The USD sharply weaker today as risk and commodities go ballistic, but there are signs that some divergences relative to past behavior may be developing here. Also - we look at AUDUSD and USDJPY technicals today.
USD, risk and Interest rate spreads
We pointed out yesterday that risk measures had been coming off heavily as the USD was rallying. Over the last two days, however, we have seen an epic bounce in risk and a fairly strong sell-off in the USD, so we're not having much success in finding the leading indicator here in this rather closely correlated market. We do find it interesting that US equity indices are trading at their two-year highs while many of the USD crosses are showing the greenback is still relatively far off its recent lows. This may be a sign that there is enough belief in some of the stronger numbers coming out of the US at the moment that people are deciding that the US economy isn't looking so bad relative to other economies and that the Fed might even be sidelined by the strength - in the most extreme instance possibly not even needing to complete the QE2 program. Not our belief - but the market's. Some proof of this can be found in the interest rate spreads, which still show reasonable support for the USD. Does this mean that we are seeing some weakening of the USD/risk bond? Maybe - the strength of the correlations seems to be a bit weaker in any case due to the introduction of relative US economic reslience.
Interest rate spreads generally USD supportive, but...
The chart below shows that the pressure is still on NZD to fall versus the USD if we are only using interest rate spreads as our guide. USDCHF should be trading at a new high by the same token, but the market isn't interested at the moment. Let's see where we are on the spreads and on the FX charts after the close tomorrow.
Elsewhere, while spreads aren't particularly supportive of the USD selling off against the AUD and CAD at present, very strong commodity rallies in copper and oil and other parts of the commodity complex mean a struggle to weigh which factors are most important, with commodities clearly winning out at the moment. Below we show AUDUSD vs. the price of copper.
Technical highlight - USDJPY
Bonds tried to rally and throw the JPY a rope as well, as USDJPY retreated from resistance areas and other JPY crosses found resistance to varying degrees today as well. Later, most of the bond supported eroded as the colossal rally in risk instruments continued elsewhere. Note the importance, once again, of the Ichimoku cloud level for USDJPY - this time it is the upper cloud that is serving as support. Those looking for a continuation of the sell-off will need to this first important support give way (currently around 83.20). To the upside we have the psychological 85.00 area and then the 200-day moving average currently around 83.70.
Technical highlight - AUDUSD
AUDUSD has rallied very sharply, back above the key flat-line levels that formerly served as support in the 0.9650-0.9700 area. The important resistance levels now are the 55-day moving average around 0.9800, the falling line of consolidation and the 0.618 Fibo retracement for the entire down-move up around 0.9935
Weekly AUDUSD Chart
On the weekly, the rising trendline has even more strategic importance here, now that we have seen the third touch of the line at the low of the recent sell-off. Generally, a trend-line is far more interesting once three touches are in place, as they are an order of magnitude more rare than the pedestrian two-toucher.
Topic: US jobless benefits linked to Bush tax cut deal?
It appears that the Republicans are trying a gambit in which any deal on the extension of jobless benefits (which they oppose because there are no announced cuts elsewhere in the budget to pay for them) might be linked to a deal to extend the Bush era tax cuts beyond the end of this year. If no deal is reached on benefits, the US Labor department says that 600,000 will lose their benefits immediately and another 2 million would lose them at the end of this year.
source: www.actionforex.com
No comments:
Post a Comment