USDCAD – Will the Rally Continue?

USDCAD – Will the Rally Continue?

Chart Of The Day

USDCAD remains well bid at the 1.2600 figure as oil struggles with the $50/bbl handle. The pair appears to have made a major bottom last week and any decline in crude is likely to take it towards the 1.2800 figure.

To that end, tomorrow crude inventory figures could be key. If the number shows a disappointing draw in inventories, it will drag crude below the $47/bbl level and propel USDCAD higher. There are good reasons to suspect that crude number will miss, Seasonally July has represented peak demand for crude and August demand is likely to wane in comparison. Furthermore, although OPEC continues to make noises about capping supply, new production from Lybia will likely offset any OPEC agreements and should keep a lid on the price.

All of this creates the prospect of further gains for USDCAD. Even if the numbers prove bullish, the loonie is unlikely to manage much of a pop as 1.2500 remains solid support in USDCAD.

AUD/NZD – Will The Drop Continue?

AUD/NZD – Will The Drop Continue?

Chart Of The Day

In Asia this week, both New Zealand and Australia have important economic news on the docket. Australia has employment reports and New Zealand has its GDP numbers scheduled for release. NZ GDP is expected to be strong thanks to the improvement in trade activity. Australian employment, on the other hand, could soften with the manufacturing and service sectors reporting job losses.

The AUD/NZD pair is already in a major downtrend as the interest-rate differential between the two economies continues to widen.If the Australian employment data proves weaker than expected, the Reserve Bank of Australia may be forced to reconsider its neutral stance, and markets will begin to price in another rate cut. A decline could take AUD/NZD to 1.0300 with parity the ultimate target while 107.00 caps the upside.

CAD/JPY – Can the Rebound Continue?

CAD/JPY – Can the Rebound Continue?

Chart Of The Day

After a massive 2000 point drop CAD/JPY has been in a slow but steady rebound for the past three months making higher lows with each successive wave up. The recovery has been driven by firmer oil prices, but with crude leveling off at the $45/bbl level the pair may need another catalyst to push it higher.

One possibility is the improving tone in USD/JPY trade which appears to have bottomed out and is now making a recovery move. Although few traders expect the Fed to do anything at the upcoming June meeting, better US data could provide scope for further rally in the pair. That’s why all eyes will be on US Retail Sales tomorrow to see if the consumer is finally ready to spend. The market is looking for a rebound of 0.3% from -0.1% the month prior. If the news surprises to the upside it could lift USD/JPY towards 110.00 figure and push CAD/JPY towards 86.00

CAD/JPY – Can the Rebound Continue?

CAD/JPY – Can the Rebound Continue?

Chart Of The Day

CAD/JPY has been on a bounce lately boosted by recovery in the oil prices and better risk appetite. But the pair may be running out gas, as today late day reversal suggests that 84.00 may be too much for the unit. The drop in the pair was due to late day fade in oil prices as well as a wobbly close in stocks with both loonie and USD/JPY dropping as the day came to a close.

Tomorrow the market is going to get a look at the Canadian Retail Sales which given the upside surprise in today’s Wholesale Sales number could beat their mark as well. That would bode well for the loonie as it would suggest that the Canadian consumer remains healthy despite the complete collapse of oil prices over the past few months. If the economic data provides loonie with a boost, the pair could once again make a move towards the 84.00 level.

GBP/AUD – Will the Party Continue?

GBP/AUD – Will the Party Continue?

Chart Of The Day

Fundamentals

GBP/AUD has been on a tear this year as relatively steady cable and sinking Aussie have sent the cross to multi-year highs. Although AU rates still remain nearly 200 basis points higher than UK rates the absolute value does not matter. What matters in the currency market is the future value of rates and according to convention the trend is against the Aussie and towards the pound. The RBA has hinted that there will be more cuts to come while the BoE is preparing the market for eventual normalization. If this Wednesday’s AU employment data proves disappointing then the upward trend in GBP/AUD is likely to continue.

Technicals

Technically the pair is on the verge of a multi-year breakout and a move through the 1.9700 level could open a run towards the key 2.000 level. Meanwhile support rests at 1.9400 and even stronger support at 1.9000.

Forex: 10 Events to Watch Next Week

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Forex: 10 Events to Watch Next Week

In order of release

1. UK Consumer Price Index (Aug 19)
2. New Zealand Dairy Auction (Aug 19)
3. RBA Semi-Annual Testimony (Aug 19)
4. Bank of England Minutes (Aug 20)
5. FOMC Minutes (Aug 20)
6. HSBC China Manufacturing PMI Aug Flash (Aug 20)
7. Eurozone PMIs (Aug 21)
8. Jackson Hole Summit (Aug 21)
9. Canadian Retail Sales (Aug 21)
10. US Philadelphia Fed Index (Aug 22)

Will EUR/NZD Continue to Fall?

Will EUR/NZD Continue to Fall?

Chart Of The Day

Fundamentals

The market’s voracious demand for New Zealand dollars drove EUR/NZD to a fresh 1 year low. There’s no bigger divergence in G20 monetary policy than the one between the Eurozone and New Zealand. This year, the European Central Bank was the only major policymaking body to cut interest rates, which compares to the Reserve Bank of New Zealand, who was the only one to raise rates. But past changes to monetary policy is not the reason why EUR/NZD dropped to fresh lows over the past 24 hours. Instead, weak Eurozone data and an optimistic outlook for New Zealand boosted the market’s expectations for ECB easing and RBNZ tightening. Both central banks have made it clear that they could continue on their current monetary policy course and the prospect of additional stimulus from the ECB and rate hikes from the RBNZ should keep EUR/NZD under pressure. On the basis of fundamentals, we expect EUR/NZD to drift towards 1.52 ahead of this month’s RBNZ rate decision.

Technicals

Taking a look at the weekly chart of EUR/NZD, the next level of support for the currency pair is 1.5393. If this level is broken, then there is no major support until the 2013 low of 1.5082. The downtrend in EUR/NZD remains intact as long as the currency pair holds above its former breakdown level of 1.5707.