The Week That Was
The main theme of this week’s trading in Forex markets was that of returned Dollar strength, or at least the appearance of it. Marginal data beats in the previous week saw speculative players pushing amidst low volume creating squeezes across the majors. Most notably USDJPY broke out of it’s range, however with AUD, EUR & GBP all still within their recent consolidation, it is not clear yet that the USD bull trend has resumed.
Direction-less volatility has created uncertain trading conditions and with many looking to Friday’s GDP number to give a bullish boost heading into next week’s NFPs, markets remain muted, as GDP missed though slightly lower than was expected to miss.
A key data week for the Dollar is going to be decisive in whether we see this strength properly expressed with supporting volume, or reverse.
- USD A resurgence of Dollar strength this week came on the back of some recent better US data amidst light volume. The breakdown in JPY & EUR added to USD strength. However into Friday and we saw a return of negative US data with personal consumption and GDP both missing spurring profit taking on those with USD longs. With key data out next week it will be an important time for USD and will decide whether we see this USD trend strengthen with bigger volume joining in, or reverse.
- EUR Concerns around Greece still abound and continue to create uncertainty which keeps the single currency weighed. Having now broken down through the pivotal 1.10-1100 area it seems a retest of the range low is in sight. With positioning light, flows are expected to be choppy heading into the US NFPs next week.
- GBP Following on from last weeks negative inflation print, we saw UK GDP come in below forecast and continue to sell off against the US Dollar. Services PMI will be key to watch next week as we saw some improvement tere recently. Signs of continued wage strength should stem the GBP flow.
- JPY The most obvious victim of this bout of Dollar strength, JPY suffered sharp losses this week. Japanese investors have been increasing foreign investment and demand for JGBs has fallen. Volatility from this lack of demand should likely see JPY lower, the risk to this is a decline in risk appetite and any negative US data
- AUD The Australian currency took a hammering this week. Slowing Chinese growth is having a big impact on the Australian economy and there is a growing sense that RBA rate cuts are not yet priced in. Given it’s high beta status the Aussie received a double whammy from recent USD strength
- CAD A correction lower in Oil has hampered the Canadian currency this week and again highlights the risk to the Canadian economy from this price movement. The BoC have maintained a positive outlook recently keeping rates on hold, Friday’s Canadian GDP miss might spur speculation of a shift in sentiment, weighing on CAD.
EURUSD Short Term (1-3 Days): Neutral – 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
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