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| Weekly Preview – Carry Trade Returns Posted: 08 Apr 2011 12:38 PM PDT
The sharp appreciation of the euro and the Aussie dollar coupled with the continued decline of the dollar and the yen highlight traders' appetite for yield and distaste for currencies with loose monetary policy. EUR/USD For the third time in the past four weeks the pair is closing on its weekly high indicating momentum is behind the move higher. A breach of the long term trend line off of the 2008 high should also help spur bids for the euro. Traders will initially target the 2010 high at 1.4580 with a mid-term target at 1.5140 from 2009. Weekly stochastics show the pair is overbought and to the downside the 20-day moving average at 1.4180 has proved to be supportive. Value buyers should be looking to enter on dips at 1.4020 and 1.3860.
AUD/USD The Aussie dollar continues to make new all-time highs on the back of the carry trade. The next big round number is 1.0600 and should be targeted by traders. Technical indicators show the pair is overbought but are not yet signaling for a reversal. Support for the pair comes in at Thursday's low at 1.0410, followed by 1.2090 and the February high at 1.0200.
USD/JPY The pair's appreciation was capped at 85.50 where the trend line falling off of the 2007 high comes in. Momentum has swung higher and a breach of this barrier should initially target the post intervention high from September at 85.90. Traders should be targeting the May 2010 low at 88 where the pair should encounter selling pressure with the 100-week moving average not too far behind at 88.60. Support is found at this week's low at 83.85. The 2010 low at 80.20 as well as the previous channel line should contain any pullback in the pair.
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| Posted: 08 Apr 2011 12:19 PM PDT
The euro continued to move higher in New York trading as the US Federal Government may shut down this weekend over the budget impasse. Unless a deal is struck in the late hours, the US government looks to shut down as Democrats and Republicans cannot agree on a 2011 fiscal budget. While much of the drama played out is showmanship that could have an impact next year in the Presidential election, the event is a non-factor that takes up a significant amount of air ways and print in the forex blogs. In a relatively quiet New York trading session, US wholesale inventories rose 1.0% on expectations of 1.1%. Canadian housing starts were also stronger at 189K with forecasts for 180K. For the third time in the past four weeks the EUR/USD will close on its weekly high, indicating momentum is behind the move higher. The EUR/USD is up at 1.4440 from 1.4391. The yen was stronger today as traders have taken profit on short yen positions. The USD/JPY is at 84.80 from 85.12. The EUR/JPY is even at 122.50. Equities sold off late in the session as S&P 500 was down 0.6%. Crude oil was higher at $112.60 from $111.00. |
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