Data/Event Risks
- USD: The risks today are minimal from the data side, with just factory goods orders and the NY ISM. Tomorrow’s non-manufacturing ISM looms as the most important economic release of the week.
- GBP: The PMI construction data can sometimes cause a wobble, only because construction spending is pretty volatile within the GDP numbers. Sterling is vulnerable to further downside if the data remains weaker than expected. See how to trade the services PMI with GBP/USD.
- AUD: The RBA rate decision comes out Tuesday (03:30 GMT). Rates are seen on hold at 3.00%.The surprise would be a rate cut, but chances of this are seen as low (no more than 15%). The Aussie would be vulnerable to such a move, threatening the 200d moving average, currently at 1.0311.
Idea of the Day
Friday was a telling day in FX markets, with EURGBP the best illustration of this. The single currency saw solid buying on the first trading day of the month, even before the US numbers had been announced. We then saw relentless selling of sterling in the wake of the US numbers. In absolute percentage terms, this was the biggest one day move in EURGBP since May 2010. This was even more remarkable, coming after what was the biggest monthly gain for EURGBP for 4 years. All in all, FX markets are feeling a lot bolder so far this year, with investors not afraid to push trends in a more aggressive fashion than has been the case for a long time.
Latest FX News
- EUR: Still no need to fight the tape in the single currency right now, as Friday’s price action resoundingly demonstrated once again. EUR/JPY almost touched 127 on Friday, up an incredible 34% since late July 2012. EUR/GBP soared through 0.87 as sterling continues to bear the brunt of recent euro-buying.
- JPY: Â Remains on the back-foot, especially against the euro but also the Aussie and the dollar. Pullbacks in yen crosses against the majors this year have been shallow and brief, confirmation of relentless selling pressure.
- GBP: Sterling traded like the sick man of Europe on Friday, with no shortage of sellers especially in the wake of the US numbers. The pound was down 0.5% against a dollar that itself was weakening against most other currencies (yen was the other exception). Such unrelenting selling, especially vs. the EUR, reflect the new paradigm of FX markets and a greater confidence to chase overbought (technically at least) pairs higher.
- AUD: The real action amongst the majors these days is away from the Aussie, in currencies such as the yen, the euro and sterling. All things considered, the AUD has held firm given these swirling cross-currents.
Further reading:Â EUR/USD Gains Slowed Down At 1.3700, But Only Temporary (Elliott Wave Analysis)
