Forex Investment and Currency Trading

London is back from the long weekend, it is the start of a new month but there is little appetite for adding fresh “risk” positions so far today, it would seem. If anything, the mood has turned a quite cautious in European trading after some mixed data reports – UK manufacturing PMI falling back under 50, euro zone manufacturing PMI remaining below 50 while German unemployment provided a modest positive with a marginal drop in the total number of job-seekers last month. Chinese stocks nudged a little higher, helped by better PMI data, lifting Asian markets broadly, though the Shanghai index remains firmly in bear market territory; European markets have fallen back modestly, US equity futures are in the red and US yields are trading back close to the recent range lows (with 10-year rates around 3.38% at writing). It all has a distinctly “risk off” feel about it this morning and that is reflected in the price action, with the AUD and NZD the notable under performers on the session so far, with the GBP and CAD not far behind. A neutral-sounding RBA policy statement earlier today (accommodative policy is “appropriate” for the time being) was quite at odds with recent market betting on a rate hike coming as soon as October and compounded pressure on the AUD. The Aussie’s recent struggles in the mid/upper 0.84 zone is starting to look like a slightly more formidable technical hurdle – a potential double top signal – key short term support is now at 0.8155/60 where the mid-August low and the 55-day MA currently converge.

From the look of the price action so far this morning, the markets seem to be leaning towards cutting back risk and buying the USD. Even the JPY is losing modest ground against the generally stronger USD; traders continue to look for firm support for USD/JPY on dips to the mid 92 area at the moment (speculation of option-related and semi-official demand on dips); the JPY may sustain a creeping bid tone while dust settles after the Japanese election though some suspect that overall gains for the JPY will remain limited from a medium term point of view. EUR/USD remains pinned between resistance in the upper 1.43 area and support on the mid 1.42s.