Forex Investment and Currency Trading

USD While the USD rallied from heavily oversold levels, the rebound has been modest. While financial sector risks may be subsiding economic risks appear to be increasing, with a test of USD lows in 2Q.
EUR EUR/USD corrected but held support at 1.5340. Meanwhile, the trade-weighted EUR remains near its highest level since the 1992 ERM crisis, with little prospect that an ECB policy signal will bring it lower.
JPY The holding of the key technical support and tentative signs of an easing of risk aversion will probably limit near-term downside risks to USD/JPY, although a sustainable rebound is not likely until 2H 2008.
GBP GBP/USD held important technical support and has climbed back above 2.00; the GBP appears oversold on excessive pessimism, and a test above 2.10 remains likely during 2Q; we hold long GBP/USD.
CHF The trade-weighted CHF has retreated from a 5-year high, and signs of lessening risk aversion suggest further correction; EUR/CHF is likely to trade into the 1.58 - 1.59 range during the weeks ahead.
SEK EUR/SEK holds above 55-day MA (9.3992) on general EUR strength. Little on the horizon to break the 9.40 - 9.50 trading range although SEK gains toward 9.30 likely during 2Q.
NOK EUR/NOK surged to a 9-month high on softer oil price, but NOK ToT still very strong. Higher inflation risks and a likely April 23 Norges Bank rate hike set the stage for a retreat below 8.00 during 2Q.
CAD The USD/CAD close above its 200-day MA is surprising as moderate Canadian economic momentum persists and energy prices remain solid. Significant data to come before April 22 BoC rate decision.
 

AUD AUD/USD has regained its 55-day MA (.9074), setting a more positive tone on stronger global equities. Gov. Stevens speech Wed could be pivotal on future RBA policy; we remain long AUD/USD.
NZD NZD/USD has helped key support levels. Important data during the week ahead include 4Q GDP and trade/CA data that is likely to keep the RBNZ on hold through the summer and keep NZD/USD above .80.
MXN An upside surprise in CPI has reduced market expectations of near-term Banxico easing. In a weaker USD environment, USD/MXN could continue to test the long-term support at 10.66
BRL As commodity prices stabilize and potentially bottom, strong domestic performance and widening rate differentials could firm the local currency, pushing USD/BRL lower towards 1.65.
ARS USD/ARS has edged higher as concerns mount that an ongoing farmers strike could lower agricultural exports, but central bank intervention should keep USD/ARS in the 3.13-3.18 range.
 

CLP The pace of recent CLP appreciation is likely to slow as prospects for wider Chile-US rate spreads stabilize and officials voice concerns on CLP strength. USD/CLP should find support at recent lows around 430.
TWD The KMT’s victory in the presidential election cleared a heavy cloud of political uncertainty for Taiwan, boosting investor confidence and providing support for the TWD in the months ahead.
CNY The USD rebound coincided with the resumption of the CNY/USD appreciation last week. The CNY will continue to rise at a faster pace as long as the USD fall is orderly.
 

MYR The recent USD/MYR climb above 3.20 is more likely related to position-adjustment. MYR to resume appreciation course on clearer political picture and pro-growth policy.
KRW USD/KRW to retrace from March high on the ease in FX regulations and BoK interventions. Shift in policy focus towards price stability to reinforce KRW gains in coming weeks.
HUF The NBH favors a stronger HUF to offset inflation pressures and is increasing hawkish rhetoric raising the odds of rate hikes. Near-term support of 255.5 in EUR/HUF could be tested.
TRY Renewed concerns about local political risks regarding AKP charges weigh on near-term TRY sentiment. Meanwhile, USD/TRY could push toward 1.20 (55d ma) on high local rates.
PLN The widely expected third consecutive rate hike by the NBP will unlikely lead to significant PLN gains with firm long-term support at 3.50. EUR/PLN range bound between 3.52-3.57 seems likely.
ZAR The ZAR remains sensitive to international risk appetite, while domestic inflation and energy problems continue to weigh on sentiment. Upcoming CPIX, PPI and electricity price talks critical for the SARB.