Forex Investment and Currency Trading

Dollar strength across the board, yet aussie and kiwi still holding up quite well with employment numbers out of both countries this evening (645pm NZ release, 930 AU). With inflation pressures continuing to rise, in particular RBA’s commodity index which was up 10.6% last month, employment data and wage pressures will be a key concern for both central banks. With the vix now breaking the December lows keep an eye on the 16 level for further confirmation and support for cross antipodes.

More cause for concern out of the BOE this morning as manufacturing data weakens. Odds of a cut has risen and sterling has broken support at 1.9650. Watch this level today for momentum stops back to the topside with support now at 1.9500/25.

Market’s call is for a hold tomorrow and a cut at the June 5th meeting. Next week is loaded with data – retail sales, rics, cpi, dlcg house prices, employment, wage data, and the inflation report. Long 1w vol makes some sense.

EURUSD: Horrific data out in Europe last night.  The data continues to drive home the fact that the economies overseas cannot escape a global slowdown in activity. Yet, inflation abounds which most CB’s have tried to temporarily turn a blind eye to with the exception of the ECB.  The perception of the ECB swings on a pendulum between a steady hand at the rudder of the H.M.S. Euroland in rough seas to inflation paranoid Bundesbankers out of touch with the realities of a global market.  After bad data overnight and the imminent rate meeting tomorrow, (with no rate change and presumably hawkish rhetoric) they are definitely swinging closer to the latter assessment.  1.5330-60 region is critical support.  A break of which should yield the mid 1.51’s.  A future in which the U.S. and Britain are on the road to recovery and hiking rates to battle inflation against an ECB cutting rates to salvage a stagnant economy are in the months ahead.  Just how far ahead is the question that needs to be answered.  As always we have to be mindful of spikes in the exchange rate of euros.  Same strategy – sell those rallies.  Range today 1.5375-1.5465.

USDCAD: The dream is over for those calling for a breakout higher in USD/CAD. A false break of the trendline topside generated a tremendous amount of USD/CAD buying interest in the spot and vol market, but buyers’ hopes were shattered as oil traded up to $122 and Ivey PMI came out a bit stronger than expected, which triggered a selloff back to parity and a continuation of the selloff in vols. It seems that there are still stops lingering in the high .99s, and that with oil holding over $120 we will take the stops out sooner or later. Look to sell anything in the high 1.00s with a stop over 1.0150.