoon. We expect the Fed to ease policy by 25-basis points to 2.0%, and maintain a downbeat outlook on the economy similar to its previous statement. Nonetheless, we anticipate the Fed to leave policy unchanged for the remainder of the year after this week¡¯s rate cut given the aggressive easing that has already materialized.
In addition to the highly anticipated US jobs report on Friday, the calendar also consists of April consumer confidence, US Q1 advanced GDP, PCE, Chicago PMI, March consumption, personal income, durable goods orders, and factory orders. The April unemployment rate is expected to hold steady at 5.2%, while non-farm payrolls are not expected to improve, posting another 80k loss of jobs. The Q1 advanced reading for GDP is seen slowing to 0.2% from 0.6% previously, the PCE index is expected to ease to 3.7% from 3.9% in the previous quarter.
The greenback rallied to its highest levels in two-weeks against the yen at 104.79 and euro at 1.5590. While it remains to be seen whether the recent dollar rebound will be sustainable, Eurozone officials have become more outspoken about their unease over the euro¡¯s strength. ECB President Trichet said ¡°there have been at times sharp fluctuations between major currencies¡± and expressed concern about the ¡°possible implications on economic and financial stability¡±.
In addition to the highly anticipated US jobs report on Friday, the calendar also consists of April consumer confidence, US Q1 advanced GDP, PCE, Chicago PMI, March consumption, personal income, durable goods orders, and factory orders. The April unemployment rate is expected to hold steady at 5.2%, while non-farm payrolls are not expected to improve, posting another 80k loss of jobs. The Q1 advanced reading for GDP is seen slowing to 0.2% from 0.6% previously, the PCE index is expected to ease to 3.7% from 3.9% in the previous quarter.
The greenback rallied to its highest levels in two-weeks against the yen at 104.79 and euro at 1.5590. While it remains to be seen whether the recent dollar rebound will be sustainable, Eurozone officials have become more outspoken about their unease over the euro¡¯s strength. ECB President Trichet said ¡°there have been at times sharp fluctuations between major currencies¡± and expressed concern about the ¡°possible implications on economic and financial stability¡±.
USD Extends Rebound
The economic reports released in the Thursday session were initially dollar positive, with the greenback bouncing to 1.57 against the euro and rising to 104 versus the yen. Although the headline reading for durable goods orders was slightly weaker than expected at -0.3%, versus calls for a flat reading, it still marked an improvement from the -1.1% drop in February. The excluding transports durable goods orders posted a sharp improvement from the prior month, increasing by 1.5% in March, compared with a 2.4% decline. Weekly jobless claims also improved, falling to 342k down from 372k a week earlier. However, March new home sales posted a larger than expected drop, plunging by 8.5% to 526k units, versus 590k units in February.
The housing market continues to weigh on the economy Fed funds futures are currently pricing in an 82% probability for a 25-basis point rate cut to 2.00% when the FOMC meets next week. We expect the Fed to ease policy next week but possibly signal a pause in any further moves.
The housing market continues to weigh on the economy Fed funds futures are currently pricing in an 82% probability for a 25-basis point rate cut to 2.00% when the FOMC meets next week. We expect the Fed to ease policy next week but possibly signal a pause in any further moves.
Tuesday, April 29, 2008
Forex News: Eurozone,Swiss and U.K. Consumer Spending Softening.
Fundamental Headlines
• NZDUSD – The New Zealand Statistics office reported an unexpected trade balance deficit in March of –NZ$50 million versus a anticipated surplus of NZ$395 million. On an annual basis the trade gap increased to -4.3 billion in the year to March versus -4.42 billion in the year to February. The RBNZ may need to cut rates by year’s end as record interest rates are cooling the economy faster than expected. For more news and resources, visit our New Zealand Dollar Currency Room.
• USDCHF – The Swiss consumption gauge fell to 2.29 in March from 2.32 the month prior, as rising inflation weighed on consumers. A nine percent decline in car sales led to the index falling from an eight month high in February. Swiss inflation has accelerated to its fastest pace in 14 years has begun to diminish consumers purchasing power. For more news and resources, visit our Swiss Franc Currency Room.
• GBPUSD – The U.K. Distributive trades report printed at -26 over eight times lower than the -3 that was expected as retailers see sales slowing. The number demonstrated the affect that the deteriorating housing market is having on consumer confidence and consumption. The housing sector continued to falter with mortgagees reaching a nearly nine year low of 64,000. Despite inflation concerns the BoE may have to consider lowering rate to soften the landing of the economy. Discuss the topic and your trade ideas in the GBP/USD Forum.
• Deutsche Bank Swings To Loss On Write-Downs, Trading Loss (link) – Wall Street Journal
• Fed’s Bailout Is Questioned By Ex-Staffer (link) – Wall Street Journal
• Fed Looks To Extend Debate On Liquidity (link) – Financial Times
• European Retail Sales Slumped in April, PMI Shows (link) – Bloomberg
• U.K. Loan Approvals Reach Lowest Since at Least 1999 (link) – Bloomberg
• NZDUSD – The New Zealand Statistics office reported an unexpected trade balance deficit in March of –NZ$50 million versus a anticipated surplus of NZ$395 million. On an annual basis the trade gap increased to -4.3 billion in the year to March versus -4.42 billion in the year to February. The RBNZ may need to cut rates by year’s end as record interest rates are cooling the economy faster than expected. For more news and resources, visit our New Zealand Dollar Currency Room.
• USDCHF – The Swiss consumption gauge fell to 2.29 in March from 2.32 the month prior, as rising inflation weighed on consumers. A nine percent decline in car sales led to the index falling from an eight month high in February. Swiss inflation has accelerated to its fastest pace in 14 years has begun to diminish consumers purchasing power. For more news and resources, visit our Swiss Franc Currency Room.
• GBPUSD – The U.K. Distributive trades report printed at -26 over eight times lower than the -3 that was expected as retailers see sales slowing. The number demonstrated the affect that the deteriorating housing market is having on consumer confidence and consumption. The housing sector continued to falter with mortgagees reaching a nearly nine year low of 64,000. Despite inflation concerns the BoE may have to consider lowering rate to soften the landing of the economy. Discuss the topic and your trade ideas in the GBP/USD Forum.
• Deutsche Bank Swings To Loss On Write-Downs, Trading Loss (link) – Wall Street Journal
• Fed’s Bailout Is Questioned By Ex-Staffer (link) – Wall Street Journal
• Fed Looks To Extend Debate On Liquidity (link) – Financial Times
• European Retail Sales Slumped in April, PMI Shows (link) – Bloomberg
• U.K. Loan Approvals Reach Lowest Since at Least 1999 (link) – Bloomberg
U.K. Housing And Retail Data Weigh on Pound, Will The BoE Cut Again?
Talking Points
• Japanese Yen: Japanese Holiday
• New Zealand Dollar: Deficit Unexpectedly Widened
• Swiss Franc: Consumption Fell On Lower Car Sales
• Euro: Declining Retail Sales Weighs on Euro
• Pound: Housing Market Continues To Deteriorate
• US Dollar: Consumer Confidence and Housing Data on Tap
The U.K. CBI distributive trades report crossed the wires at -26, sending the pound over 50 points lower. The reading was over eight times lower than the -3 that was expected. The pound was weighed lower throughout the overnight session as U.K. mortgagee approvals fell to 64,000-the lowest level in at least nine years. The tight credit markets remain an obstacle for borrowers and will continue to suppress house prices going forward. Central Bank Governor Mervyn King said today that the “ratio of house prices to earnings will fall” when speaking to the U.K treasury select committee. He would go on to say that although retail sales have been “surprisingly strong” consumer spending will fall, possibly quite sharply. The MPC leader would also reiterate the committee focus on keeping inflation near their target, but if consumer consumption continues to falter, another rate cut may be needed to cushion the fall of the economy.
The Euro fell to as low as 1.5539 during the overnight session, despite light trading due to a Japanese holiday, on a four year low in retail sales. The Eurozone retail PMI index fell to a seasonally adjusted 41.8 in April from 48.2 the month prior, as rising food and energy costs saw consumer’s buy 40% less food and drinks. Rising inflation has kept the ECB frozen in its tracks as its mandate is to maintain price stability. The central bank has continued to maintain its hawkish stance, despite mounting evidence that the regions economy is starting to realize the affects of the U.S. slowdown and the credit crisis. As long as the current interest rate differential is expected to hold between Europe and the U.S., the Eur/Usd will find support and prevent any significant reversal from the dollar.
The New Zealand Dollar came under heavy selling pressure when its annual trade deficit widened NZ$50 million in March, against expectations of a surplus of NZ$395. The shortfall was a result of an eight month low in exports, bringing the 12 months ended March 31 total deficit to NZ$4.42 billion. New Zealand exporters saw a decline in demand from China, shipping nearly 40 million less goods. The Kiwi fell as low as 0.7762 before consolidating around 0.7780. Economic growth is expected to slow to its lowest levels in over ten years, as record interest rates have dulled growth faster than officials had hoped.
U.S. consumer confidence and the S&P/ Case Schiller home price index will serve as the appetizer for tomorrow’s Fed Rate decision. The two indicators will give investors insight into the most troubling areas of the economy. Expectations are that the housing industry will continue to deteriorate and in turn drag consumer confidence with it. Until the housing sector establishes a bottom, the downside risks to the U.S. economy will remain, which will continue to weigh on the dollar. However, a rebound in these numbers combined with the expectation that the central bank will signal a pause to their current easing cycle may have Dollar bulls looking to test support at 1.54.
Is The Euro Headed Below 1.500? Join us in EURUSD Forum
• Japanese Yen: Japanese Holiday
• New Zealand Dollar: Deficit Unexpectedly Widened
• Swiss Franc: Consumption Fell On Lower Car Sales
• Euro: Declining Retail Sales Weighs on Euro
• Pound: Housing Market Continues To Deteriorate
• US Dollar: Consumer Confidence and Housing Data on Tap
The U.K. CBI distributive trades report crossed the wires at -26, sending the pound over 50 points lower. The reading was over eight times lower than the -3 that was expected. The pound was weighed lower throughout the overnight session as U.K. mortgagee approvals fell to 64,000-the lowest level in at least nine years. The tight credit markets remain an obstacle for borrowers and will continue to suppress house prices going forward. Central Bank Governor Mervyn King said today that the “ratio of house prices to earnings will fall” when speaking to the U.K treasury select committee. He would go on to say that although retail sales have been “surprisingly strong” consumer spending will fall, possibly quite sharply. The MPC leader would also reiterate the committee focus on keeping inflation near their target, but if consumer consumption continues to falter, another rate cut may be needed to cushion the fall of the economy.
The Euro fell to as low as 1.5539 during the overnight session, despite light trading due to a Japanese holiday, on a four year low in retail sales. The Eurozone retail PMI index fell to a seasonally adjusted 41.8 in April from 48.2 the month prior, as rising food and energy costs saw consumer’s buy 40% less food and drinks. Rising inflation has kept the ECB frozen in its tracks as its mandate is to maintain price stability. The central bank has continued to maintain its hawkish stance, despite mounting evidence that the regions economy is starting to realize the affects of the U.S. slowdown and the credit crisis. As long as the current interest rate differential is expected to hold between Europe and the U.S., the Eur/Usd will find support and prevent any significant reversal from the dollar.
The New Zealand Dollar came under heavy selling pressure when its annual trade deficit widened NZ$50 million in March, against expectations of a surplus of NZ$395. The shortfall was a result of an eight month low in exports, bringing the 12 months ended March 31 total deficit to NZ$4.42 billion. New Zealand exporters saw a decline in demand from China, shipping nearly 40 million less goods. The Kiwi fell as low as 0.7762 before consolidating around 0.7780. Economic growth is expected to slow to its lowest levels in over ten years, as record interest rates have dulled growth faster than officials had hoped.
U.S. consumer confidence and the S&P/ Case Schiller home price index will serve as the appetizer for tomorrow’s Fed Rate decision. The two indicators will give investors insight into the most troubling areas of the economy. Expectations are that the housing industry will continue to deteriorate and in turn drag consumer confidence with it. Until the housing sector establishes a bottom, the downside risks to the U.S. economy will remain, which will continue to weigh on the dollar. However, a rebound in these numbers combined with the expectation that the central bank will signal a pause to their current easing cycle may have Dollar bulls looking to test support at 1.54.
Is The Euro Headed Below 1.500? Join us in EURUSD Forum
Dollar Strength To Continue Against Major Currencies
As we expected, a light US calendar saw technical levels be the guiding principle behind EURUSD price action last week. Our target of 1.60 was hit mid-week, followed soon after by a sharp breakdown past trend line support. As we had speculated here on numerous occasions, the run to 1.60 owed more to momentum than underlying fundamental outlook. Having touched the psychological level being aimed at, Euro bulls gave up.
Fibonacci Forum.
EUR/USD
Strategy: Bearish below 1.5800, Targeting 1.5343
As we expected, a light US calendar saw technical levels be the guiding principle behind EURUSD price action last week. Our target of 1.60 was hit mid-week, followed soon after by a sharp breakdown past trend line support. As we had speculated here on numerous occasions, the run to 1.60 owed more to momentum than underlying fundamental outlook. Having touched the psychological level being aimed at, Euro bulls gave up. The decline looks to be supported at 1.5560, the 23.6% Fibonacci retracement of the 02/08–03/17 rally. We see a retracement to just below 1.58 in the near term as current losses are consolidated, followed by a decline to the 38.2% retracement at 1.5343.
For more resources on the EURUSD, please visit the DailyFX Euro Currency Room.
GBP/USD
Strategy: Bullish against 1.9787, Targeting 2.0092
Last week we opted to remain flat on GBPUSD as the pair oscillated between the 23.6% and 50% Fibonacci retracements of the 03/14-04/15 decline in search of a direction. Following the most recent test of the downward sloping trend line resistance-turned-support established at the 03/14 high, GBPUSD has pushed higher to close above the 38.2% Fib level at 1.9903. The daily chart suggests symmetry between the most recent test of the 50% Fib and psychological resistance level at 2.00 and the one on 04/04. A continuation of this symmetry would take the current rally to the 61.8% Fib at 2.0092.
For more resources on the GBPUSD, please visit the DailyFX British Pound Currency Room.
USD/JPY
Strategy: Bullish against 103.70, Targeting 105.19
Last wee we advocated being long USDJPY above 102.90, the 38.2% Fibonacci retracement of the 12/27/07-03/17 decline. This proved wise, as the pair rallied to surpass the 104.00 level. We now notice an upward-sloping trend line connecting recent lows that has guided price action since the bottom above 95.00. This trend line would suggest a retracement to 103.70 followed by continued upside. As we have noted for several weeks now, we see USDJPY test the 50% Fibonacci retracement at 105.19.
For more resources on the USDJPY, please visit the DailyFX Japanese Yen Currency Room.
USD/CHF
Strategy: Bullish against 1.0201, Targeting 1.0547
Last week, USDCHF broke out higher of its range between the 23.6% and 38.2% Fibonacci retracements of the 02/14-03/17 decline. The move was catalyzed by the broad US dollar rally following the Euro’s rejection at 1.60. The rally has neatly topped out at the 50% Fibonacci retracement at 1.0375. This will likely prove to be a retracement point, seeing the pair ease back to find support at 1.0201 before resuming higher towards the 61.8% Fib at 1.0547.
For more resources on the USDCHF, please visit the DailyFX Swiss Franc Currency Room.
USD/CAD
Strategy: Bullish against 1.0039, Targeting 1.0250
Last week we saw significant support established at the intersection of the 50% Fibonacci retracement of the 01/22-02/28 decline and an upward sloping trend line established in November of last year. We looked for the pair to rally, and so it has. USDCAD has rallied past the 61.8% Fib at 1.0120 and has stabilized there. Our view here remains unchanged from last week. We see the pair continue to rise for a test of the long-term range top at 1.0250.
For more resources on the USDCAD, please visit the DailyFX Canadian Dollar Currency Room.
AUD/USD
Strategy: Bullish against 0.9287, Targeting 0.9500
Last week opened with AUDUSD breaking past 0.9400. We remain with our bullish bias, looking for the pair to reach 0.9500. Similarly to the EURUSD, this trade saw AUDUSD hit our target and break down soon after as 0.9500 became a double top. The down move was contained at 0.9287, the 61.8% Fibonacci retracement of the 02/28-03/20 decline. We maintain that as long as AUDUSD remains above trend line support, the up-trend is intact. That said, current positioning does not offer particularly favorable risk-reward parameters. The pair is currently stalled below psychological resistance at 0.9400. We will look for a retracement back to Fib support at 0.9287 for a long position targeting a return to test 0.9500.
For more resources on the AUDUSD, please visit the DailyFX Australian Dollar Currency Room.
NZD/USD
Strategy: Bearish against 0.7850, Targeting 0.7700
Our analysis missed the mark on NZDUSD last week. We had been looking at a long-term supporting trend line established in August and reinforced by the 38.2% Fibonacci retracement of the 01/22-02/27 rally at 0.7896. NZDUSD price action negated this assessment as the pair decisively crashed through the trend line and the 50% Fib. This amounts to a trend change, with our bias shifting to bearish and eyeing a decline to the 61.8% Fib at 0.7700.
For more resources on the NZDUSD, please visit the DailyFX New Zealand Dollar Currency Room.
Fibonacci Forum.
EUR/USD
Strategy: Bearish below 1.5800, Targeting 1.5343
As we expected, a light US calendar saw technical levels be the guiding principle behind EURUSD price action last week. Our target of 1.60 was hit mid-week, followed soon after by a sharp breakdown past trend line support. As we had speculated here on numerous occasions, the run to 1.60 owed more to momentum than underlying fundamental outlook. Having touched the psychological level being aimed at, Euro bulls gave up. The decline looks to be supported at 1.5560, the 23.6% Fibonacci retracement of the 02/08–03/17 rally. We see a retracement to just below 1.58 in the near term as current losses are consolidated, followed by a decline to the 38.2% retracement at 1.5343.
For more resources on the EURUSD, please visit the DailyFX Euro Currency Room.
GBP/USD
Strategy: Bullish against 1.9787, Targeting 2.0092
Last week we opted to remain flat on GBPUSD as the pair oscillated between the 23.6% and 50% Fibonacci retracements of the 03/14-04/15 decline in search of a direction. Following the most recent test of the downward sloping trend line resistance-turned-support established at the 03/14 high, GBPUSD has pushed higher to close above the 38.2% Fib level at 1.9903. The daily chart suggests symmetry between the most recent test of the 50% Fib and psychological resistance level at 2.00 and the one on 04/04. A continuation of this symmetry would take the current rally to the 61.8% Fib at 2.0092.
For more resources on the GBPUSD, please visit the DailyFX British Pound Currency Room.
USD/JPY
Strategy: Bullish against 103.70, Targeting 105.19
Last wee we advocated being long USDJPY above 102.90, the 38.2% Fibonacci retracement of the 12/27/07-03/17 decline. This proved wise, as the pair rallied to surpass the 104.00 level. We now notice an upward-sloping trend line connecting recent lows that has guided price action since the bottom above 95.00. This trend line would suggest a retracement to 103.70 followed by continued upside. As we have noted for several weeks now, we see USDJPY test the 50% Fibonacci retracement at 105.19.
For more resources on the USDJPY, please visit the DailyFX Japanese Yen Currency Room.
USD/CHF
Strategy: Bullish against 1.0201, Targeting 1.0547
Last week, USDCHF broke out higher of its range between the 23.6% and 38.2% Fibonacci retracements of the 02/14-03/17 decline. The move was catalyzed by the broad US dollar rally following the Euro’s rejection at 1.60. The rally has neatly topped out at the 50% Fibonacci retracement at 1.0375. This will likely prove to be a retracement point, seeing the pair ease back to find support at 1.0201 before resuming higher towards the 61.8% Fib at 1.0547.
For more resources on the USDCHF, please visit the DailyFX Swiss Franc Currency Room.
USD/CAD
Strategy: Bullish against 1.0039, Targeting 1.0250
Last week we saw significant support established at the intersection of the 50% Fibonacci retracement of the 01/22-02/28 decline and an upward sloping trend line established in November of last year. We looked for the pair to rally, and so it has. USDCAD has rallied past the 61.8% Fib at 1.0120 and has stabilized there. Our view here remains unchanged from last week. We see the pair continue to rise for a test of the long-term range top at 1.0250.
For more resources on the USDCAD, please visit the DailyFX Canadian Dollar Currency Room.
AUD/USD
Strategy: Bullish against 0.9287, Targeting 0.9500
Last week opened with AUDUSD breaking past 0.9400. We remain with our bullish bias, looking for the pair to reach 0.9500. Similarly to the EURUSD, this trade saw AUDUSD hit our target and break down soon after as 0.9500 became a double top. The down move was contained at 0.9287, the 61.8% Fibonacci retracement of the 02/28-03/20 decline. We maintain that as long as AUDUSD remains above trend line support, the up-trend is intact. That said, current positioning does not offer particularly favorable risk-reward parameters. The pair is currently stalled below psychological resistance at 0.9400. We will look for a retracement back to Fib support at 0.9287 for a long position targeting a return to test 0.9500.
For more resources on the AUDUSD, please visit the DailyFX Australian Dollar Currency Room.
NZD/USD
Strategy: Bearish against 0.7850, Targeting 0.7700
Our analysis missed the mark on NZDUSD last week. We had been looking at a long-term supporting trend line established in August and reinforced by the 38.2% Fibonacci retracement of the 01/22-02/27 rally at 0.7896. NZDUSD price action negated this assessment as the pair decisively crashed through the trend line and the 50% Fib. This amounts to a trend change, with our bias shifting to bearish and eyeing a decline to the 61.8% Fib at 0.7700.
For more resources on the NZDUSD, please visit the DailyFX New Zealand Dollar Currency Room.
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