Forex Investment and Currency Trading

USD/CAD – Support at 0.9940 and 0.9724 is expected to attract buying interest for a return to 1.0343. USD/CAD remains locked in a broad 0.9700-1.0400 trading range as overbought conditions caused the rejection of the top end of the range two weeks ago. A base building processis is underway, with support at 0.9940 and 0.9724 expected to attract buying interest for another test of resistance at 1.0343. Adaily close above this level would resolve the consolidative rectangle pattern to the topside, targeting 1.0468 and 1.0653 thereafter. Target remains located at 1.0335.
EUR/USD – Close above the cyclical high at 1.5905 would favour greater [...]

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USD
Event risk: Mixed messages from the chain-store data but broad recessionary conditions and 4 consecutive falls in retail jobs suggest downside risk to consensus calling for a 0.2% rise in core retail sales (Mon). The ECRI leading index hints at still more potential downside for the Empire survey (Tue) and Philly (Thur). A 7%+ fall in Feb permits warns March housing starts (Wed) could fall sharply too. The Fed’s Beige Book (Wed) is likely to be peppered with anecdotes of yet more slowing in activity while the core CPI (Wed) should bounce back from an aberrant flat outturn to [...]

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Carry trades were unwound overnight as increasing risk aversion saw low yielders outperform high yielders across the board. Equities drifted lower in both Asia (Nikkei down 1.05%, HSI 1.35% lower) and Europe (down ½-1%) in line with the flight-to-quality bid, as credit concerns were once again in the spotlight with news that Citigroup is currently in talks to sell $12bn of loans at a loss to Apollo Management, Blackstone Group LP and TPG Inc LP, sparking fears that other leveraged loan players maybe suffering similar problems with their leveraged loan portfolios. In terms of data, the only release of note [...]

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AUD
Policy rates rose for two months consecutively in February and March. But markets now price the next move in rates as down and this represents a significant danger for the AUD as it is starting from high levels supported primarily by attractive rate differentials.
Immediate rate cut risks shouldn’t be exaggerated. The RBA’s latest monetary policy statement was certainly more dovish, but that only made it broadly neutral as the previous stance had been clearly hawkish. There are, as the RBA said, some tentative signs of weakness in the Australian economy, with business and consumer sentiment both weakening and credit growth [...]

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