Dean’s review of the market this morning suggested we may have a quiet few days leading into the FOMC meeting on Wednesday. Forex traders are often careful ahead of these big announcements and tend to lighten positions so they are not caught off guard by a surprise rate decision. This results in reduced liquidity and a tightening of the ranges that the Forex markets trade in.
The EURUSD has had a bit of a rally after the battering it took on Friday afternoon. Good numbers out of the US gave the dollar some momentum and we are likely witnessing some profit taking today. Those that were short will be locking in some profits and lightening their positions. The range for today has been well below the average daily range of 61 pips with a brief spike to 1.1197. We opened at 1.1150 and currently trading 1.1184. There is very little data out before Wednesday to affect this pair but we may see a little movement from US Housing Starts in the early afternoon tomorrow.
Very similar action being played out in the GBPUSD. We drifted up this morning from our open at 1.3010 and topped out at 1,3090. The market has drifted back and we currently trading 1.3060. A typical range is 100 pips and we are just shy of that today. Also, not too much on the news front tomorrow to affect this FX pair and we could see a further tightening of the range. A Bollinger band squeeze is a good way to see this reduced liquidity.
The AUDUSD has continued it push higher today and Dean favoured the commodity currencies in his report this morning. Strong support at 0.7440 has proved to be valid and we have seen a nice push higher to 0.7550. The market found a bit of resistance at 0.7570 but we are still trading close to highs of the day. We have traded in a slightly wider range than the average and perhaps a few shorts have been squeezed out. The meeting minutes from the RBA will be out early tomorrow morning and the market will be looking for some guidance on where interest rate policy is headed.
The NZDUSD has been one of the stronger performing pairs of late despite the sell off at the end of last week. We opened at 0.7271 and have reached a high of 0.7324 but trading a little off that now. The market will be watching the Dairy Auctions tomorrow and to see if the higher prices can continue to drive the Kiwi further towards 0.7475. There has been talk that the central bank could look to cut rates to halt it’s advance.
A short in USDCAD was Dean’s preferred trade this morning and he was watching for opportunities. We got a small decline in early trade but this has not followed through in the US session. We are trading a little lower than the open at 1.32. The oil price has bounced a little this morning and one would expect this to be reflected in the Loonie. If we can see continued strength, then the short position will look all that more attractive.
The USDJPY has traded lower all day but we are just off the bottom of the range today. The Yen has strengthened and probably the same profit taking action we saw across most pairs. The Bank of Japan will also be holding a meeting on Wednesday but one wonders what ammunition they have to throw at a strengthening currency. The BOJ has never been scared to get involved in the market and the 100 level remains the key support line.
A very strong day for the Rand (USDZAR) again having opened at 14.20 to the dollar and briefly getting below 14. It seems that no news is good news for the currency. A slow and steady crackdown in “state capture” is having the desired effect with investors. How long this will last is anyone’s guess but good to see it for the time being.
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