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USD/JPY threatens fall to six-week low

  
Analysis, Forex

Big turnaround in USD/JPY

A mix of risk-on has shifted into more of a dollar selloff.
It’s been a wild ride in USD/JPY today as the pair dropped on the Navarro story, then rebounded on the denial, then jumped on a positive risk tone and has now plunged. USD/JPY is now just pips away from the June low of 105.57.
Big turnaround in USD/JPY
At the moment support at that low is holding but a breakdown would clear the way for a test of 106.00, which was the early-May low.

5 reasons AUD/USD is going to 0.7400

  
Analysis, Forex

Morgan Stanley’s latest out look report project the Australian dollar to 0.74 in 2021

MS look for what they describe as “front-loaded gains” for AUD:
  • Australia will outpaces developed market peers on economic growth
  • should also benefit from expansionary fiscal policy
  • RBA to be relatively-less-dovish
  • Australia is open to positive growth areas like manufacturing-sensitive Asia
And, further:
  • high carry should also make it an attractive destination for yield-seekers
By 2021 other economies should have caught up to Australia.
After that “Australia’s structural economic challenges related to household indebtedness and deleveraging once again come into focus”, which will halt the AUD gain around 0.74.

Can the US dollar disconnect from the risk trade?

  
Analysis, Forex
  Tags

That’s an idea that has to be on the table

Ultimately, a bet on a currency is a bet on that country’s growth. Yes there are a dozen caveats because of the structure of global capital but growth wins and the growth story often gets lost.
We’re ultra-accustomed to the safety trade and the US dollar’s role in that but it’s not the only safe haven. The two best year-to-date performers are the yen and Swiss franc.
That's an idea that has to be on the table
Also notice that the euro is basically unchanged against the dollar this year. Now, the consensus opinion is that Europe is a black hole of growth and the past 12 years makes that pretty clear but you could argue that’s all priced in.
I can envision a world where growth diverges widely because of differing coronavirus numbers. This chart is stark, especially with Europe’s population exceeding the US by 25%.
Europe vs US on coronavirus
Is it so tough to envision a year or so of better-than-expect European growth compared to the US because of the virus. Certainly, the US has proved it’s better at running an economy but Europe right now looks like it’s better at running public health, and that matters.
That said, here are German daily cases and they’re also worth keeping an eye on:
AUDUSD
So what’s the trade? There is none right now. I think technicals are the way to trade right now and there is a beautiful head-and-shoulders top in EUR/USD.
The risk trade is the only game in town. The head-and-shoulders pattern targets 1.10 so there’s nothing to consider until there.
There’s also a host of other currencies, including an Australian dollar trade that I highlighted seven weeks ago that’s gone extremely well.
The overall point is that the old fashioned ‘risk trade’ is seductive when volatility is high but the rules of FX are often rewritten and now is as good of a time as ever.

CFTC Commitments of Traders: Big swings in AUD and EUR

  
Analysis, Forex
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Forex futures positioning data for the week ending June 16, 2020:

  • EUR long 117K vs 96K long last week. Longs increased by 21K.
  • GBP short 16K vs 24K short last week. Shorts trimmed by 8K.
  • JPY long 22K vs 17K long last week. Longs increased by 5K.
  • CHF long 2K vs 2K long last week. No change
  • AUD short 7k vs 37K short last week. Shorts trimmed by 30K
  • NZD short 9K vs 11K short last week. Shorts trimmed by 2K
  • CAD short 25k vs 26K short last week. Shorts trimmed by 1K
  • Prior week
Aussie shorts really threw in the towel but EUR longs continue to pile in. That’s a fresh two-year high and a massive one-week move.
Forex futures positioning data for the week ending June 16, 2020:

EURUSD falls to new week low and below lower trend line

  
Analysis, Forex
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Falls below Thursday low at 1.11851. Close risk.

It was just a short two or so hours ago that the EURUSd was breaking higher above 1.12256 and running to the 100 hour MA (currently at 1.1255). The price stalled against that MA level (it did the same on Wednesday) and then fell back below the 1.12256 level again.
Falls below Thursday low at 1.11851. Close risk.
The selling has not let up as the clock ticked toward the London fixing at 11 AM ET/1600 GMT.  That took the price below the low from yesterday at 1.1185 and a lower trend line at 1.1178. The low reached 1.11673 and has since bounced back higher.
It’s Friday. It’s the 4 PM London fixing which can lead to increased volatility and liquidity issues. Nevertheless, the holding of the 100 hour moving average just a few hours ago and the subsequent fall continues to show that the bears are more in control. Resistance at the 1.1200 to 1.1206 area now.

Is risk for the GBP tilted to the upside?

  
Analysis, Forex

A case for GBP bulls

A case for GBP bulls 

I was reading a piece on Bloomberg’s markets live blog saying that Brexit 2020 may well be a flop. The point it made was that Brexit in 2016 was a shock. We know that hardly anyone saw it coming and when it happened the GBP fell sharply lower.However, this time, markets have had years of pricing in the UK’s new role in the world.

A more ‘in the background’ role for the UK?

Europe has been pulling together its fiscal and monetary policy to try and support the whole eurozone. However, the UK and its assets have seen global repricing as the UK is re-assessed as a medium sized nation with uncertain trade arrangements. Rightly or wrongly, investors have been downgrading the UK’s prospects. Also, don’t forget that a number of companies are still planning on removing their Headquarters from London.

Is risk tilted to the upside for the GBP

So, even if the EU and the UK don’t arrange a deal this year is a no-deal Brexit virtually priced in? Although the GBP could be expected to fall lower on a no-deal Brexit is the GBP pretty much well placed for upside from current levels? The risk of further downside is still in play as long as a ‘no-deal’ is still a possibility. However, for traders taking a longer term approach with a 2-3 year timeframe then the outlook looks firmer for the GBP the longer the outlook.

GBP upside?

So much for the breaks

  
Analysis, Forex

Markets are misbehaving…

The markets are misbehaving.  The market broke after Texas reported a surge in hospitalizations, but the pattern being developed that it will take more than a region to bother the markets. Moreover, the hope regarding coronavirus now in the US is just plow through it. If you are vulnerable, take care of yourself.  Pres. Trump will be rallying up Oklahoma and Arizona in the next week.  Let er rip and see where the cards fall.
For the markets:
  • Stocks are off the lows still led by the Nasdaq. The S&P is trading above and below 0.0 after trading down about 14 points. The Dow is down -18 points after being down about -154 points. The Nasdaq moved to unchange but is now back up by 55 points.
  • EURUSD fell to the lowest level since June 4 and below the lows from this week and last week between 1.1212 and 1.1225. The price squeezed back to 1.1237 and trades at 1.1225 now.
  • GBPUSD fell below the 100 day MA at 1.2522 to a low at 1.2510 but is back above the 100 day MA at 1.2539 currently.
  • USDJPY fell below its 100 hour MA at 107.244 on way to a low at 107.12. It has traded back above that MA line and trades at the MA level as I type.
  • USDCAD spiked above its 100 hour MA at 1.35804 but is trading back below the MA level at 1.3556 after peaking at 1.35936.

Markets are just not acting right. They are misbehaving… It is time to take a little break and take a breathe

US dollar rises as flows head out of currencies

  
Analysis, Forex

Flows into the safety of the US dollar

As China reacts to increases in coronavirus cases in Beijing and Florida spooked the market with a surge in their cases, the flow funds into the forex market has been into the US dollar.

EURUSD: The EURUSD it is looking to test the lows from yesterday at the 1.12256 level. Below that the Friday low at 1.12119 would be eyed. The price fell below a trendline at 1.1260 level.
GBPUSD: The GBPUSD cracked below its 200 hour and 100 hour moving averages at 1.26455 and 1.26175 respectively. The price low just reached 1.2641. The 100 day moving average is down at 1.25274 today. Yesterday on Friday the price traded above and below that level but based at the 100 day moving average and ran higher in the afternoon New York session yesterday. There should be support on the 1st test should the price continue to move lower from here.
USDCHF. The USDCHF has moved up to test its 100 hour moving average at 0.95168. We currently trade at 0.95119.  A move above the 200 day moving average should solicit more upside momentum.

Dollar, yen gains ease a little on the session

  
Analysis, Forex

EUR/USD trades flat after testing its earlier low on the day

EUR/USD H1 15-06

The dollar and yen are seeing gains pare back a little on the session as we see EUR/USD and GBP/USD trade back to flat levels on the day now. EUR/USD tested its Asia Pacific low @ 1.1227 before rebounding back to 1.1255 currently.
That said, sellers are still in near-term control as price action remains well below the key hourly moving averages @ 1.1300-20 at the moment.
Meanwhile, AUD/USD has also seen its earlier decline pared back in a move to 0.6820 from as low as 0.6777 earlier at the start of the session.
The overall risk mood is still negative but not as dire as it was at the opening with European indices keeping near 2% declines and US futures also keeping losses around 2.7% from being as much as nearly 3.5% lower a few hours back.

Monday morning open levels – indicative forex prices – 15 June 2020

  
Analysis, Forex

Good morning, afternoon or evening to all ForexLive traders and welcome to the start of the new FX week!

As is usual for a Monday morning, market liquidity is very thin until it improves as more Asian centres come on online … prices are liable to swing around on not too much at all, so take care out there.
Some change from late Friday levels:
  • EUR/USD 1.1240
  • USD/JPY 107.26
  • GBP/USD 1.2525
  • USD/CHF 0.9519
  • USD/CAD 1.3605
  • AUD/USD 0.6836
  • NZD/USD 0.6425
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