Forex Investment and Currency Trading

Canadian Dollar
The CAD has a data-free week (or little more) ahead of it, with no major domestic economic reports due until building permits on July 7th and no major speeches scheduled. Left to its own devices, it remains to be seen whether the CAD can recover some of its recent relative under performance. Analysts remain bullish on the CAD versus the USD from a longer term point of view given Canada’s stronger structural position relative to the US, sounder financial system and lack of credit/quantitative easing policies and feel that global investors who are seeking a safe, hard currency alternative [...]

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The week ahead includes a fair amount of economic data, the highlights being May retail sales, April business inventories and the latest instalment of the Federal Reserve’s Beige book. On Thursday, the Fed will also release Q2 Flow of Funds figures which should confirm an ongoing destruction of household wealth, given poor equity market performance and ever-lower home prices. Several Fed official speakers are on tap, though the calendar begins to wind down ahead of the upcoming FOMC meeting on 23-24 June. At the end of the week, Treasury Secretary Geithner will head to Italy to join the G-8 group [...]

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EUR

EUR-USD raliied since putting in higher lows
EUR-USD short term fair value overvalued vs. S&P 500 IRS spreads
EUR-USD short term fair value undervalued vs.Baltic Dry Index
EUR is benefiting from broad USD weakness in 2009

JPY

JPY NEER has stabilised for now after correcting lower
Japan’s external surplus continues to collapse
Japanese investors continue to invest in foreign assets
Weak oil, domestic demand should eventually boost C/A surplus

AUD

Australia is heading into recession
Markets are focused on limited further room for RBA easing
AUD-USD looks well-positioned to benefit from USD weakness

NZD

New Zealand’s economy remains in a deep recession
Market expects the RBNZ to keep cash rate at 2.5% through 2009
Fiscal and [...]

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The AUD has appreciated strongly in conjunction with the rally in stocks. Indeed the Aussie has outperformed all the other majors since March 9th, supporting the trade idea of long recommendation in AUD/JPY.
Last week brought a string of positive data surprises. Retail sales continued to surprise on the upside helped primarily by the fiscal boost from the government and the rapid flow through of easier monetary policy. The housing market is showing signs of life given the pick up in building and mortgage approvals, although house prices are continuing to fall. Finally, Australia’s external balance has improved due to the [...]

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