A moment of “risk on”

2

The Australian Dollar moved back above the 1.0200 as retail sales were better than expected and the RBA left rates unchanged.  The retail sales number increased 0.9% in January, which was much better than the expectation of 0.4%.  After the rate decision, which was no surprise, RBA governor Stevens commented that inflation will be “consistent with the target” and the growth will be “ a little below trend” for this year.

He also mentioned that the current monetary policy was appropriate.  And to cover any glitches in the economy going forward, he stated that if necessary the central bank will look at possible policy easing in the future.  After falling as low as 1.0115 yesterday, the AUD is back near the 1.0240 area.  Support for the currency is at 1.0200, while resistance remains at 1.0280.

The Canadian Dollar remains under pressure, as it traded yesterday near its weakest level in eight months.  As a commodity currency, the CAD felt the pressure of crude oil falling to its lowest level in 10 weeks.  Crude oil is Canada’s largest export.  Adding to this, was a report out of China, which is Canada’s third largest exporting partner that showed the economy expanding at a slower than anticipated pace.

The Bank of Canada meets tomorrow and is expected to keep interest rates unchanged at 1%.  Traders will be listening closely to the statements made following the meeting to determine the direction of the central bank.  Dovish statements will certainly push the CAD lower.  USD/CAD reached a high of 1.0271 overnight.  Support for USD/CAD is at 1.0250 and 1.0220, while resistance at the moment appears at 1.0280 and 1.0310.

After trading around the 1.3020-30 level during most of the overnight trading session the EUR jumped to a high of 1.3075 after Eurozone, German and French PMI numbers were better than expected.  French PMI improved from 43.6 in January to 43.7 in February.  Germany’s PMI was 54.7, when it was expected to be only 54.1 and Eurozone PMI was 47.9 in February, when the expectation was 47.3.

The markets chose to ignore PMI drops in Italy and Spain.  It seemed that traders were looking for any good news to buy the EUR, jumping on this news to squeeze the short positions out ahead of Thursday’s ECB meeting.   The ECB is expected to leave rates unchanged.  According to the technical charts, the direction on the EUR remains bearish and will stay that way until the currency breaches the 1.3170 level.  Current resistance is at 1.3080, while the 1.3020 area remains supportive.

For the time being the markets seem to be ignoring the Sequester that went into effect on March 1 in the US, with automatic across the board cuts of $85 billion to the US federal budget.  According to government leaders, these cuts could remain in effect for months, as there seems to be no middle ground in negotiations between the Republicans and Democrats emerging at this time.  There have been reports of longer lines at airports since these cuts went into effect.  The TSA is one of the government agencies that is effected by the Sequester.

The direction for the EUR has been set by the early morning European move higher.  If the equity markets continue to rally, we could see further addition to “risk on” trading and a higher EUR.  Once again, at least for the time being, traders are ignoring the political problems in Italy.  The question here is whether or not the North American market continues to follow through.

Further reading: Italy’s Grillo suggests a euro-exit – an “Italeave”

The Australian Dollar moved back above the 1.0200 as retail sales were better than expected and the RBA left rates unchanged.  The retail sales number increased 0.9% in January, which was much better than the expectation of 0.4%.  After the rate decision, which was no surprise, RBA governor Stevens commented that inflation will be “consistent with the target” and the growth will be “ a little below trend” for this year.  He also mentioned that the current monetary policy was appropriate.  And to cover any glitches in the economy going forward, he stated that if necessary the central bank will look at possible policy easing in the future.  After falling as low as 1.0115 yesterday, the AUD is back near the 1.0240 area.  Support for the currency is at 1.0200, while resistance remains at 1.0280.

The Canadian Dollar remains under pressure, as it traded yesterday near its weakest level in eight months.  As a commodity currency, the CAD felt the pressure of crude oil falling to its lowest level in 10 weeks.  Crude oil is Canada’s largest export.  Adding to this, was a report out of China, which is Canada’s third largest exporting partner that showed the economy expanding at a slower than anticipated pace.  The Bank of Canada meets tomorrow and is expected to keep interest rates unchanged at 1%.  Traders will be listening closely to the statements made following the meeting to determine the direction of the central bank.  Dovish statements will certainly push the CAD lower.  USD/CAD reached a high of 1.0271 overnight.  Support for USD/CAD is at 1.0250 and 1.0220, while resistance at the moment appears at 1.0280 and 1.0310.

After trading around the 1.3020-30 level during most of the overnight trading session the EUR jumped to a high of 1.3075 after Eurozone, German and French PMI numbers were better than expected.  French PMI improved from 43.6 in January to 43.7 in February.  Germany’s PMI was 54.7, when it was expected to be only 54.1 and Eurozone PMI was 47.9 in February, when the expectation was 47.3.  The markets chose to ignore PMI drops in Italy and Spain.  It seemed that traders were looking for any good news to buy the EUR, jumping on this news to squeeze the short positions out ahead of Thursday’s ECB meeting.   The ECB is expected to leave rates unchanged.  According to the technical charts, the direction on the EUR remains bearish and will stay that way until the currency breaches the 1.3170 level.  Current resistance is at 1.3080, while the 1.3020 area remains supportive.

For the time being the markets seem to be ignoring the Sequester that went into effect on March 1 in the US, with automatic across the board cuts of $85 billion to the US federal budget.  According to government leaders, these cuts could remain in effect for months, as there seems to be no middle ground in negotiations between the Republicans and Democrats emerging at this time.  There have been reports of longer lines at airports since these cuts went into effect.  The TSA is one of the government agencies that is effected by the Sequester.

The direction for the EUR has been set by the early morning European move higher.  If the equity markets continue to rally, we could see further addition to “risk on” trading and a higher EUR.  Once again, at least for the time being, traders are ignoring the political problems in Italy.  The question here is whether or not the North American market continues to follow through.

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About Author

Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned the significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.

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