NZDCAD –  Back to the Lows?

NZDCAD – Back to the Lows?

Chart Of The Day

In a rather butchered syntax, the RBNZ came out on the wires stating that it currently had no plans for unconventional policy (ie QE) anytime in the foreseeable future. The comment was more telling for what it denied rather than what it stated s it revealed that RBNZ is clearly much more preoccupied with easing policy initiatives rather than having any plans to tighten.

On the other hand, BOC meets on May 30th and although the market is only assigning 27% probability to rate hike in May, the bank may offer forward guidance that is more hawkish. Taken together with promising signals on NAFTA deal from President Trump, the loonie looks like a relative bid against the kiwi which suggests that NZDCAD can be headed back towards .8800 in the next several days.

GBPUSD – Fresh Lows in View?

GBPUSD – Fresh Lows in View?

Chart Of The Day

Cable has been the big loser today after Governor Carney dismissed any notion of hiking rates anytime in the foreseeable future.

Speaking at the Mansion House, Mr. Carney stated that, “From my perspective, given the mixed signals on consumer spending and business investment, and given the still subdued domestic inflationary pressures, in particular, anaemic wage growth, now is not yet the time to begin that adjustment.

In the coming months, I would like to see the extent to which weaker consumption growth is offset by other components of demand, whether wages begin to firm, and more generally, how the economy reacts to the prospect of tighter financial conditions and the reality of Brexit negotiations.”

In addition to the dovish news from BoE, cable was hit by news that PM May is having trouble negotiating with the ultra-right DUP party and if those talks stall, the prospect of a Tory government could be in doubt which is sure to propel pound even lower.

Technically the pair would make a symmetrical bottom at the 1.2500 level, which was the breakout point at the time Ms. May called the snap election. With political and monetary news turning ever more negative cable is headed that way.

CADJPY – Back to the Lows?

CADJPY – Back to the Lows?

Chart Of The Day

It’s been a rollercoaster trip for CADJPY over the past 24 hours. The agreement to curb production by OPEC boosted oil by 7% and more hawkish rhetoric by Kansas Fed Chief Esther George added fuel to the fire sending the pair towards the 78.00 figure. But just as quickly as it rose, the pair gave back all of it gains and then some when equities tumbled in afternoon NY trade today.

The key question going forward is whether this spike in risk aversion is just a one-day affair or the start of a more serious selloff as investor begin to worry about the financial risk posed by the possible liquidation of Deutsche Bank. Tomorrow the market will also get a glimpse at the Canadian GDP data, and while these are only monthly results any miss of expectation could add to the woes and push the pair towards a retest of the bottom at 75.00. For now, the technicals have carved out a very ugly shooting star on the dailies and until those highs are broken, every rally is a sell.

GBP/USD – Back to the Lows?

GBP/USD – Back to the Lows?

Chart Of The Day

After failing at the 1.3450 level cable saw a major breakdown today dropping below 1.3200 figure on the back of cooler than expected CPI data as lower exchange rates failed to spark any inflation in the UK economy.

Tomorrow the market get a glimpse at the labor numbers as well as wage data and the day after that the BOE will make it monthly announcement on policy. If the employment numbers miss then the UK central bankers will feel emboldened to ease further, especially with inflation non-existent. That suggests that sterling could decline to 1.3000 over the medium term horizon as rates in UK continue to decline.

Technically the pair has support at 1.3000 and then 1.2800 levels while the upside continues to be contained by the 1.3450 level.

AUD/NZD – Headed for New Lows

AUD/NZD – Headed for New Lows

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For the past month, AUD/NZD gradually trended lower and we continue to look for new lows in the currency. The sharp sell-off in U.S. equities at the end of last week stripped the Australian dollar of its beginning of the week gains and left the currency in negative territory. Labor market numbers are due for release next week and the market expects a relatively robust gain of 15K new jobs on top of the 27K new jobs generated in July but according to the latest PMI readings from the Australian Industry group all three sectors -- manufacturing, construction and services are deep in contraction territory having fallen by as much as -9.5 points in just one month alone. What’s even more troubling is that employment sub-indexes of all three reports are well below the 50 boom/bust line suggesting that at very best the labor report next Wednesday will miss its mark, and at very worst could show a net job loss for the month. As such, we expect further losses for AUD. Meanwhile dairy prices continue to rise and the improvement in New Zealand retail sales and trade numbers suggests that next week’s Q2 GDP numbers will be strong. For these reasons we could see new 2016 lows in AUD/NZD next week.

Technically, AUD/NZD resistance is at 1.04 and more significantly 1.05 but we have to turn to the monthly charts for support. There’s some support at 1.03, which is near where the currency pair ends the week but the more significant support level is the March 2015 low near 1.0150

AUDNZD to New Lows?

AUDNZD to New Lows?

Chart Of The Day

AUDNZD to New Lows?

For the past few weeks we have seen AUDNZD gradually move lower and today, it broke a brief consolidation to trade at its lowest level in nearly 8 weeks. Very little Australian and New Zealand data was released this week and the few reports that out should have actually driven the currency pair higher (Australian building permits rose sharply while NZ permits tumbled). That changes tonight with Australian retail sales, manufacturing PMI and Chinese data scheduled for release. Judging from the price action of the currency investors fear that the numbers will be weak but the main reason for AUD’s underperformance versus NZD is central bank policy. RBNZ Assistant Governor McDermott suggested yesterday that they are not eager to lower rates again because the housing market is overvalued and NZ is doing better relative to rest of world. The only thing we’ve heard from the RBA on the other hand is that they are worried about the strong level of the currency.

Technically, there’s no support in AUDNZD now until the July low of 1.0320. If that is broken then we could see 1.01 easily. Resistance is at the breakdown point of 1.04 but the more significant level to watch is 1.0530, which is where the 20 and 50-day SMA converge.

GBP/USD – Back to the Lows?

GBP/USD – Back to the Lows?

Chart Of The Day

After making several failed attempts at 1.3500 cable is back towards the key 1.3000 support level as the sellers continue to put pressure on the unit. Although the political resolution of Brexit is moving slowly, the market is now focused on the possible easing by BoE which could cut rates as much as 50bp at their meeting in August.

In the meantime the markets will focus on the eco data from UK, with tomorrow’s UK labor numbers coming next. The market anticipates a rise in jobless claims by 3.9K but the uptick could be bigger given the shock of Brexit on UK businesses which likely suspended all hiring for now. A big jump in unemployment figures would only spook the market further and could send cable towards a test of the key 1.3000 level.

A break there would up retest of the post Brexit lows at the 1.2800 figure, meanwhile the upside is firmly capped by 1.3500 top.

GBP/JPY – Fresh Lows Ahead?

GBP/JPY – Fresh Lows Ahead?

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GBP/JPY made yearly lows today dropping below the 150.00 level before recovering slightly ahead of the North American close. The pair is at the intersection of the perfect storm in the Brexit trade as it stands to either benefit or suffer the most from the results.

The Brexit story is not only a story about the UK economy but also about the stress on global capital markets. If UK were to leave EU it could start a trend that could unravel the current economic order and send markets into massive selloffs which is why along with the decline in GBP USD/JPY has been dropping as well. Of course if the risk passes the relief rally would trigger a swift short covering move in both pairs.

For now the GBP/JPY remains under pressure and another test of 150.00 could open the way towards 145.00 while the upside is capped at 155.00 until the referendum vote provides clarity.

USDCAD – Back to the Lows?

USDCAD – Back to the Lows?

Chart Of The Day

With the exception of the pound there is perhaps no more volatile major currency to trade than the Canadian dollar. The loonie has been buffeted by the whims and fortunes of crude and as oil has headed towards $50/bbl the loonie is now moving towards its recent swing lows near the 1.2500 level.

However despite the recovery in crude Canadian economy has not been nearly as resilient with recent data showing a slowdown across many sectors. Today’s slip below the 50 boom/bust level in Ivey PMI was only the latest sign that the economy in the Great White North is lagging.

This week the market will get a look at the Canadian labor data due Friday. The market is looking for rebound to 5K from -2K the month prior, but given the slowdown in activity Canadian labor numbers could show another contraction which could offset any further gain in oil and keep USD/CAD from making fresh swing lows. For now 1.2700 remains key support while 1.3000 is now resistance.

USDJPY – Back to the Lows?

USDJPY – Back to the Lows?

Chart Of The Day

Well Janet Yellen couldn’t have hurt the dollar more if she tried. Her latest speech made it perfectly clear that the Fed is going to be extremely cautious in normalizing monetary policy as its remains far more concerned about global capital markets rather than any inflationary pressures at home.

Ms. Yellen made it perfectly clear that for the time being the Fed will ignore most of the fundamental data and will likely remain stationary for the foreseeable future. The Fed funds futures are now pricing in 100% chance of a rate hike only by December of this year.

Ms. Yellen’s dovish posture creates a set of asymmetrical risks with respect to this week’s data. Any positive data may be minimized on the assumption that the Fed will not act anyway, and any negative surprises will only continue to weigh on the dollar.

Yet despite the negative sentiment USD/JPY remains in an uptrend and only a break below the 112.00 mark would rupture the current trendline. That’s why despite all the negative news the pair may still be a buy the dip story as long as it can hold those levels