The Aussie (AUD) has moved back to 3-week highs vs. USD as risk appetite has increased to start 2012. Recent economic data has been positive for the global economy and this bodes well for the Aussie as the likelihood of carry trades picks up.
Looking at the chart below, 1.0330 had served as short-term resistance and the “top tails” were a bit higher to 1.0360 so a close above those levels could mean another move to the upside. Also to not from this chart is that the MACD is just starting to gain some momentum and is not nearly as high as it was the last time we were at these prices levels.
Should the news and data continue to come in better than expected, then we could see 1.05 by the end of the week. Pay particular attention to Thursday, as Chinese PMI services figures are duw out, as are Australian trade balance and new home sales numbers.
So the grand plan and final resolution was fianlly released late last night and the market has responded favorably at this point. This is the European “bazooka” that the market has been calling for and there was nothing extraordinary about this release.
So the market has responded with continued risk appetite, and table appears to be set for risk assets to rise heading into the end of the year. The Euro is known as the “anti-Dollar” so if Euro is rising, the US dollar is typically falling and that correlates with higher stocks and commodities which is what we are seeing.
The full-on details of the plan are still a little murky, and it will be interesting to see if contagion occurs in any of the other debt-laden countries or if anyone else seeks a Greek -style deal. So stay tuned for that one and in teh meantime enjoy the ride higher!
The Euro started out the week with much hope and promise but that quicklly faded after German officials dampened the mood surrounding the Euro debt crisis talks. Over the weekend, the G-20 voiced their own hope that Euro leaders would be able to come up with a plan by the end of the Euro summit taking place this week, but German officials don’t think that it’s possible.
The market looks to be in agreement as a short-term double top formed at 1.39 in EUR/USD (our target from last week’s Euro trade) and is moving lower as risk appetite is being trumped by risk aversion. The next short-term target for Euro is 1.3675 vs. USD, just above the S2 daily pivot support.
Despite the recent decline in the US dollar and the increased risk appetite in teh marketplace, there is still major risk to the global economyemanating from Europe and the US, and now we can add China to the mix. Weaker export growth in China shos that their economy is slowing and this is not a good thing for the global economic recovery as China has been the main driver of activity.
Looking at this chart of USD/CHF, the dollar vs. the Swiss franc we can see that a double bottom was put in at 89.20 as the risk emanating form the Euro zone takes focus. As both currencies are “safe-havens”, it is interesting to note that money flows are moving toward the Dollar and out of the Swissie!
SNB intervention could be the worry, though more likely this is an indcitment of Europe in general. Stay tuned!
Despite the recent decline in the US dollar and the increased risk appetite in teh marketplace, there is still major risk to the global economyemanating from Europe and the US, and now we can add China to the mix. Weaker export growth in China shos that their economy is slowing and this is not a good thing for the global economic recovery as China has been the main driver of activity.
Looking at this chart of USD/CHF, the dollar vs. the Swiss franc we can see that a double bottom was put in at 89.20 as the risk emanating form the Euro zone takes focus. As both currencies are “safe-havens”, it is interesting to note that money flows are moving toward the Dollar and out of the Swissie!
SNB intervention could be the worry, though more likely this is an indcitment of Europe in general. Stay tuned!
As we predicted on Monday, the Aussie has broken out vs. USD and is now trading firmly above parity as risk appetite has returned to the markets. Global stocks and commodities are up as the marekt believes that a resolution to the Euro debt crisis is near.
In addition, a strengthening Chinese Yuan may actually be a good thing for Australian exports as they now become cheaper to the world’s second largest economy. For those concerned about inflation, this could be a catalyst in the not so distant future.
Normally, when a double-top resistance is broken like occurred at parity in the chart, that area now becomes support. Tomorrow will bring the Australian employment report and while we don’t have an opinion one way or the other on the report, we believe that the Aussie will trade up to the R4 daily pivot resistance and then establish a range between 1.00 and 1.025 as we vacillate between risk themes in the markets
It doesn’t really make sense to look at anything other than the Euro today as it is the Euro debt crisis that continues to drive sentiment in the markets. This creates the “risk environment” where the market decides if they want to take it or avoid it. Then the correlative properties of the currencies take over and we esentially have two trades in the market.
To start the week, risk appetite has picked up after last week’s selling but today we are at “crossroads”. The market has been anticipating some good news from the Euro zone regarding the Greek debt deal and the overall debt crisis and the potential resolution to it. And so far, we have seen little to believe that we are any closer than we were last week.
Yet the markets are willing to give the benefit of the doubt when it’s early in the week, but become more fearful as we near the weekend when markets are closed and nothing has been accomplished. This has been par for the course for EU leaders and frankly has been what has been weighing heavily on global markets.
Looking at the 1-hour chart of EUR/USD, we can see a familiar pattern emerging– early week risk appetite followed by end of the week risk aversion. Last week I called a move lower in this pair which hasn’t happened–yet.
But should there be no resolution or a negative outcome, then that selling could resume rather quickly. Earlier this morning, EUR/USD bumped up against its R1 daily pivot resistance and could have problems advancing further. Alos note that our fast-setting stochastic is showing a bit of an over-bought condition which could foreshadow some further selling.
A new range is being established, so perhaps a return to 1.34 by the end of the week may occur.
What started out his morning as an orderly market became anything but as the ECB announced that further Dollar liquidy measures have been put in place in coordination with the US Fed. This is going to help European banks that some thought may be facing a liquidity crisis as now there are more Dollars available to the ECB.
This was “one” of the problems facing the ECB and the fear was that there would not be enough Dollars to go around should banks need more capital. While I’m uncertain of the details of the move, the market sees this as positve for the Euro and for risk appetite in general, as seen in the chart below.
The euro is up 0.3 percent in early morning trading in New York today reaching $1.3689 at 8:00 am from $1.3643 at yesterday’s close. With the growing likelihood of a bail-out package being extended to Ireland, risk appetite is on the rise.
“Ireland appears close to an agreement on its bailout, which is positive for sentiment,” said Neil Jones, head of European hedge-fund sales at Mizuho Financial Group Inc. in London. “The German economy is powering ahead.”
Source: Bloomberg
The Canadian dollar advanced 0.5 percent to reach parity with its US counterpart. Seven straight days of crude oil price gains helped propel the Canadian dollar back to parity as Canada is one of the world’s leading exporters of oil.
“Broader movements related to risk appetite are responsible for Canadian dollar strength,” Stephen Gallo, head of market analysis at Schneider Foreign Exchange in London. “The desire is to move into risk, but there is caution about those positions getting stretched too far.”
Source: Bloomberg
