Tag Archives: AUD
Will The Fed Tolerate A Stronger USD For Longer? – Credit Agricole.
Given that US financial conditions have tightened of late, investors will also want to know if the Fed will tolerate further tightening (eg, USD appreciation). The Fed should deliver a 25bp rate hike but may keep its economic and policy outlook little changed, opting to wait for more economic data and details on the upcoming Trump stimulus. At the same time, Yellen may signal willingness to tolerate further tightening in US financial conditions in view of the latest rebound in US inflation expectations and given the resilience of risk sentiment at home and abroad.
Given the latest USD underperformance, the bigger surprise for the FX markets could be indications that the Fed would tolerate higher UST yields and a stronger USD for longer, as well as any potential revisions to the 2018 dot-plot to reflect the recent drop in the unemployment rate below the Fed’s NAIRU.
This could help USD regain some lost ground vs commodity and risk-correlated G10 currencies if further tightening in global conditions starts eroding market risk sentiment. AUD could be vulnerable to potential disappointments from the upcoming data out of Australia and China. We keep open our short AUD/USD trade.*
The BoE, the SNB and the Norges Bank will also meet next week but should keep policy unchanged. That said, the MPC could see the latest disappointing UK data as confirmation of its cautious macro outlook and reiterate it will keep policy very accommodative in the face of surging cost–push inflation. This could keep the headwinds in place for GBP against USD. EUR/GBP could start consolidating after the recent sell-off following the Italian referendum and December ECB meeting.
Forex Volume Set To Rise. USD JPY To Stabilize – Credit Agricole.
Article Courtesy of Credit Agricole.
The views expressed in this article are the opinion of Credit Agricole FX market analysts. Please feel free to share.
The holiday season is in full swing and for some this may mean that markets will settle down as liquidity dries up in the coming weeks.
Our evidence suggests that Forex volume tends to go up in August, however, data releases and events can trigger renewed spikes of short-end vol across G10. It remains to be seen whether the combined effect of the multitude of idiosyncratic shocks will be sufficient to fuel a broader risk off move. Even so, we have added to our portfolio a long XAU/CHF trade as a risk-off hedge. Another interesting strategy is to identify cheap FX volatility to benefit from accentuated market moves on the back of event risks and thin market liquidity ahead.
Next week’s data calendar is laden with data releases like US non-farm payrolls, and events like the BoE Inflation report and the RBA policy meeting.
The BoE inflation report may struggle to exceed the dovish market expectations ahead of the August inflation report, and that could help GBP consolidate more broadly. We remain long GBP/CHF going into the release. Investors are looking for another solid US payroll and earnings data.
JPY should remain in the spotlight ahead of the announcement of Abe’s fiscal stimulus next week. We expect Japanese stocks to recover some more as a result and that should help USD/JPY stabilize.
Ahead of the RBA, markets see a greater than 50% chance of a rate cut. We also see a non negligible risk of policy action and stick to our tactical AUD/USD short. The FX options markets do not seem to be pricing in a significant scope for spot moves making AUD short-term gamma an interesting buy as well.
That said, we remain bulls on AUD/NZD over the longer-term, and expect the upcoming NZ unemployment and inflation expectations data to fuel rate cut expectations ahead of the August RBNZ meeting, and keep the cross supported. Potential disappointments from Chinese PMI data could keep both antipodean currencies under pressure against USD.
Trading Update – Euro Dollar Breaks 137. BNP Paribas Target 140.
Euro Dollar yesterday broke through the 137 level printing a high at 13710 and closing the session at down 70 pips at 13640. Yesterday BNP Paribas put a price target of 140 on Euro Dollar.
The Euro currency is very strong at the moment so we could see a test of that level in the coming weeks but i think in the longer term the Euro will weaken against the Dollar as the fed scale back on QE. Europe may also step in with a rate cut if Euro continues its upward trend as a strong Euro will hurt the recovery in Europe.
There was a rumor circulating yesterday that Goldman Sachs had closed its long position on Euro Dollar. If you read my post from the 12th Jan you will remember that they put a price target of 137 on Euro Dollar. Well according to rumors yesterday that position has been closed. A 70 pip drop from the highs could also back that up. I closed my Euro long at 96 so i missed the top by 14 pips but i went short at 13700 which more than made up for the 14 pips. 🙂
Cable made a decent rally this week, but more talk of a downgrade saw the price crash 180 pips yesterday. I had a price target on Cable to go short that unfortunately did not get hit, but we had a couple of decent trades on Cable this week so that’s OK.
Euro Yen continues to push higher which i think is contributing to the Euro Dollar rise, they seem to be feeding off each other at the moment. There was a crazy move on Euro Yen yesterday, the price pushed down 100 pips and then went back up 200 pips an hour later. You don’t see moves like that very often and it was clearly market manipulation, which caught a lot of short sellers out.
AUD USD pushed down this week but we did see a little recovery on Friday that we managed to get in on. My longer term view on AUD is bearish as the currency is still pretty high compared to where it usually trades, so it could go down quite a bit over the next few weeks. I have a longer term price target of 10225 on AUD, so a bit further to go down yet.
Please note: that my views on these pairs are purely my opinion based on the price action i can read on the charts. My views are not a recommendation to trade. What i do is far more complicated than just picking targets. You need to be fully conversant with my methods before you can trade these targets.
Trades for this week.
Sorry i did not give a midweek update this week but i have been really busy so did not have the time. I did not take as many trades this week as normal but i still had a good week.
Monday. Cable long at 15713 up to 15742 for 29 pips. AUD long at 10386 up to 10406 for 20 pips. EJ short at 12203 down to 12177 for 26 pips. EJ short at 12173 closed at 12184 for 11 pips loss.
Tuesday. Euro long at 13423 up to 13473 for 50 pips.
Wednesday. AUD long at 10404 up to 10428 for 24 pips.
Thursday. Cable short at 15833 down to 15813 for 20 pips.
Friday. Euro long at 13608 up to 13665 for 57 pips. Cable long at 15810 up to 15840 for 30 pips. AUD long at 10363 up to 10423 for 60 pips. Euro long at 13667 up to 13696 29 pips. Euro short at 13700 down to 13660 for 40 pips.
Total trades for the week 12. Total pips for the week 378. Not a great week for me pips wise but still good. One loser this week which does happen from time to time.
Midweek Forex Trading Update.
Forex trading on Monday was a bit of a write off to be honest. Everything was going sideways, and i don’t like trading when currencies are doing that. So no trades to report for Monday.
Euro Dollar has been in a funny mood all week, and been very hard to trade. Very little price action set ups. I have scalped a few pips, but no major pips in the bank for Euro so far this week. I have had a bit of success with EJ though, that has been moving around a bit so i have managed to get some good trades on that one.
AUD is moving in a very tight range at the moment so that’s not really moving enough to get any decent trades on. We did get one trade yesterday on AUD at 10576 down to 10556 for 20 pips. The other trade we took yesterday was EJ long at 11762 up to 11800 for 38 pips. So 58 pips for yesterday is not too bad.
Cable has also been going sideways this week, but i think we are due a move up on that one. It seems to have formed a triple bottom. Cable is quite weak at the moment though as everyone is expecting the UK get downgraded at some point in the near future. I think the downgrade is in the price, but they are also talking of further QE so that could push it down a bit further. I have a target at 15770 area that may get hit at some point this week. I may take it long at that level, it just depends on what the price action is telling me at the time.
So back to today. First trade of the day was EJ long at 11740 up to 11814 for 74 pips. We then had EJ short at 11822 down to 11785 for 37 pips. I also took a trade on USD CAD at 9905 up to 9970 for 65 pips. I have been looking at Dollar Cad as another pair to add, along with AUD JPY. The only problem when following too many pairs is you can miss good set ups on other pairs. I am currently looking at 6 pairs so hopefully i will start posting more trades on USD CAD and AUD JPY soon.
I have also decided to make 2 blog posts per week, but make them a bit more detailed, with a bit of market analysis thrown in if i have time. I will be doing one at the end of the week, either late Friday or Saturday, and one midweek.
I don’t think the short quick update posts do much for the quality of the blog to be honest. So i am going to stop them. I cant really see the point in having 100s of posts with just half a dozen lines in. It just clogs the blog up and makes it harder for people to find the good stuff. 🙂
Have a great trading week, I will update the blog with more Forex trading at the end of the week.