The dovish message by Mario Draghi has hurt the euro, and was probably designed to do so. A secondary effect is now seen: commodity currencies are rising.
CAD, AUD and NZD are strengthening against the US dollar and even more against the euro. Here’s why they are strengthening and defying their own problems. The 3 charts below provide some visualization for USD/CAD, AUD/USD and NZD/USD:
With the European Central Bank already expanding its rules on bond buying and as it is expected to announce an extension and/or enlargement of its QE program, so money may flow outside.
And where to? Commodities and safer commodity currencies.
- USD/CAD is moving down to 1.3160. This comes despite Canada being in recession and a rise in oil inventories.
- AUD/USD is rising to 0.7040. This comes despite weak Australian GDP.
- NZD/USD is on its way back to 0.74.
And everything comes despite a strong data point from the US, that could help the Fed pull the trigger on a rate hike.
But if the euro-zone is printing enough money, who needs the Fed for this hot money? Or at least that’s what markets may be thinking at the moment.
Tomorrow we have the all important Non-Farm Payrolls.
Here is how it looks on the USD/CAD 30 minute chart. It has touched on 1.33 not that long ago and fell quite nicely from 1.3270. The next support line is 1.3120.
Here is the AUD/USD chart. The Aussie already dipped several times below the very round 0.70 level but never went anywhere fast. 0.7060 works as initial resistance, followed by 0.7120.
NZD/USD technical chart. 0.6372 was the previous high in attempt to recover. Now we are above 0.64. The next round number of 0.65 is key. On the downside, 0.6310 is the bottom.
