Forex Blog

October 30, 2013

Financial Transaction Tax Backed By Germany

The path to implementing a tax on financial transactions (known as the FTT) was never going to be smooth. This week’s announcement that the expected coalition between Christian Democrats and the Social Democrats in Germany will prioritise the tax’s implementation, is a sign that the proposal remains on track. But any measure that taxes or regulates financial markets and banks will always meet concerted opposition.

In recent weeks, this has been growing from some quarters. The latest criticism, from France’s central bank governor Christian Noyer, was splashed on the front page of Monday’s Financial Times: “France central bank chief says Robin Hood tax is ‘enormous risk’” ran the headline. As this extremely small tax is to be implemented by 11 European countries, it is appropriate to ask: an enormous risk for whom?

via theguardian.com

The post Financial Transaction Tax Backed By Germany appeared first on MarketPulse.

September 26, 2013

Pimco’s El-Erian Dissects the NFP Report

Despite the data’s richness, only two indicators consistently attract widespread attention: net monthly job creation (which amounted to 169,000 in August) and the unemployment rate (7.3% in August, the lowest since December 2008). Together they point to a gradual and steady improvement in overall labour-market conditions.

This is certainly good news. It is not long ago that job creation was negative and the unemployment rate stood at 10%. The problem is that the headline numbers shed only partial light on what may lie ahead.

The figure for monthly job creation, for example, is distorted by the growing importance of part-time employment, and it fails to convey the reality of stagnant earnings. Meanwhile, the headline unemployment rate does not reflect the growing number of Americans who have left the work force – a phenomenon vividly reflected by the decline in the labour participation rate to just 63.2%, a 35-year low.

To get a real sense of the job market’s health, we need to look elsewhere in the BLS’s report. What these other numbers have to tell us – about both the present and the future – is far from reassuring.

For the full article visit The Guardian

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This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

August 2, 2013

NFP: Dollar Brake or Gas?

Today’s key event, US non-farm payrolls, will determine the direction of the dollar and all the other asset classes. The stronger than expected US data that’s been released over the past week has definitely raised market expectation to new heights for this morning’s labor release. With the Fed not including any “tapering bias” in their mid-week statement, they have managed to increase the influence that the market will be placing on the labor market data between now and their mid-September meeting. Strong labor market data today would be broadly supportive of a potential September taper. The fixed income asset class will be the most active of classes if the market is surprised greatly in either direction by the employment headline.

This non-farm payroll, at a minimum, is expected to post another solid increase of +185k in July. However, the market seems to have set its sight higher and the final print would have to exceed +200k if it wants to push the ‘mighty buck’ and US treasury yields higher. Investors are also looking for the unemployment rate to tick down to +7.5% from +7.6%. A number worse than +160k should be met with investor disappointment – the USD and US treasury yields would likely move lower as a result.

For specific currencies, the USD/JPY pair could possible end being the most impacted if there is a surprise result in a shift of Fed expectations. Analysts would argue that this is due to the currency pair’s strong correlation with US treasury yields and the expectations by investors that the treasury market will see the biggest reaction to the jobs market.

If today’s NFP report happens to print on the strong side, a rise above +200k, and an unemployment rate easing down to +7.5%, then US 10′s are expected to back up through key resistance of +2.75%. Such high yields would likely push USD/JPY north of the psychological ¥100 and towards ¥100.50. Conversely, if the headline comes in sub +160k, and despite an unemployment rate improving to +7.5%, US 10′s could trade below +2.60-55%, thereby pushing USD/JPY to revisit sub ¥98.50 and trade towards ¥98.00.

Other US data releases are expected to reveal that nominal consumer spending should have risen in June by +0.4%, while personal income should advance +0.6%, thereby boosting the US savings rate to +3.4%. Consensus expects the headline PCE price index to be up +0.4% in June, with core up +0.1% – very much in keeping with the soft year-on-year trend.

Other data this week revealed that the global PMI surveys continued to improve in July. The aggregate global manufacturing PMI index rallied to 51.2 from 50.3 in June. Digging deeper, analysts note that the forward-looking new orders subcomponent seems to be following a similar pattern and increased to 52.1, the highest level in five-months. The July global aggregate is solid proof that the results from the developed markets are more than offsetting the weakness in the emerging sector. Investors seem now to be expecting that global IP growth momentum will expand at a faster pace in H2, somewhere in the region of +5.4% from +3.4% in H1. Significantly, analyst’s calculations include a market expectation that a Chinese slowdown will not impede a Euro and North American upswing.

In conclusion, strong convictions do have their limitations. With such market enthusiasm for recent strong data, an even slightly below consensus US job print could actually prove hugely disappointing. This scenario would be consistent with a USD pullback, especially against the JPY and AUD (a currency in danger of being strongly oversold), but also across emerging markets. A reading in line with consensus or above, on the other hand, would cement expectations of a September taper, pushing the USD higher against most of its trading partners.

On the commodity front its not too much of a market surprise to see that gold futures have fallen close to -1.2% since this week’s mid-week FOMC meet, especially as the stronger U.S. economic data has strengthened the case for QE tapering in September. On the US fundamental front, Q2 annualized GDP growth was +1.7%, July ISM manufacturing index was also higher at 55.4, while the weekly initial jobless claims fell -19k to +326k. Also aiding the gold bears strategy was the World Gold Council (WGC) releasing a report urging gold investors “not to overestimate the impact of the rising interest rates and the tightening of the monetary policy in the U.S. on gold prices.” Again this morning, ahead of the US jobs report, the yellow metal has faced further selling in both overnight regions. In a matter of hours the market gets to see if the investor is required to take the foot off the gas and apply some USD buying caution.

Forex heatmap

Other Links:
Aussie Falls Below Significant 90 Line

Dean Popplewell, Director of Currency Analysis and Research @ OANDA MarketPulseFX

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This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

NZD/USD Technicals – Pushing Channel Bottom before NFP

In a week without any major news releases, NZD/USD managed to trade extremely bearishly, sending price deep within the multi-year support channel, almost testing Channel Bottom. This highlights the strong bearish pressure that NZD/USD has around 0.81 resistance. This week’s decline is an affirmation of the downtrend since April 2013, and potentially invalidates the rally that started 3 weeks ago. The 3 White Soldiers pattern is effectively negated with this week’s Bearish Engulfing Marubozu, which is now below the closing price of the 2nd “soldier”. Price is now looking likely to break the Channel altogether, and even though we have around 12 hours worth of trading left, this possibility should not be ruled out with Non-Farm Payroll coming out later. Should a strong NFP strengthens USD further, NZD/USD may be able to break Channel Bottom this week, possibly resulting in acceleration of price lower on Monday opening. Even in the event of USD weakening post NFP, it is unlikely that price will be able to push all the way and tag 0.81, breaking the Channel Top in the process. Hence we would still be trading within the Channel, which would still impair the 3 White Soldier pattern, and the strong bearish movement may only be deferred by one week before fresh bearish impetus take hold again.

Weekly Chart

http://forexblog.oanda.com/mserve/NZDUSD_020813W1.PNG

Even though Stochastic readings are still pointing higher, it should be noted that previous peaks have not tagged Overbought before heading lower. As such, there may not be a need to hold out and wait until Stoch level has enter the Overbought region and break 80.0 once again for a bearish cycle signal to take place.

Historical Open Position Ratios

http://forexblog.oanda.com/mserve/NZDUSD_openratios020813.PNG

Using this contraion indicator, we can see that the great turn around this week happened just when Net Position held at 0.10% in the favor of bulls. With majority retail traders continuing to long NZD/USD, pressure will continue to be on the bearish side (due to its contraion nature). Without breaking into net short regions, we can also interpret that the major decline from the break of 0.84 (when the net long ratio was first spotted) remains in play. And judging by the increasing in long ratios, especially with ratios currently above 20.0% and clearly above the “fakeout” knob seen back in March, the odds are good that it may be a while before we hit Net Short again. This provides yet another support for the case of lower NZD/USD moving forward.

RBNZ Wheeler must be extremely happy right now, as this turnaround in NZD/USD present the opportunity for RBNZ to sell NZD further into the trend, pushing NZD/USD lower further. Continue to keep watch on key support levels moving forward, as every support break represent a potential entry level for RBNZ to sell into, which would translate to stronger and more aggressive bearish follow-through.

More Links:
EUR/USD – Losing Ground as Markets Eye ECB Rate Announcement
AUD/USD – Touching below 0.89 briefly ahead of NFP
Gold Technicals – Breakout below 1,300 seen

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This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

July 31, 2013

USD/SGD – Higher Unemployment Rate Sinks SGD

Singapore’s headline unemployment rate hit 2.1% in Q2 2013, highlighting the worsening of the local economy which saw the unemployment rate slowly gaining from Q4 2012′s 1.8%, to Q1 2013′s 1.9% and now 2.1%. Beneath the headline figure, the situation appears to be worse. Resident unemployment rate currently stands at 3.0% similarly growing from 2.7% Q4 2012 and 2.9% earlier this year. Unemployment rate for Singapore Citizens are even higher, rising now to 3.1% from 2.9% from the preceding 2 quarters. The increase in unemployment rate flies in the face of the increasing numbers of job created in the quarter, which sum up to 32,500 in Q2 2013, compared to 28,900 in Q1. Total employment numbers have also risen significantly, standing at 3,419,000, 4% higher on a Y/Y basis.

The standard plausible explanation to reconcile such divergence is to assume that participation rate of employment has increased. However, in the context of Singapore, who relies heavily on foreign talents and does not have a huge local citizenry, as such participation rate should not vary that much to begin with. Therefore, the only plausible explanation is that the new jobs are actually given to foreigners who tend to cost much lesser. This assertion goes in line with the higher number of layoffs, which grew from 2,120 the previous quarters to 2,900 workers.

Without commenting on the socio-political implications of such an arrangement, it seems that the increasing unemployment rate should not impact Singapore’s economy, at least not in the short run. Hiring cheaper foreign labor is actually a positive move, and allow firms to be much more competitive with a lower overhead. As mentioned previously, Singapore does require to alter her economic drivers considering that her industrial output has been falling even as global markets are recovering. The once vaunted Singapore high-tech industries which produce high-end electronics and pharmaceutical products are slowly taken over by Taiwan, Malaysia and Thailand. Singapore firms definitely need to restructure themselves in order to compete better, or risk losing out entirely.

Hourly Chart

http://forexblog.oanda.com/mserve/USDSGD_310713H1.PNG

Hence, it is interesting to see that SGD actually weakened, sending USD/SGD towards 1.274 following the data release, when the numbers aren’t that bad. Even if we disregard the short-term positive impact and focus purely on the headline figure, a 2.1% unemployment is highly enviable even in healthy nations in the Scandinavian countries, not to mention our beleaguered friends in Euro-Zone. However, if we see the short-term trajectory of USD/SGD, with price trading nicely within a rising channel, it becomes not surprising that USD/SGD rallied significantly (relatively) following the economic news release despite prices traditionally being insular towards local economic data. This shows that the underlying sentiment of USD/SGD remains firmly bullish, and even though we are currently looking at prices bouncing lower from Channel Top, with Stoch levels hinting of a bear cycle, the likelihood of price holding above Channel Bottom remain high. Furthermore, given the fact that stoch troughs has been formed this week around the 50.0 level, any subsequent bear cycles that emerge from here may be stopped short similarly, again affirming the holding of Channel Bottom scenario.

More Links:
AUD/USD – Drops Back to Test Support Level at 0.90
EUR/USD – Finds Solid Support at 1.3250
GBP/USD – Falls Sharply Through 1.53

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This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

June 7, 2013

After Currency Panic Attack: 3-Likely NFP Outcomes

It was not supposed to happen this way. Many were anticipating a contained trading range. Yesterday’s ‘big’ currency move was expected to take place after this morning’s highly anticipated and a potential watershed moment for non-farm payrolls. It may still do. Many investors, dealers and speculators have been uptight and intense for most of this week ahead of the Fed’s go to indicator. This morning’s employment report is the granddaddy of all economic indicators, and if we were playing the percentages after yesterday’s move, it should not be a quiet session.

Size does matter! – The dealer chatter that a -$22-billion USD/JPY sale at ¥98.00 yesterday happened to drive the FX market down -1% in 5-minutes is very believable, especially when one considers the type of volume that individuals were trying to lay off in a hurry. The ‘mighty’ dollar fell to new monthly lows against the EUR (-1.5%) and Yen (-3%) as a percentage of individual’s cheered optimistic comments from Draghi and while others unwound questionable positions ahead of this morning’s employment data.

Yesterday’s first 100-points of EUR’s premium can be attributed the ECB keeping its benchmark rate unchanged and Draghi offering no sign that his fellow cohorts were considering furthering easing any time soon. An even bigger percentage of the markets mammoth move can be blamed on the Yen, and it’s billion dollar stop-losses littered amongst every new ‘big’ figure. In fact, there was no new news from either the BoE or ECB to keep market direction on course. Some payroll jitters can be attributed to pre-payroll position adjustment as investors look for directional clues on the timing of the Fed tapering QE.

Yesterday’s breakdown in the Nikkei and USD/JPY will have many who have entered into the two most crowded trades (long Nikkei and short Yen) a tad worried. The wild move is trying to confirm technically, what many have believed was a correction of Abenomic rallies, may in fact be considered a reversal, especially now that the Tokyo bourse has broken through its -25% correction level and USD/JPY trading just above ¥96.00. Not making it any easier for the dollar and any equity bull is that the volume being traded is on the rise – signs of potential mass liquidation will only lead to more similar moves like yesterday’s ‘currency panic attack.’

What’s Japan to do to stem Abenomics opposition? The MoF will have to consider how far they can test the remaining G20 members if they ever contemplate implementing any “possible intervention.” In the overnights session, USD/JPY happened to push lower to ¥96.39 in the wake of comments from Japanese Finance Minister Aso that the government has no plans to intervene and will watch the FX market carefully. Japan’s Economic Minister Amari also said “they will monitor various market movements and added that market volatility may be solved by improving the real economy.”

Now that some of the irrational FX move has been priced “out” or “in,” everybody will be focusing on this morning’s employment reports from North America, especially the US non-farm payroll report. Canada will be taking care of itself. Today’s U.S release has been building itself to potentially becoming a ‘watershed’ moment for the Fed, QE and the US economy. We should thrown in any other excuse that backs some of the irrational and rational major currency moves we have witnessed this week. The final print employment will even get to top China and the PBOC setting of the strongest Yuan reference rate on record before the Chinese President, Xi Jinping, and his U.S. counterpart Barack Obama meet for talks in California this weekend. Chinese data tomorrow may reveal that their export growth halved last month – certainly not a good thing for the rest of our economies. The Yuan What can we has appreciated +1.6% this year – Asia’s best performer!

What should the market be expecting from this morning US employment report? How should a rational individual interpret the headline numbers?

Market consensus is looking at a headline print somewhere in a tight range between +163k to +170k, with no change in the unemployment rate at +7.5%. However, a slowdown in the headline for last month (mid range of +150k, but less than the expected headline) is very much on the cards, especially after this week’s weak ISM and ADP reports (statistically there many are non-correlation arguments).

The several asset classes are expected to perform quiet differently. For the James “Bond” trader, they most certainly will require a “very weak” headline print to make them consider curtailing this “taper talk.” The rest of us would require a very strong print to have confidence that there is sufficient underlying economic strength in the US.

It should not be a surprise to expect the FX market to struggle to interpret the data – especially after yesterday’s dollar shenanigans.

A strong print (greater than the +165-170k consensus) should validate some of the market expectations of Fed asset purchase tapering. The “mighty buck” gets to reverse some of its losses against its G10 counterparts. Probably less so against the emerging market currencies – any that is directly affecting US growth. Under this scenario the “yellow metal” should lose territory again, even the AUD cannot be saved!

A weak print (less than +120k) will be ‘the excuse’ to commence selling the ‘mighty dollar’ again against G10 currencies. Renewed massive USD/JPY weakness will heighten expectations that the Japanese authorities will have to do something outside the box to stem the reversal tide and threat to Abenomics. The dollar has the potential to rally against EM currencies on a weaker print.

Finally, what about neutral territory? That is anywhere between a weak and strong print (+120k and +170k). This is expected to confuse market participants thought process for US monetary policy even further. Naturally the market will look towards revisions, recent technical strength and weakness levels for guidance, however, a result like this could probably have more of an “equity/bourse” impact rather than FX or FI. No matter the result Bernanke and his cohort’s will be watching and listening!

Forex heatmap

Other Links:
EURO Confinement A Game Winner Ahead Of NFP

Dean Popplewell, Director of Currency Analysis and Research @ OANDA MarketPulseFX

Get OANDA’s exclusive weekly Market Pulse FX

Email Address: Preferred Format:

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

EUR/USD – Euro Red-Hot as ECB Holds Steady

EUR/USD posted sharp gains on Thursday, climbing about 150 points in an action-packed session. The ECB held a policy meeting, and voted to maintain the current benchmark interest rate at 0.50% and deposit rates at 0%. The pair got a boost from optimistic comments from ECB head Mario Draghi about Eurozone growth in 2014. In economic releases, German Factory Orders disappointed, dropping to a seven-month low. In the US, Unemployment Claims improved and met expectations. On Friday, German Trade Balance easily beat the forecast. German Industrial Production will be released later today. We’ll get a good look at the US labor picture, with the release of two key events – Unemployment Rate and Non-Farm Payrolls. On Friday, EUR/USD has settled down, trading in the mid-1.32 range in the European session.

Recent ECB policy meetings have resulted in strong volatility from the euro and Thursday was no exception. EUR/USD sparkled, jumping around 150 points on the day, as the currency briefly crossed above the 1.33 level. As expected, the ECB maintained its benchmark rate at 0.50% and deposit rates at 0%. There has been talk of lowering deposit rates into negative territory, but so far the ECB has not taken any action in this direction. In his remarks, ECB President Mario Draghi downgraded the forecast for Eurozone growth in 2013 from 0.6% to 0.5%. However, for 2014, Draghi hiked  the forecast from 1.0% to 1.1%. The markets seemed pleased with Draghi’s comments, and the euro surged against the dollar, which was broadly weaker against the major currencies.

US employment numbers continue to be a mixed bag. On Wednesday, ADP Non-Farm Payrolls slipped badly. The key employment indicator missed the estimate for the third consecutive month. The indicator posted a reading of 135 thousand, well off the forecast of 171 thousand. Unemployment Claims showed improvement, coming in at 346 thousand. This almost matched the forecast of 345 thousand. The markets will get another look at the US employment picture on Friday, with the release of Unemployment Rate and Non-Farm Payrolls. If the results are not in line with market expectations, we could see a reaction from EUR/USD.

It isn’t often that Spanish releases impress the markets, so the first week in June has been a pleasant surprise. Services PMI looked very sharp posting its best performance since July 201., which was the last time that the index was above the 50-point level. Earlier in the week, Manufacturing PMI followed suit with a strong rise. This was followed by Unemployment Change, which pointed to 98 thousand less claims, a record for the month of May. Prime Minister Mariano Rajoy, whose government remains deeply unpopular due to a strict austerity program, could get some breathing room from these figures. If the fourth largest economy can continue this positive trend, it would be great news for the Eurozone and the euro.

May 9, 2013

NZD/USD – More Jobs in New Zealand as Unemployment Rate falls to 2009 low

New Zealand headline Unemployment Rate for Q1 came in at 6.2%, a sharp decline from the 6.8% previous quarter, suggesting that NZ economy is going in the right direction with unemployment rate climbing down since the 7.3% surprise back in Q3 2012. This is also the largest Q/Q % increase in employment figure since the financial crisis back in 2008, which puts NZ in the front seat as the first developed economy to move out of the crisis shadows (US is not counted despite record stock prices as unemployment rate remains high and Fed is still continuing to attach QE life support machine to the economy).

According to the Statistics New Zealand’s Household Labour Force Survey, overall participation rate has actually increased from 67.2% to 67.8%, making the strong 0.6% dip in unemployment rate all the more impressive. Much of the increase in employment came from the Canterbury region, whose own 4.3% unemployment rate is the lowest in New Zealand and mostly attributed to the rebuilding efforts of Christchurch after the earthquakes.

Some astute traders may wonder why RBNZ revised the estimated 2013 GDP lower by a 0.7% recently given such strong employment data? Well, looking beyond the headline figure, employment doesn’t seem to be so strong – Excluding Canterbury, rest of the country is at 6.6%, which is admittedly not too shabby itself, but Auckland currently stands at 7.3%, with Northland coming in at 10.0%. It seems that the healthy numbers are purely driven by the rebuilding investments, which is definitely not sustainable. Tradable sector remains highly weak, which is in line with our understanding of the damage from the drought. Once we understand that, the previous assertion that New Zealand being able to walk out of 2008′s shadows suddenly doesn’t seem so strong anymore.

Hourly Chart

http://forexblog.oanda.com/mserve/NZDUSD_090513H1.PNG

NZD/USD rallied strongly once the headline numbers were released, hitting the 0.8465 support turned resistance which has been in play since last week. Perhaps market had cold feet after reading the subsequent numbers as shown above, or perhaps the resistance level was just too strong from a technical basis. Whatever the reason may be, it is clear that overall sentiment remains bearish. From a technical perspective, price faced resistance from the incumbent Kumo, and was trading back down lower, in line with what Stochastic readings which are peaking and heading lower. All these entrench the bearish sentiment seen from price action and affirms, rather than invalidate the breakout of 0.8465 that happened on Tuesday.

However, bulls received aid from their Australia neighbors, who released their own stronger than expected employment numbers, driving AUD/USD dollar higher and pushed NZD/USD along as well. Bulls of NZD/USD would be glad to receive the second wind, but 0.8465 resistance remain stubborn though price has broken away from the Kumo now, which may allow price to retest 0.8465 once more. The possibility will always remain unless price start to head lower and break into the Kumo. But given current new development, Kumo can be expected to provide some buoyancy in price especially if 0.842 remains intact.

Daily Chart

http://forexblog.oanda.com/mserve/NZDUSD_090513D1.PNG

Daily Chart shows price entering back into the Kumo after attempting a breakout yesterday. 0.848 remains the level to beat in order to invalidate the bearish pressure on the Daily Chart, and given the uncertainty nature while trading within Kumo, a test towards 0.848 is possible despite Stochastic readings still remaining bearish. It is also interesting to note that the low of yesterday was around April lows, which is an affirmation of the rally from 14th Mar lows. Should price manage to break 0.848, bullish acceleration towards the rising Channel may occur, and the break of the descending trendline confluence with Kumo Senkou Span A may happen.

The question now we need to ask is this – is the Australia Employment data enough to change all the analysis of NZD/USD that was discussed earlier? Without AUD/USD push, it is highly likely that price would have continued downwards as technicals and fundamentals appeared to have lined up perfectly. The push from AUD/USD may have changed the short-term technical outlook, but the longer term outlook remains the same (0.848 was the level to beat the moment NZD/USD rallied on the employment numbers). Continue to keep a lookout on price around 0.8465, and let the market show us where it wants to go.

More Links:
AUD/USD – Struggling to Stay Within Touch of 1.02
EUR/USD – Runs Into Brick Wall of Resistance at 1.32
GBP/USD – Makes Another Run at 1.56

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This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

AUD/USD Near 1.0240 on Solid Job Numbers

Australian employers boosted payrolls more than four times economists’ estimated in April as the job market weathers a weaker domestic outlook. The Aussie jumped.

The number of people employed rose by 50,100 from a month earlier, after a revised 31,100 drop in March, the statistics bureau said in Sydney. That compares with the median estimate for an 11,000 rise in a Bloomberg survey of 24 economists. The jobless rate fell to 5.5 percent from 5.6 percent.

The data underscore the resilience of the world’s 12th-largest economy, which has been driven by investment in resources to meet Chinese demand. Central bank Governor Glenn Stevens lowered interest rates by 2 percentage points in the past 19 months, including a quarter-point reduction this week, to a record-low 2.75 percent as he seeks to revive industries outside mining, where investment is predicted to peak this year.

Bloomberg

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This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

February 25, 2013

AUD/USD – Soft HSBC PMI breaks 1.03

HSBC PMI suggest that Chinese manufacturing sector is continuing to expand, a 4 month streak since last November. However the pace of growth has slowed down tremendously. Feb’s preliminary (Flash) reading came in at 50.4, vs consensus estimate of 52.2 and 52.3 previous. Domestic demand in China remained strong, continuing the trend that we have seen in previous months, definitely delighting the Chinese Government that wishes to strengthen Yuan without jeopardizing domestic demand too severely. The stability of demand is a good sign for exporters to China such as Australia and New Zeland, who will be able to see their respective exports picking up in 2013.

Hourly Chart

http://forexblog.oanda.com/mserve/AUDUSD_250213H1.PNG

Traders of AUD/USD reacted badly on the headline figure that missed expectations. However, AUD/USD was already gapping lower below 1.03 from last Friday’s close, and it should be noted that traders and speculators could be simply looking for any reason to sell. Price has since moved slightly higher towards 1.028 after finding support just above 1.026. Depending on how traders digest the finer prints of the PMI, prices could still rally towards 1.03 due to reasons explained above. However that may be unlikely as traders appear to give more weight to the headline figure, with Australian benchmark index ASX declining from its intraday high after the Chinese news.

Weekly Chart

http://forexblog.oanda.com/mserve/AUDUSD_250213D1.PNG

From the weekly chart, price action is threatening a bearish breakout below 1.03. However traders may wish to take caution from early entries as price has thrice failed to close below 1.03 for 3 consecutive weeks. Stochastic readings appear to be forming a trough with Stoch/Signal closing into each other, which diminishes the bearishness price is showing us, though there remains possibility of further downsides even on the Stochastic indicator with trough back in Jun 2012 much lower than current levels. However, if we were to compare current readings to the trough back in Oct 2012, the divergence between readings and price levels actually provide us a bullish signal as it suggest that sell-off in the past weeks have been much more aggressive than before.

Fundamentally, RBA is not looking as dovish as before with Governor Stevens suggesting that AUD levels are too high, yet at the same time suggesting that levels are not strong enough for intervention. As such, the long-term case for AUD/USD is less bearish as before, and a return higher is certainly not out of the equation.

More Links:
AUD / USD – Trying to Cling on to 1.03 Again
AUD/NZD – The Curious Case of RBA vs RBNZ

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This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

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