Forex Investment and Currency Trading

USD failed to recover from the US earnings induced tumble seen yesterday following the release of weaker than expected results from American Express, Texas Instruments, and Apple. Crude oil’s attempt to push higher overnight were yet again met by strong resistance at USD132/bl preventing oil from recouping any of the losses suffered last week.

EUR/USD consolidated the gains seen yesterday following the release of poor US earnings data as the pair traded sideways around yesterday’s high of 1.5930. There is an absence of key Eurozone data today and as such, EUR is likely to be at the mercy of USD.

GBP/USD held above the 2.00 level throughout the Asian/Early European trading session as the pair pushed up to a high of 2.0063. Comments emanating from BoE’s Gieve where somewhat dovish in nature as he highlighted the risk of inflation expectations becoming stuck at a high level, while noting that a UK recession cannot be ruled out.

USD/JPY It is starting to feel like we are entering summer markets and we may start to see that the market does not react as much as you would expect to news in either direction. Short vol strategies executed by central banks during summer time can have a dramatic impact on price action and we may be in for at least a few weeks of rangebound price action. In USD/JPY, 105.50 / 107.10 is a reasonable range to expect for the rest of this week.

NZD remains the laggard within G10, down 1.49% against USD in the past five trading days, while continuing to underperform its Antipodean neighbour. AUD/NZD held a 30pip range around 1.2825 overnight following the 7-year high of 1.2851 seen yesterday. There are no data ahead of tomorrow’s RBNZ rate announcement for which the consensus is for no change.

USDCHF: The market tried being long dollars yesterday but that didn’t seem to work so for today we would look for range trading with a bias for dollar weakness. 1.0250/60 seems to define the top of the range in USDCHF but the resistance in EURCHF is much bigger. The cross has been building a perfect rectangle consolidation for the past two and a half months with yesterday marking yet another failure at the top end of the range around the 200 day SMA.

AUD and NZD: The next 48 hours will be huge for both AUD and NZD as we see Australian CPI tonight at 9:30PM New York time, then the RBNZ decision tomorrow at 5PM New York time. The reaction to any surprise in CPI tonight should be substantial. The RBNZ is a 50/50 call at the moment with New Zealand, like most nations worldwide, suffering from a very poor growth / inflation mix. Given the market’s heavy appetite for carry trade, a no change decision by the RBNZ could send Kiwi significantly higher while a cut would confirm the bears’ scenario and should accelerate losses. Either way, Kiwi will be interesting.