Forex Investment and Currency Trading

Unwelcome echoes of SARS fill the news headlines this morning, with the market focused on the “swine flu” public health emergency; the MXN has been hit hard by expectations that the outbreak will hit the tourism sector and the broader economy but with cases noted across North America and in the
EU, many other economies are potentially at risk of a broader “pandemic”. The EU has advised against non-essential travel to infected areas. The financial markets have switched quickly into risk-averse mode this morning, with equity markets dropping sharply early morning and higher risk currencies under performing while the JPY out-performs. [...]

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The Fed and the Bank of Canada appear to have shifted into data-watching mode following the 25 basis-point ease in the United States and the Bank of Canada’s 50 basis-point slice to the overnight rate in April. The Fed’s policy statement suggested that committee members view the cumulative 325 basis points of easing plus non rate-related liquidity measures as providing the foundation for financial markets to function and the economy to recover. The statement did not signal a definitive end to rate cuts but more of a switch to a “wait and see” stance.
While no significant pick-up in growth is [...]

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There are no significant data releases scheduled today, with the resulting limited event risk presenting the scope for a quiet start to the week. The February Canadian international securities transactions data is unlikely to move markets, while there are no data releases scheduled in the U.S. Three Fed officials are scheduled to speak today, but none of the topics are considered market-moving in nature. Keep in mind that the BoC interest rate decision is tomorrow, with market forecasting a 50bp cut in rates.
Short-Term Outlook: Valuations Favour a Move Higher Today
With the hourly studies generating a buy signal from oversold levels, [...]

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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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