FOREXYARD: Forex News Blog | |
- Aussie Dollar Inching Lower as China Hints at Policy Adjustment
- Is the Fed Weakening the USD Intentionally?
- Mixed Fundamentals Hold EUR Steady
- Sterling Rises on Hawkish Comments
- Technical Tips – Spot Gold Testing New All-Time High
- Market Focus Turns to US Economic Data
- Euro Advances on Prospects Debt Crisis Will Be Contained
| Aussie Dollar Inching Lower as China Hints at Policy Adjustment Posted: 15 Apr 2011 08:25 AM PDT
Talks of a possible tightening of China's monetary policy has a number of Pacific traders adjusting their portfolios ahead of the move, which has apparently caused a draw-down in the strength of the Australian dollar (AUD). The Aussie's recent bullishness was halted momentarily as many investors contemplated the move by China, but very little change in value has occurred prior to any announcements from China. This weekend's meeting of the G20 and IMF has helped generate much of the speculation regarding pressure on China, but the tightening of its monetary policy is also supported by recent data. Indeed, Chinese data reveals that its inflationary growth has reached a three-year peak in acceleration, suggesting heightened demand for a tightening of interest rates to prevent a hyper-inflationary spiral. First quarter economic growth data also outpaced most analysts' expectations. All of this data together paints a picture of not just a level of pressure, but of almost a necessity that China raise rates in the near term. The adjustment should have the effect of pushing a number of its Pacific neighbors' currency values lower in the immediate aftermath as values shift. As such, traders may want to begin expecting a quick downturn in AUD, and perhaps even NZD values. |
| Is the Fed Weakening the USD Intentionally? Posted: 15 Apr 2011 08:20 AM PDT
Many investors watching the news out of the United States and Europe have begun to anticipate a rapid downturn in US dollar values in the immediate future, it appears. Commentary on the disparity between the monetary policies of the Atlantic countries has begun to turn investors in favor of the euro. Indeed, the looseness of US interest rates makes the dollar appear much less attractive than its main currency rivals amid the current market environment. But statements from the Fed support this laxity, a move which some have said represents a push to perhaps weaken the USD intentionally. This is also a notion strengthened by the relatively high numbers of pensioner and other fund managers selling US bonds and notes in exchange for its European counterparts. Whether the move is intentional or simply a side-effect of the current monetary environment is a question for economic historians. What is relevant for us, today, is that the US dollar is bearish. Traders who expect a sudden rebound in USD values may be acting against the common wisdom of the day. Anyone following the Fed's recent statements would be hard pressed to convince anyone that a strong dollar is desired at the moment. |
| Mixed Fundamentals Hold EUR Steady Posted: 15 Apr 2011 08:03 AM PDT
The euro appeared ready to take a hit on Friday as Moody's rating agency downgraded Ireland's debt to a level near "junk" status. But the 17-nation common currency was trading flat through most of the day given the large number of sovereign debt purchasers in the market, and the string of unanimously positive figures emerging from the euro zone throughout the day. The euro zone's regional trade balance, along with Italy's specific trade balance, showed a diminishing deficit as both approach an even balance steadily. European inflationary figures on the consumer side also revealed positive and sustainable levels of growth. The relaxed tone of US Federal Reserve Board members in regards to inflation and monetary policy has many investors anticipating a steady increase in momentum favoring the EUR throughout the remainder of 2011. Speculation that the European Central Bank (ECB) will hike rates at least two more times this year have also helped play into this sentiment. Despite Ireland's downgrade, the EUR appears strong. Traders will likely continue to be on the common currency to gain ground against its rivals as little news short of a monetary policy adjustment in the United States will shift sentiment. Look to go long on the euro this month. |
| Sterling Rises on Hawkish Comments Posted: 15 Apr 2011 04:17 AM PDT
The pound was bid this morning versus the euro and the dollar following hawkish comments from Bank of England Monetary Policy Committee member Andrew Sentance. Earlier today BOE MPC member Andrew Sentance said the decline in inflationary pressures may be only temporary given sterling's deprecation. This could send inflation above 5% and increasing the need for an adjustment higher to the interest rate. Sentance claims that a weak pound has kept inflationary pressures high as imported goods continue to add to inflation levels. A stronger pound would help to counteract rising import prices as this would make imported goods less expensive Sentance is one of the most hawkish members of the MPC and has voted to raise interest rates at every MPC meeting since June of last year. Recent data shows inflationary pressures run high 2010 CPI rose by 4%. While the inflation level is above the target of the Bank of England the data was well below expectations for a year over year increase of 4.4%. The lower than expected inflation numbers has pushed back market expectations for a BOE interest rate increase to August from May. Sentance expects inflation will pick up and has voiced his concerns repeatedly, but his term as an MPC member expires in May and his comments may be shrugged off by traders as the day progresses. After the comments hit the news wires the GBP/USD traded higher at 1.6353. Support for the Cable is at last Monday's high of 1.6180 with resistance at 1.6425 and 1.6460. The EUR/GBP was lower at 0.8824 with support found at the trend line off of the mid-February low at 0.8790. Resistance comes in at the October high of 0.8940. This afternoon a slew of US data releases are on the calendar with the most important being the Core CPI m/m release at 12:30 GMT. Lower than expected inflationary pressures in the US should keep the dollar on its back foot going into the weekend. |
| Technical Tips – Spot Gold Testing New All-Time High Posted: 15 Apr 2011 01:14 AM PDT
Spot gold prices rose to a new all-time high yesterday. On rising momentum, prices should continue to rally with an initial target at $1,500. Looking at the daily chart, spot gold prices fell back to the early March high at $1,444 before moving higher to a new all-time high at $1,479. Prices could continue to move higher with a target at the big round number of $1,500. To the downside, the late March lows at $1,410 should prove to be resistive as well as the mid-March low of $1,380, a level that the rising trend line from the July low is encroaching upon. A break below $1,308 would unravel the longs and signal a reversal of the bullish trend.
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| Market Focus Turns to US Economic Data Posted: 14 Apr 2011 11:41 PM PDT
Today's US CPI release should continue to show limited price pressures in the US economy and keep any dollar rally in check. Today's market events USD – Core CPI m/m – 12:30 GMT The EUR/USD has been range trading between 1.4370 and 1.4520. While momentum is currently to the upside, a failure of the pair to close above the 1.4500 level this week may weaken the short term upside potential. A target remains for 1.4580 with support coming in at the rising trend line from the January low at 1.4250. USD – TIC Long-Term Purchases – 13:00 GMT The momentum of the USD/JPY is waning following a failure of the pair to move above 84.50, a level that coincides with the long term downtrend off of the 2007 high. A close below the 200-day moving average would imply a target at 82.00. |
| Euro Advances on Prospects Debt Crisis Will Be Contained Posted: 14 Apr 2011 12:00 PM PDT
The euro climbed towards a 15-month high against the U.S. dollar on Thursday on estimations that the sovereign debt crisis will be contained, and following disappointing U.S. economic data. The dollar fell against most of its major currency counterparts today after a report showed that applications for jobless benefits rose by 27,000 in the week ended in April 9 to 412,000, well above expectations for 379,000 claims, said the Labor Department. The EUR/USD recovered from a daily low of 1.4365, and reached as high as the 1.4500 level. The EUR/JPY cross followed the EUR/USD's movements and recovered from a daily low of 119.30 and is currently trading near the 121.00 level. Looking ahead to tomorrow, traders are advised to follow the U.S. economic releases which include the Consumer Price Index, the Long-Term Purchases and the Preliminary Consumer Sentiment by the University of Michigan. The end result of these reports usually tends to have a large impact on the market, and a volatile trading session is likely to take place as result. |
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