USD falls after WSJ article on tapering; NZD stays very strong


USD

There isn’t much of note on today’s economic calendar so as always on a Friday it will be about positional adjustment ahead of the weekend.  An article by well-known Fed-watcher Hilsenrath titled “Fed likely to consider refining easy-money message” raised doubts about exit timing and caused a sharp sell-off in the USD. We must wait and see whether this was another one-off impulsive reaction or whether it leads to a culling of longer-term USD long positions.

USD/JPY crashed particularly hard which is slightly surprising given that any taper-delay should be regarded generally as risk positive. This tells us that the market was simply overly long and hence the sharp sell-off. The next technical target is at 98.25.

Chart

The AUD/USD also bounced strongly from .9150 to .9275 which shows this market was caught out-of-position as well. The big levels to watch are at .9130/.9350 but I’m still expecting a sharp rally towards .9600 in coming weeks to relieve oversold daily readings.

AUD/NZD was the main event yesterday during Asian trade, falling from 1.1550 to 1.1400 but we can probably expect some sessions of consolidation as this usually quiet cross recovers from the exertions!

EUR/USD almost touched 1.3300 but its difficult to get bullish at these levels given that we’ve been in sideways trading mode between 1.2750/1.3400 for some months now.

Chart

Some of the EUR crosses are worth monitoring closely, especially EUR/AUD and EUR/JPY, with some of the better technicians suggesting that both are quite heavily overbought in the medium term.

Cable is likely to follow the lead of the EUR/USD and EUR/GBP remains modestly bullish whilst still above .8550. 

Good luck today and TGIF.

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