Best of the Week
Most Popular
1. Gold Final Warning: Here Are the Stunning Implications of Plunging Gold Price - P_Radomski_CFA
2.Fed Balance Sheet QE4EVER - Stock Market Trend Forecast Analysis - Nadeem_Walayat
3.UK House Prices, Immigration, and Population Growth Mega Trend Forecast - Part1 - Nadeem_Walayat
4.Gold and Silver Precious Metals Pot Pourri - Rambus_Chartology
5.The Exponential Stocks Bull Market - Nadeem_Walayat
6.Yield Curve Inversion and the Stock Market 2019 - Nadeem_Walayat
7.America's 30 Blocks of Holes - James_Quinn
8.US Presidential Cycle and Stock Market Trend 2019 - Nadeem_Walayat
9.Dear Stocks Bull Market: Happy 10 Year Anniversary! - Troy_Bombardia
10.Britain's Demographic Time Bomb Has Gone Off! - Nadeem_Walayat
Last 7 days
The Deep State vs Donald Trump - US vs Them Part 2 - 21st May 19
Deep State & Financial Powers Worry about Alternative Currencies - 21st May 19
Gold’s Exciting Boredom - 21st May 19
Trade War Fears Again, Will Stocks Resume the Downtrend? - 21st May 19
Buffett Mistake Costs Him $4.3 Billion This Year—Here’s What Every Investor Can Learn from It - 21st May 19
Dow Stock Market Trend Forecast 2019 May Update - Video - 20th May 19
A Brief History of Financial Entropy - 20th May 19
Gold, MMT, Fiat Money Inflation In France - 20th May 19
WAR - Us versus Them Narrative - 20th May 19
US - Iran War Safe-haven Reasons to Own Gold - 20th May 19
How long does Google have to reference a website? - 20th May 19
Tory Leadership Contest - Will Michael Gove Stab Boris Johnson in the Back Again? - 19th May 19
Stock Market Counter-trend Rally - 19th May 19
Will Stock Market “Sell in May, Go Away” Lead to a Correction… or a Crash? - 19th May 19
US vs. Global Stocks Sector Rotation – What Next? Part 1 - 19th May 19
BrExit Party EarthQuake Could Win it 150 MP's at Next UK General Election! - 18th May 19
Dow Stock Market Trend Forecast 2019 May Update - 18th May 19
US Economy to Die a Traditional Death… Inflation Is Going to Move Higher - 18th May 19
Trump’s Trade War Is Good for These 3 Dividend Stocks - 18th May 19
GDX Gold Mining Stocks Fundamentals Update - 17th May 19
Stock Markets Rally Hard – Is The Volatility Move Over? - 17th May 19
The Use of Technical Analysis for Forex Traders - 17th May 19
Brexit Party Set to Storm EU Parliament Elections - Seats Forecast - 17th May 19
Is the Trade War a Catalyst for Gold? - 17th May 19
This Is a Recession Indicator No One Is Talking About—and It’s Flashing Red - 17th May 19
War! Good or Bad for Stocks? - 17th May 19
How Many Seats Will Brexit Party Win - EU Parliament Elections Forecast 2019 - 16th May 19
It’s Not Technology but the Fed That Is Taking Away Jobs - 16th May 19
Learn to Protect your Forex Trading Capital - 16th May 19
Gold Ratio Charts Offer The Keys to the Bull Market - 16th May 19
Is Someone Secretly Smashing the Stock Market at Night? - 16th May 19
Crude Oil Price Fails At Critical Fibonacci Level - 15th May 19
Strong Stock Market Rally Expected - 15th May 19
US China Trade Impasse Threatens US Lithium, Rare Earth Imports - 15th May 19
Gold Mind Reader's Guide to the Global Markets Galaxy: 'Surreal' - 15th May 19
Trade Wars and Other Black Swan Threats to Your Investments - 15th May 19
Our Long-Anticipated Gold Momentum Rally Begins - 15th May 19
Defense Spending Is Recession Proof - Defense Dividend Stocks - 15th May 19

Market Oracle FREE Newsletter

U.S. House Prices Analysis and Trend Forecast 2019 to 2021

Currency Charts Analysis & Strategy: EURUSD, AUDCAD and USDJPY

Currencies / US Dollar Apr 11, 2007 - 07:53 PM GMT

By: Ashraf_Laidi


The dollar is little changed after the release of FOMC minutes, which shed more detail on the Fed's decision to downgrade its view on growth and housing, but also stepped up its inflation vigilance. The minutes noted that: "Most participants continued to expect that core inflation would slow gradually, but the recent readings on inflation and productivity growth, along with higher energy prices, had increased the odds that inflation would fail to moderate as expected" . Such a statement affirms that inflation remains the principal risk to the Fed's economic assessment even as it witnesses the gradual data deterioration of the US economy.

The minutes will help provide some support to the greenback until Thursday's data releases.

At 5am EST, the European Union releases the growth forecasts for the Eurozone growth, which could be notable as far as revisions for 2006 and 2007 growth.

The ECB rate decision is due at 7:45 am EST and is expected to leave rates unchanged at 3.75%. More importantly, the press conference at 8:30 am EST will be highly scrutinized by the market for whether ECB president Trichet will sound off his persistent hawkishness and thereby maintain the door open for a May rate hike. As long as Trichet reiterates that he is "vigilant" on inflation, and interest rates remain low, markets could expect some support for the currency.

AUDCAD: (watch Aussie jobs report at 9:30 pm EST tonight)

Although the Aussie continues near its 17-year highs versus the US dollar, the currency may be already showing signs of peaking in the crosses. With last week's strong data from Canada (jobs and IVEY), and with the Canadian dollar's breaking to fresh 4-month highs vs the USD including breaching the 200-day moving average, the currency has ample upside against the Aussie. Although the Reserve Bank of Australia may be expected to tighten next month (we do not share this assessment), the Aussie may run into some difficulty as early as this evening with the 9:30 am EST release of the March employment report. Employment is expected to have slipped to 15K from 22K while the unemployment rate remaining steady at 4.6%.

Despite soaring uranium prices boosting the Aussie, Australian officials have already started complaining about the strengthening currency impacting exporters. A report showing jobs below 5-10k should weigh on the currency across the board.

Technically, AUDCAD nears its 5-week trend line support at .9405, with further CAD strength seen dragging the pair towards 0.9370s, which is apt to call up the 0.934 support as long as the recent decline oil prices is abated.

EURUSD: Waiting for Trichet

The upward course of EURUSD remains safely in check even in the case of a pullback to as low as 1.3280. The reasons to this assessment are two fold: 1) Fundamentally, the pair is being driven by a powerful trifecta of: i) improved Eurozone domestic demand; (ii) steady ECB tightening campaign and (iii) downside US risks. 2) Technically, the pair has climbed to 2-year highs without any signs of overbought patterns or bearish divergences. Traders continue to deem the pair as fundamentally and technically sound, deeming periodical dips as opportune entry point. With support levels steady at 1.3398 and 1.3370, the pair is equipped to gather fresh momentum towards the 1.3460s.

USDJPY: Pushing the envelope

We have long noted that USDJPY remains the only dollar pair in the green for the greenback due to falling risk averseness and prolonged BoJ cautiousness vis-a-vis the risk or renewed deflation. While the current return to carry trades pales in comparison to that of the past 9 months, we're not seeing the return to the yen carry trades has been especially driven the Bank of Japan's ongoing discomfort with deflation. The new Japanese fiscal year is also encouraging Japanese institutions to invest abroad. We also cannot ignore the unfolding technical picture, which is positive on the daily and weekly charts. Thus, while the 119.50 resistance is the 61.8% retracement of the major decline from the 2007 high to the 2007 low, there remains ample room towards the trend falling trend line resistance, with 119.80 remaining as a viable target. As long as geopolitical and systemic risks (sub prime) remain under wraps, 119.80 remains a high possibility. Downside seen extending to as low as 119.20 and 118.65, especially amid the onset of further protectionist rhetoric from Washington towards China, which is not expected to end any time soon.

By Ashraf Laidi
CMC Markets NA

Ashraf Laidi is the Chief FX Analyst at CMC Markets NA. This publication is intended to be used for information purposes only and does not constitute investment advice. CMC Markets (US) LLC is registered as a Futures Commission Merchant with the Commodity Futures Trading Commission and is a member of the National Futures Association.

Sharp swings ensued in today's FX trading, as the dollar fell sharply during the Asian session following a spike in oil prices after President Bush announcement to double the Strategic Petroleum Reserve to 1.5 billion barrels over the next 20 yrs. An unexpectedly low inflation report from Australia sharply significantly curtailed chances of a February rate hike by the Reserve Bank of Australia next month and boosted the US currency by a full cent. But the dollar sell-off resumed, especially against the yen, dropping to a 5-day low before recovering on an unexpectedly dovish report from the minutes of this month's Bank of England interest rate decision. (more below)

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules