Forex Investment and Currency Trading

The major currency pairs are off to a fairly quiet start, with somewhat disappointing Chinese data releases overnight driving the market out of the “risk” currencies and back into common or garden “safe havens”; commodity currencies are under performers while the JPY and CHF are the out-performers on the session so far, in other words. The USD generally looks a little softer in DXY term perhaps reflecting the losses seen in US equity futures; or perhaps not. Some analysts are not eager to draw a line under the USD’s inverse relationship with equities at the moment – or, more particularly perhaps, to jump on the pro-dollar bandwagon; the USD remains over valued from a longer term point of view and the weak US fiscal position will ultimately pull the currency lower. The underlying trend higher in EUR/USD remains positive – albeit very choppy – in the past few weeks. The 1.4075/00 area should provide good support for the EUR in the short term and some traders look for medium term strength towards the 1.50 area. In the short term, there is a fair bit of event risk to deal with – namely Treasury supply (USD37bn in 3-year notes) today and the FOMC conclusion tomorrow. We see limited USD upside at the moment.

The JPY is the stand out performer on the day so far; the market is slowly but surely taking back a good chunk of Friday’s huge rally in USD/JPY and intraday losses have taken spot right back towards key support on the daily “cloud” chart at 96.25; a daily close under here is liable to see a further unwind of the recent JPY weakness. The Kiwi’s under performance has been driven by worries that the local economy could be affected by drought conditions; NZD/USD has pivotal support at 0.6640, however; the loss of support here may see the market slide quickly back to the 0.65 zone.