Forex Investment and Currency Trading

The markets are moving on somewhat higher liquidity and turnover this morning as London returns from its long weekend; risk sentiment continues to run in a higher gear, it would appear, with the commodity currencies generally outperforming (the RBA leaving interest rates on hold at 3.0% helping lift sentiment for the AUD in particular). While Asian equity markets saw some follow through on North American market gains yesterday, the early price action in US equity futures has been rather timid (modest losses so far). USD LIBOR rates nosed under 1.0% for the first time and the TED spread continues is slow grind lower but there does not appear to be a whole lot of justification – at the moment, at least – for a significant extension of the risk rally today. The momentum and positioning will help sustain the risk friendlier positioning for a little longer, however (until the data and markets catch up or the rally is impossible to justify). Market remains upbeat on the CAD’s prospects in a broader sense though and retain a bearish bias on USD/CAD with the market now trading below the January lows (1.1764); Momentum (this trend is building up a decent head of steam) and positioning (the spec market was still small short CAD through last week, according to the IMM pit data) count as significant short term positives at least for the CAD and there is still more (possibly quite a bit more) to be squeezed out of this particular rally. Short term trends are looking stretched but the corrections will be rather limited in the near term. Traders see intraday support at 1.1680 (more downside pressure below here) and suspect that the market may have already seen the high for the session at 1.1770/75 overnight. Above 1.1800 intraday is bullish USD/CAD.

The GBP – a currency is consider to be one of the most under valued amongst the G-10 – has powered ahead, supported by GBP buying on the crosses (talk of a large EUR/GBP expiry this morning at 0.8875 has helped).

EUR/USD has managed to sustain yesterday’s break above trend/consolidation resistance overnight; early selling pressure today looks to have based in the low 1.33 area, from a short term technical point of view and look for firm support today between 1.3350/70; there is decent positive momentum under the EUR and look for limited losses and more upside (towards 1.3500/50) shortly. Higher US interest rates at the longer end of the curve (and more supportive interest rate spreads) continue to do little for the USD. Keep an eye on gold and silver; both markets look poised to break out (above $907.10 and $13.02 respectively) and higher levels here would be positive for commodities and a drag on the USD broadly.