Andrew Lockwood
The City Traders
Powell kicked the USD in the gut last week with what should be considered a dovish stance on the economic outlook. Pressure had been mounting by fellow Fed members for an earlier timeline in the tapering process. Powel conceded that it was discussed that by the year-end the process would commence. However, he also reiterated that this was not an indication that higher rates would follow shortly behind. So cheap money is here to stay for longer. The stock markets have been thriving in the low-interest-rate environment which is likely to continue for the foreseeable future. Stocks higher means ‘risk on’ Risk on tends to support the high beta, commodity currencies such as the AUD, NZD and the CAD. The low yielders, the JPY and the CHF tend to get sold to fund the asset purchases. As trend followers, we like to buy strong and sell week.
The RBNZ recently surprised the markets by leaving rates unchanged against the strong expectations of a hike. A limited outbreak of Covid cases was deemed to be the underlying reason. We believe that once the current lockdowns in Australia and New Zealand ease their respective currencies will surge. Longer-term trades in buying NZDJPY, NZDCHF and AUDJPY could be the best game in town.
The biggest event this week to watch out for will be the Non-Farm Payroll numbers for August. Markets are expecting a read in the region of 650K new jobs added. Good job numbers are pretty much priced in. We believe, that unless we see a big shock to the upside, the USD will remain subdued with the bias to the downside.
The information provided in these commentaries is for education purposes only and should not be confused with investment advice. Trading foreign exchange or CFD’s on margin carries a high level of risk and might not be suitable for all investors. Before deciding to invest in foreign exchange or CFD’s you should carefully consider your trading objectives, level of experience and risk appetite . The possibility exists that you could sustain a loss of some or all of your initial investment.
Recommended Content
Editors’ Picks
EUR/USD clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.