We had a interesting week as the market remained on the lookout for signs from the Feds on September tapering, BOE surprised the market with a Fed style threshold for its monetary policy, and China’s trade data indicated that perhaps the much feared slowdown was overrated. All in all, most trends remained unchanged as traders wait for more data in the coming weeks… In the U.S, although the outlook for QE tapering in September still remained a bit uncertain, especially after Fed officials Evans, Fisher, and Lockhart all said their pieces, there is not doubt that tapering will take place soon and that September is still a real possibility. Of course, tapering in September became an even stronger possibility after the release of US June Trade Balance data, which could add as much as 0.6% to the second quarter Prelim GDP, or push the GDP figure to 2.3%… If combined with a steady drop in unemployment rate and a strong Nonfarm Payroll figure during the early September release, it’s likely to cement a tapering announcement on September 18, 2013. In the UK, the BOE Quarterly Inflation Report followed footsteps of the Fed (and ECB) as BOE decided to issue forward guidance in the “style” of the Federal Reserve’s threshold where the BOE pledges not to tighten policy until unemployment is below 7% target. The conditions followed this guidance include: rates could rise even with unemployment above threshold if inflation was above 2.5% in 18-24 months or QE policies threatened “financial instability.” In conclusion, due to the uncertainty with the USD and the apparent resistance we are seeing in the current technical levels on the EURUSD, I’ll be looking to SELL EUR on rally, especially considering that USD should be gaining on the back of a stronger GDP and better improvements in the Employment sector. GBP should be a BUY on dips, although I have to admit that the dip will have to be significant because the current level on GBP is not sustainable UNLESS we get more data to support the currency, and that would be hopefully this week… In other words, unless we see a decent correction, I’d stay out of the GBP. JPY is firming up on better news out of JPY but also at the same time from a weaker USD. I believe ultimately USDJPY will rally to 100 again, but in the meantime, use caution and try to buy on dips for the pair (USDJPY) but use tight stops. CAD, AUD, and NZD are all likely to be driven by risk sentiments and USD, therefore I’d recommend to trade the news or follow risk sentiments. CHF is likely to remain well supported, but I’m waiting for that confirmation of tapering, which should provide momentum to drive USDCHF back to the 0.9700 level… As a matter of fact, we’ve entered LONG USDCHF around the 0.9175 level last week and we are eyeing the 0.9400 for the short-term
Posted on: Mon, 12 Aug 2013 06:56:14 +0000
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