The Forex Week In Review

The Week That Was…

As we end another week in the Forex markets its safe to say that this has been a far from boring session.  We’ve seen EURUSD racing towards parity, GBPUSD breach 2010 lows, USDJPY testing 2007 levels, USDCAD testing 2008 levels and the Aussie forging fresh multi-year lows too.

The Dollar rally which has driven these moves is now reaching a critical stage having hit the big 100 level. Positioning has been reduced on the run up this price and with the FOMC meeting looming large next week, there is plenty of scope for a renewed surge should the Fed seem less “patient” to raise rates.  However, with recent action so extended, there is also plenty of room for a Dollar correction should the Fed’s disappoint USD bulls next week.

  • USD Retail sales came in softer this week in line with a recent spate of weaker US data ( payrolls not included). However, the Greenback forged higher and tested the 100 leve for the first time in over a decade. The recent move into this price has become very stretched and positioning has decreased, suggesting scope for a pullback here but with the FOMC looming next week and anticipation of the Fed adopting more hawkish language in the removing of “patient”, USD longs look secure.
  • EUR Traded steadily lower this week with the ECB’s QE program sending core and periphery bonds lower and so taking the single currency with them. The break of 1.10 last week has seen the Euro racing towards parity, however, weaker US retail sales granted some reprieve to EUR which managed to claw it’s way back above 1.05. Leveraged players and US corporates have still been sellers this week, though in lighter size and with the FOMC meeting next week, flows are likely to return n favour of more downside as long USD exposure is sought.
  • JPY A congested and direction-less week for JPY having conceded it’s gains on the crosses and remained tightly bound against the Dollar. The Japanese economy is signalling early signs of reflation which would likely limit further BoJ action. The Nikkei closed over 19,000 for the first time since April 2000 and demand at these levels is still strong. With the increasing need to maintain hedging ratios as Japanese stocks soar, USDJPY is likely to remain strongly supported.
  • GBP With the BoE having recently revised down their 2015 inflation outlook we have seen another aggressive down week for GBP which plummeted down through 2013 lows. UK Data has disappointed and with political risks looming in the run up to the election in May, the UK currency is likely to remain pressured. Added to domestic uncertainty, the USD rally looks set to continue victimising GBP into next week’s FOMC meeting with anticipation of hawkishness.
  • CAD Another negative week for the Canadian currency, especially so against the Dollar which rose to it’s highest levels against the currency since 2008. The BoC appear more Hawkish in having recently taken any near-term rate cuts off the table however there is definite room for further CAD downside to improve the country’s competitiveness.
  • AUD Having continued it’s losing streak and broken YTD lows against the Dollar, the AUD saw a quick bounce on the back of weaker US retail sales. If there is to be a pulllback in this USD rally then high-beta currencies such as AUD would be obvious beneficiaries. RBA minutes will be of key importance and any dovishness will see AUD resume it’s downward trajectory.

 

Key Views

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

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