The Forex Week In Review

The Week That Was

An important week in Forex markets, with the majority of this week’s action was driven by the USD unwind as we saw weaker data yet again. Elsewhere, Mario Draghi reaffirmed the ECB’s commitment to fully delivering it’s QE program through September 2016 and a less dovish BoC buoyed the Canadian currency. With the G10 space split between carry demand USD/G10 positioning and risk on/risk off we have seen most pairs simply rotating within their month long ranges whilst USDCAD bucked the trend and broke free to the downside

Overview.

  • USD data weakness set the tone of the week for the Dollar which saw some further unwinding. The data dependant stance of the Fed negates any reason for USD bullishness until this data soft-patch comes to an end. Growth differentials are still supportive of USD but many players are playing the wait and see game now
  • EUR Mario Draghi reiterated his commitment to running the ECB’s QE program through to September 2016. Low interest rates and the accommodative monetary policy have made EUR a firm funding currency favourite. As political tension stemming from Greece continue, EUR should remain pressured.
  • JPY Remain trapped in the near term due to a strange dichotomy currently experienced. Japanese investors became the largest holders of USTs outside of the US but simultaneously foreign investors have flooded Japanese markets. JPY does remain strong on the crosses however.
  • GBP A much stronger week for the UK currency which has benefited greatly from the USD unwind. This week’s CPI print showed that the UK has not infact dipped into deflation but downside risks remain. The forthcoming BoE minutes releases is likely to highlight some members’ concerns about the economy, in tandem with the continuing political risks surround the UK election, pressure should re-emerge on the currency.
  • AUD Another happy beneficiary of the USD unwind, the Australian currency has enjoyed a much better week and with a strong employment report there is decent scope for price to remain positive near term as carry trade demand continues to draw investor inflows.  RBA minutes and quarterly CPI will be the next hurdle
  • CAD A barnstorming week for the Canadian currency with a less dovish than expected BoC adding fuel to the fire which was lit on weak US data. BoC did however revise down their growth forecasts but cited the US recovery and a weaker currency as reasons to believe they would pull through.

Key Views

EURUSD Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks) Bearish
GBPUSD: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks) Bearish
USDJPY: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks) Bullish
USDCAD: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks) Bullish
AUDUSD: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks) Bearish

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