The Week That Was
Forex markets were caught by a few surprises this week. Firstly we had comments from the ECB regarding the front loading of it’s QE program heading into the summer and the possibility of even lower negative rates with the stated intention that the ECB will do whatever it can to achieve it’s inflation target.
We then saw the US CPI print come in better than expected on Friday in what must have been an “About time!” moment for USD bulls. Housing data was also better this week and markets are starting to look towards a pickup in US data to boost the Dollar. The policy divergence trade which has been so popular all year between Euro/Dollar now looks to have found it’s catalyst for a a fresh phase of action.
- USD Finally USD bulls see some light at the end of the tunnel. A much stronger week for the global reserve currency. Comments from the ECB drove US strength early on whilst the key headline data for the week, the US CPI print on Friday came in above expectations and saw longs re-join the fray.
- EUR Comments regarding the frontloading of the ECB’s QE program into the summer months saw the single currency retreat sharply from its recent high’s. Many players have been waiting to pounce on a resumption of the EUR downtrend and we saw leveraged accounts re-entering short positions. The US CPI beat on Friday saw price break back down below the post March FOMC high.
- JPY A reduction in bond volatility has made long FX positions more appealing to Japanese investors alongside a more positive risk environment. USDJPY moved back towards yearly highs on the US CPI beat on Friday. Recent range looks to be threatening a topside breakout.
- GBP Following the recent strength that GBP had experienced we saw some profit taking heading into this week’s CPI release. Britain officially dipped into deflation for the first time sine 1989 and we saw price retreat sharply from highs. Improved retail sales data bolstered the bulls case once again only to be taken back down by the US CPI beat and a little verbal intervention from BoE Governor Carney
- AUD Continued to slide this week iron ore prices hampered the Australian currency. Markets are skeptical of the consumer-led recovery in Australia given declining wage-growth and rising unemployment and there are fears that RBA rate cuts are not fully priced in. The resumption of the USD bull trend threatens the base of AUDUSD range.
- CAD A much softer week for the Canadian currency after recent strength. Mixed local data on Friday was out shined by the US CPI beat and saw price breaking through the top of the recent USDCAD range
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
AUDUSD: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks) Bearish
USDCAD: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks) Bullish
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