Over the last five trading days, the Austrian Dollar has over performed against the majors with the AUDGBP recording a 0.6% gain.
USD – The USD over the same period lacks direction as the market seeks for new clues that the Fed will lift rates in March. The USD direction in the short term depends on the FOMC statement that is due for release on Wednesday. Traders will be on alert for hints that the Fed will remain on course to gradually raise rates, so traders should expect USD market volatility to start to pick up in the coming days.
GBP – The GBP in recent days’ trading continues to remain under pressure as the GBP downtrend remains intact. The fact that BoE governor Carney took a dovish line during his latest parliamentary testimony, and said that “conditions are not yet right for a rate hike”, may give further fuel to short sellers. However, the technical for the GBPUSD may be pricing in a potential move higher as price bounces off of recent lows near the 1.4075 area.
CAD – The Bank of Canada left rates unchanged, which is leading a small recovery bounce for the CAD, since the markets were bracing for a rate of 25 basis points. The CAD should continue to trade lock step with Oil prices, so CAD traders will still remain focused on Oil moves for direction.
JPY – The JPY continues to be the destination for cash outflows from China as Asia stock market worries should keep the JPY at higher levels. However, traders should remain on alert since it is not uncommon for the BoJ to intervene if the stronger JPY starts to make policy makers uncomfortable.
The AUD remains at risk to further drops in equity and commodity prices, with direction for the AUD to be determined, at least in the medium term, from the outlook and developments in China. The GBP on the other hand has seen its trade deficit shrink which could provide some support for the GBP; however, BoE Carney’s recent remarks about rates remaining low for some time could keep a lid on the GBP.
Technically, the GBPAUD momentum (Stochastic) indicates oversold conditions with upside price projections to remain limited to stay within the downward longer term trend channel. My conclusion for the short term trader is to enter into buy positions above 2.0490 for a 2.0590 target.
The USDJPY is now bouncing off the recent 115.90 lows and may be entering a short term recovery phase. I am expecting for price to attempt to test the early January support now turned resistance (119.70 ), before we can determine if an actual trend reversal is taking shape. My strategy for the short term is to hold long positions for a 119.70 initial target.
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Senior Currency Strategist
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