Forex Investment and Currency Trading

Equities are in the green in the main this morning and that appears to have been enough to provide a modest setback at least for the USD overall as investor risk aversion recedes once again. The markets remain very much range bound overall as investors remain unsure of where the next shoe in this global economic slowdown will drop though some do tend to think that the range pendulum has swung in the USD’s favour for a while now and that the markets are perhaps due a move in the other direction. There is little data for the markets to get their teeth into this week – retail sales in the US aside – so the focus will likely remain on equities and the credit markets for direction. Equity sentiment changes at the drop of a hat, it would appear, and the uptick in LIBOR rates once again suggests that bank concerns may be on the rise (despite this morning’s positive sentiment really reflecting bullish comments from Citi); tight credit, funding worries and the risk of more bank deleveraging might be a USD-positive concoction in the short term. Beyond that, the US Treasury is selling a lot of debt this week; a poorly received auction is perhaps the biggest potential stumbling block for the USD in the short term. While the GBP has under performed this morning on the back of weak industrial production data, the EUR and the CHF are looking slightly better positioned. Technical experts think a clear push above the 1.27 area would be a short term positive for EUR/USD while USD/CHF needs to break short term range support at 1.1464 to push lower. Long term price action in USD/CHF does point to a top/bearish reversal in the USD overall (there have been a number of negative price signals on the daily/weekly charts in the past few weeks as the USD rally slowed under 1.19) and a clear break below 1.1464 should target a drop to the mid 1.10s at least.

The EUR crosses might provide a decent pointer for EUR/USD; Note that EUR/JPY is pressing up against trend resistance at 125.50 today. With the cross basing below 114 again this year,  the underlying track is higher towards the 130/131 area. Above 125.50 in the next few days – note rising trend momentum – will point to a rapid move towards the top of the recent trading range and provide decent underpinning for the EUR tone overall.