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Quiet News Days Can See Unexpected Moves

On a day minus any real news reports coming out of Europe or the US, the AUD and CAD seem to be the main movers today as traders are looking at the actions of the FED and ECB in a positive way and are feeling confident moving back into the “risk-on”, higher yielding currencies.

Aiding in the move were comments from the Minneapolis FED President.  He commented that the FED should keep rates around the zero level until the unemployment level in the US falls below 5.5%.  Also helping these currencies was a report that Spain is getting closer to formally asking for a bailout.  The bailout for Spain would include ECB bond purchases.  A formal announcement is expected sometime next week.  Spanish PM Rajoy and Italian PM Monti will be meeting in Rome today.

Guest post by  Matthew Lifson, Foreign Exchange Trader,  Market Analyst of  Cambridge Mercantile Group.

According to some analysts, Gold will be one of the commodities that will benefit moving forward by the actions of the FED and the BOJ in the last few weeks.  Analysts say that quantitative easing tends to benefit commodities and that Gold is one that takes the most advantage of such moves.   Investors tend to buy the commodity as a hedge against inflation. If the FED easing lasts until the end of 2014, experts look for Gold to reach a high of $2,400.

As for the EUR, the central currency has bounced off support at 1.2955 and at the moment (5:00 am) is making new highs near 1.3040.  It looks as if the market had gotten themselves short earlier and failing to break the 1.2955 level has seen a reversal of these short positions.  According to reports, Greece is making progress with the Troika to finally secure the next piece of bailout funds.  There does seem to be some “pushback” internally in Greece as PM Samaras is getting some negative feedback regarding budget cuts and other austerity measures.

I expect the currencies to remain within ranges defined earlier this week.  Quiet news days tend to sometimes see unexpected moves as positions are squared ahead of the weekend. We have already seen that as the market first moved lower triggering stops below 1.3000, then has reversed direction and triggered stops of newly shorted positions on the move back up.  There have been some comments this morning by ECB and EU members regarding the proposed European banking union.  According to one EU member, Germany would not oppose the ECB supervision plan.  Resistance for the week stands at 1.3120.

Asian and European stock markets are higher as are the DOW Futures indicating a positive start for the US equity markets.

Matthew Lifson

Matthew Lifson

Matthew Lifson is a Foreign Exchange Trader and a Market Analyst. with Cambridge Mercantile Group.