Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Coronavirus Coming Storm Act Now to Protect Yourselves and Family to Survive COVID-19 Pandemic - 19th Feb 20
Future Silver Prices Will Shock People, and They’ll Kick Themselves for Not Buying Under $20… - 19th Feb 20
What Alexis Kennedy Learned from Launching Cultist Simulator - 19th Feb 20
Stock Market Potential Short-term top - 18th Feb 20
Coronavirus Fourth Turning - No One Gets Out Of Here Alive! - 18th Feb 20
The Stocks Hit Worst From the Coronavirus - 18th Feb 20
Tips on Pest Control: How to Prevent Pests and Rodents - 18th Feb 20
Buying a Custom Built Gaming PC From Overclockers.co.uk - 1. Delivery and Unboxing - 17th Feb 20
BAIDU (BIDU) Illustrates Why You Should NOT Invest in Chinese Stocks - 17th Feb 20
Financial Markets News Report: February 17, 2020 - February 21, 2020 - 17th Feb 20
NVIDIA (NVDA) GPU King For AI Mega-trend Tech Stocks Investing 2020 - 17th Feb 20
Stock Market Bubble - No One Gets Out Of Here Alive! - 17th Feb 20
British Pound GBP Trend Forecast 2020 - 16th Feb 20
SAMSUNG AI Mega-trend Tech Stocks Investing 2020 - 16th Feb 20
Ignore the Polls, the Markets Have Already Told You Who Wins in 2020 - 16th Feb 20
UK Coronavirus COVID-19 Pandemic WARNING! Sheffield, Manchester, Birmingham Outbreaks Probable - 16th Feb 20
iShares Nasdaq Biotechnology ETF IBB AI Mega-trend Tech Stocks Investing 2020 - 15th Feb 20
Gold Stocks Still Stalled - 15th Feb 20
Is The Technology Stocks Sector Setting Up For A Crash? - 15th Feb 20
UK Calm Before Corona Virus Storm - Infections Forecast into End March 2020 - 15th Feb 20
The Growing Weaponization of Space - 14th Feb 20
Will the 2020s Be Good or Bad for the Gold Market? - 14th Feb 20
Predictive Modeling Suggests Gold Price Will Break Above $1650 Within 15~30 Days - 14th Feb 20
UK Coronavirus COVID-19 Infections and Deaths Trend Forecast 2020 - 14th Feb 20
Coronavirus, Powell and Gold - 14th Feb 20
How the Corona Virus is Affecting Global Stock Markets - 14th Feb 20
British Pound GBP Trend and Elliott Wave Analysis - 13th Feb 20
Owning and Driving a Land Rover Discovery Sport in 2020 - 2 YEAR Review - 13th Feb 20
Shipping Rates Plunge, Commodities and Stocks May Follow - 13th Feb 20
Powell says Fed will aggressively use QE to fight next recession - 13th Feb 20
PALLADIUM - THIS Is What a Run on the Bank for Precious Metals Looks Like… - 13th Feb 20
Bitcoin: "Is it too late to get in?" Get Answers Now - 13th Feb 20
China Coronavirus Infections Soar by 1/3rd to 60,000, Deaths Jump to 1,367 - 13th Feb 20
Crude Oil Price Action – Like a Coiled Spring Already? - 13th Feb 20
China Under Reporting Coronavirus COVID-19 Infections, Africa and South America Hidden Outbreaks - 12th Feb 20
Will USD X Decline About to Trigger Precious Metals Rally - 12th Feb 20
Copper Market is a Coiled Spring - 12th Feb 20
Dow Theory Stock Market Warning from the Utilities Index - 12th Feb 20
How to Get Virgin Media Engineers to FIX Hub 3.0 Problems and NOT BS Customers - 12th Feb 20
China Under Reporting Coronavirus COVID-19 Infections by 66% Due to Capacity Constraints - 12th Feb 20
Is Coronavirus the Black Swan That Takes Gold To-Da-Moon? - 12th Feb 20
Stock Market 2020 – A Close Look At What To Expect - 12th Feb 20
IBM AI Mega-trend Tech Stocks Investing 2020 - 11th Feb 20
The US Dollar’s Subtle Message for Gold - 11th Feb 20
What All To Do Before Opening A Bank Account For Your Business - 11th Feb 20
How and When to Enter Day Trades & Swing Trade For Maximum Gains - 11th Feb 20
The Great Stock Market Dichotomy - 11th Feb 20
Stock Market Sector Rotation Should Peak Within 60+ Days – Part II - 11th Feb 20
CoronaVirus Pandemic Stocks Bear Market Risk 2020? - Video - 11th Feb 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Watch the French Elections and Neutral US Payrolls to Target Euro 1.3470

Currencies / US Dollar May 04, 2007 - 12:39 AM GMT

By: Ashraf_Laidi

Currencies

We mentioned in Thursday morning's note that: "a strong services ISM from the US including a favorable employment index is expected to trigger renewed euro selling towards 1.3570, a break of which could extend to 1.3545-50". Indeed, EURUSD fell from 1.36 to 1.3570 and is now trading at 1.3548, with the low being 1.3547.

This point represents the 38% retracement of the $1.3339-1.3680 move. But we do expect the pair to stabilize back towards the 1.3580s by Friday European trade ahead of US payrolls.


Yet the principal source of euro weakness could come from Sunday's French presidential election in the event that socialist candidate Segolene Royal wins over Rightist candidate Nicolas Sarkozy. A combination of an upside surprise in US payrolls on Friday followed by a Royal Victory could drive the euro towards the $1.34 figure, especially if markets reduce the odds of a Fed easing later this year.

Almost exactly two years to the month after France rejected a referendum on European Union Constitution-dealing a severe blow to the euro -- France's decision on its next president may have an impact on the single currency.

Mr. Sarkozy served as Interior and Finance Minister in the outgoing rightist government and won the first round of elections with 31.2% over Royal's 25.9%. Mr. Sarkozy is seen as an advocate of free markets, vowing to cut taxes, create more labor market flexibility and reduce the role of State intervention in private companies. He also favors abolishing the 35-hour week brought about by the last Socialist government and intends to increase the number of hours to improve personal incomes and overall growth.

Ms. Royal's socialist-oriented agenda favors state intervention in many industries such as defense, aerospace and energy companies, while raising pension funds partially funded with taxes on stock market revenue. A victory by her would not only be a surprise (since she is trailing behind with 5-6 percentage points in opinion polls), but also weigh on the euro due to her social-friendly policies.

Both candidates have openly spoken in favor of weakening the euro and taking greater political control from the European Central Bank. Even the market-friendly Sarkozy complained about the strength of the euro, which he said strained French exports further widened the nation's trade deficit. But with Segolene Royal's policies seen in favor of higher taxes and more State interventionism, the surprise effect of her victory would not only remove the center right incumbent government but also trigger a negative euro reaction.

Last night's presidential debate between Royal and Sarkozy was deemed a draw by most political analysts, but an Internet poll showed 53% of the 900 people polled to have found Mr. Sarkozy more convincing than Ms. Royal's 31%. But it is notable that centrist candidate Francois Bayrou (who came placed 3 rd in the first election round and whose electpriare could trigger the 18% swing vote) said he would not vote for Mr. Sarkozy based on his performance in last night's Televised debate .

Still Bearish on Aussie

Once again, we are issuing a note highlighting our bearish expectations for the Australian dollar. The last note we sent out was in April 23, suggesting AUDUSD would be dragged down to 0.8225 from 0.8280. Indeed, the pair dropped to 0.8225 before pushing back higher. We expect the pair to find renewed downside on a combination of a falling hawkishness in tonight's quarterly monetary policy statement by the Reserve Bank of Australia, and upside data surprise from the US. There will be sufficient time between the 9.30 pm EST release of the RBA statement and the 8.30 am EST release of the US payrolls report. Thus we see the prospects for AUDUSD, testing the 0.82 figure, and subsequent target at 0.8180. In the event that payrolls come in neutral (between 95 and 110K), we expect renewed downside pressure on the Aussie. Any number above 110-120K should be AUD negative. A payrolls figure below 90K can potentially lift the pair back up 0.8250 and 0.8290, especially in case the US unemployment rate rises to 4.5%.

We're also still bearish AUDCAD , as the Canadian dollar continues its stellar performance, soaring to 7-month highs against the US dollar and 6-month highs against the euro. Pitting the strong CAD against the weak AUD is a strategy that continues to pay. The pair has dropped for a 13 consecutive days, losing nearly 9% in less than 3 weeks. On April 23, we issued a bearish note to clients from 0.9335, calling for a 0.9225 target. Today, the pair trades at 0.9118. We expect further declines towards 0.9050, followed by 0.8980. There RBA has left interest rates unchanged at 6.25% after Q1 CPI slowed to 2.4% y/y, while the RBA's preferred target fell to 2.7%, within the RBA's preferred target of 2-3%.

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.


© 2005-2019 http://www.MarketOracle.co.uk - 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