Forex Investment and Currency Trading

The markets will be easing back slowly after the long weekend in the US but the USD is trading generally firmer as risk aversion appears to be creeping up on the markets again; the JPY is the top performer on the session so far, however, reflecting the view that the USD is no longer necessarily the “go to” currency in times of risk aversion or market uncertainty. Weaker than expected US payroll data last week weighed on risk sentiment and that may drive commodities and equity markets lower still; with the S&P 500 close to important short term support around the 885/895 area (200-day MA at 887), further marked losses in equities will likely drive risk aversion up further. The coming week holds a lot of data releases, however, but one that might not be a “marquee” event may be one of the more important; Singapore releases its Q2 GDP sometime over the course of this week and the Asian exporter is expected to see a strong bounce growth (to around 12-13% on an annualized basis) which may help temper some of the building gloom developing over the global economy.

The G8/14 meeting in Italy this week will also be a major focal point for the markets, but with this particular gathering falling between April’s G20 meeting in London and the September G20 meeting in Pittsburgh, expectations are perhaps suitably low that the meeting will produce any significant initiatives. China continues to provide some apparently mixed messages on the USD but the “dollar debate” was joined this weekend by France and with many BRIC countries pondering ways to avoid the USD, some continue to think that this is a potential stumbling block for the currency, particularly as the USD has hardly benefited from the central banks’ continuing appetite for USD-denominated assets of late. The USD is likely to come up in discussions at some stage but some suspect the issue of the USD’s reserve status will not feature in official the G8 communiqué.

Speculation that the BoE may take up the option to extend its QE policy further at this week’s policy meeting will likely keep the GBP on the defensive. GBP/JPY is testing important support around the mid 153 zone and looks poised to slip. After struggling to break above 1.6650/00 recently, Cable may drift back to the 1.60 zone at least.