AUD / NZD Outlook of the day

AUD/NZD

·         The greenback traded unchanged or lower against the other G10 currencies during the European morning Thursday. It depreciated against AUD, NZD, JPY and CHF, while it was virtually unchanged against EUR, GBP, SEK, CAD and NOK.

·         The Australian dollar continued its rally, taking the first place among today’s winners, driven by a 9.8% rise in firms’ estimates for capital spending for 2014/15, overshadowing a dip in actual capital expenditure in Q1. AUD/USD moved higher as it remained supported by the 0.9200 area, but the most noticeable move, from a technical point of view, came from AUD/NZD which surged above 1.0900, the upper boundary of the sideways path it’s been trading since the 13th of December 2013.

·         Gold continued declining and found support one dollar above our hurdle of 1250. Although we may experience a bounce near that zone (considering positive divergence between our momentum studies and the price action on the 1-hour chart), I still see a negative picture. A dip below the 1250 zone could open the way for the 1235 barrier.

·         AUD/NZD surged during the European morning, breaking above the key hurdle of 1.0900 and completing a short-term inverted head and shoulders continuation pattern*. On the daily chart the 1.0900 barrier is the upper boundary of the long-term sideways path the pair was trading since the 13th of December 2013. As a result I would expect the break to see as a first target the 1.1050 (R1) barrier, which coincides with the 161.8% extension level of the formation’s width. A successful move above that level could extend the advance towards the longer-term target of 1.1210 (R2), slightly below the 200% extension level of the width of the long-term sideways path between the 1.0530 and 1.0900 levels. Nonetheless, zooming in on the 1-hour chart, the RSI seems ready to exit overbought conditions, while the MACD shows signs of topping. As a result we may experience a pullback to test the 1.0900 obstacle as a support this time before the bulls take control again.

·         Support: 1.0900 (S1), 1.0850 (S2), 1.0785 (S3)

·         Resistance: 1.1050 (R1), 1.1210 (R2), 1.1310 (R3)

* Since an inverted head and shoulders formation has bullish implications, if it occurs after an uptrend it is considered a continuation pattern. Usually we identify the formation at market bottoms, signaling a trend reversal.

USD moving higher against most G10 currencies ! USD/ZAR chart !

USD/ZAR

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      The dollar continued moving higher against the most of the other G10 currencies during the European morning Wednesday. It was lower only against NOK, while it remained near its opening levels against JPY and CAD. The losers were NZD, GBP, AUD, SEK, EUR and CHF. 

US - Worrying about volatility being too low

Worrying about volatility being too low

·         US officials have expressed concern that volatility in the markets is too low. Low volatility is a concern because it encourages investors to take on too much risk and raises the likelihood of a crash in the future

·         It’s clear that this process is indeed unfolding:  investors do expect volatility to remain low, and they are taking on more risk.

·         However, I expect volatility to start to rise again at least by the end of the year.

·         In an environment of rising volatility, USD, GBP and perhaps NZD may do well. AUD is likely to underperform, and EUR may be hit. Carry trades are also vulnerable.

EUR/USD - Outlook 27/05/2014

·         EUR/USD failed to reach the 1.3600 level and after finding support at 1.3612 (S1), moved higher to trade again above 1.3650. The pair is now trading below the resistance of 1.3685 (R1), which lies near the 50-period moving average. Comparing both our momentum studies with the price action, we can identify positive divergence, thus I cannot rule out further advances. Moreover, on the daily chart, we can see a possible piercing line candle formation, favoring the continuation of the rebound. Nonetheless, considering that ECB policy makers are “comfortable” of taking action at the Bank’s meeting next week, I still consider any bullish waves as renewed selling opportunities before the bears prevail again.

·         Support: 1.3612 (S1), 1.3475 (S2), 1.3400 (S3).

·         Resistance: 1.3685 (R1), 1.3745 (R2), 1.3790 (R3).

FED policy , European Parlamient elections and EUR/USD expectations !

·         Conflicting views of Fed policy:  Fed policy is a focus this week, as I wrote yesterday, but just because people are focusing on it doesn’t mean it’s becoming any clearer. The Wall Street Journal suggested that the FOMC minutes to be released on Wednesday may have a hawkish tone, but another press report that the markets apparently took more seriously suggested the minutes would have a softer tone. Speaking in Texas, San Francisco Fed President Williams noted that inflation has been persistently below the Fed’s long-term target and said he was concerned that the recovery in the housing market had “stalled”. But he quickly contradicted those dovish comments by saying that the Fed would probably start raising rates over the next year or so as part of the process of “normalization” (which the market already expects, but it’s another thing to have it officially confirmed.) Investors started to worry that comments like this would be part of Wednesday’s FOMC minutes and 10-year yields moved up 2 bps. Fed Funds futures moved off their lows yet still ended the day with implied rates at the long end down 5.5 bps.

·         There was a similar mix of views with regards to ECB policy. ECB Board member Mersch said “the probability that the Governing Council will act already at its next meeting in June has risen significantly”, but Governing Council member Nowotny said that negative interest rates “must still be thoroughly discussed”.

·         The fact that EUR/USD was unable to make new lows against this mix of views made investors nervous and there was some short-covering as a result.

      I think the market is starting to pay more attention to this weekend’s European Parliament elections and this is likely to be negative for the euro.

German Central Bank (Bundesbank) - EURO/USD Mover !

The Bundesbank is open to supporting aggressive--and in some cases, for the ECB, unprecedented--steps including negative rates on bank deposits, long-term loans to banks at capped interest rates and purchases of packaged bank loans, a person familiar with the matter told The Wall Street Journal.

 Pressure on the Euro as the German Central Bank backs Mario Draghi's speech and we are looking forward to that 5th of June ECB meeting where important decision will be taken. This "package" is rumored to include negative rates on bank deposits, long-term loans to banks at capped interest rates and purchases of packaged bank loans.

It is pretty obvious that the ECB is willing to take unprecedented measures to reach it's targets, is it the time to see the Euro slipping to the 1.30 mark again? 

Euro and Yen , time to decline ?

Our busy week has started as expected and many questions are looking for answers at this point .
many traders are wondering themselves right now if the Euro and the Yen have come to a reversal point.
The ECB is ready to act in June as Mr. Mario Draghi (president of the ECB ) mentioned this past Friday in his speech, and  Japan's current account shows that surplus continues shrinking.

What if Japan's current account surplus turns into a deficit as figures show long term?
How is Japan going to attract funds into its financial markets in order to to pay bills? having one of the lowest interest rates does not help this task. In case of a change in the interest rate policy might cause the yen to weaken even further .

Busy and interesting week with many opportunities for traders.

Ukrainian Conflict huge market mover ?

This internal struggle that Ukraine is going through is escalating.
A lot of tension in Donetsk region prior the referendum that is scheduled to take place tomorrow. The result of this will have a big impact or ?
The markets have "ingored" somehow this conflict from the very beginning but now we have a big step a head of us. Is this the time when markets will really react ?

We will have to wait and see what the result of the referendum is and then how the market is going to react during this very promising volatility wise trading week.

FXCy launch !

So ...here we go ..

I have thought about starting a blog for quite some time now but never really decided to start the project.
So there I was yesterday afternoon having my self made  Freddo Cappuccino, speaking to a friend that just created a work related blog in a few minutes as he claimed and I decided to start my own !

This blog will be a Forex blog trying to give more inside about the exciting and volatile FX market.