Forex Investment and Currency Trading

Upside momentum is waning as buying fades and the Fed decision to not increase Treasury purchases last week could lead to more profit taking. In addition, market fair value model shows EUR/USD overvaluation is close to its highs over the past year. The question is whether any EUR/USD sell-off is likely to be large given that, from a technical perspective, most of the major USD crosses appear settled into well-defined ranges. That said there are several data/events this week, outlined below, which could trigger a sharp move in EUR/USD.
FOMC speakers will likely reinforce that a policy tightening is a long [...]

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The currency markets are showing little enthusiasm this morning; quiet markets may well characterize trading this week though the USD looks a tad vulnerable to extending the grinding losses seen over the past week or little more; overnight USD gains made on the back of comments from China’ central bank governor suggesting that there would be no quick move away from the USD have faded a little after the head of the Arab Monetary Fund suggested that the US’ huge debt pile and concerns about the USD’s reserve status could weigh on the currency. European news has been a little [...]

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Overnight we saw China stirring the pot again, renewing its call for the creation of a super-sovereign currency. In its annual financial stability report, the PBOC avoided mentioning the USD by name, but said that “An international monetary system dominated by a single sovereign currency has intensified the concentration of risk and the spread of the crisis.” The report advocated a bigger role for SDRs, and suggested that the IMF be entrusted with managing a portion of its member countries’ foreign currency reserves. The USD underperformed overnight, partly on an improvement in risk sentiment, but particularly after the Chinese comments, [...]

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CHF: Reported intervention against EUR & USD
Reuters & Bloomberg yesterday reported speculation that the SNB has been buying both EUR and USD, consistent with a dramatic move in the CHF crosses. The perceived involvement in USD/CHF came as a surprise to the market, as the SNB had previously stated it would specifically buy euros as part of its intervention policy. But, the weakness in the USD and JPY had meant that daily estimate of the SNB’s trade-weighted exchange had appreciated by more than the level of EUR/CHF would suggest. Indeed, the Swiss TWI was at its strongest post-intervention level ahead [...]

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