Monday, August 6, 2012

Market Update: Will the US Keep the Risk Rally Going?

Coming Up This Week
  • Tuesday: AUD Interest Rate Meeting
  • Thursday: JPY BoJ Policy Report
  • Friday: CAD Employment Change

For at least a day we are back to the “good US news” equals a falling dollar and everything else moving higher. This was seen during Friday’s Non Farm Payrolls figures which triggered an overall risk rally in the markets and completely reverse the sentiment from last Thursday’s ECB Interest Rate Meeting. The trading action seems to indicate that more than anything else (more than budget cuts and austerity), traders want to see economic growth. While one Non Farm Payroll report doesn’t indicate the US is roaring back, it does show that the three quarter growth of Q3&4 of 2011, and Q1 of 2012 isn’t completely reversing. As such, if US figures continue to beat expectations, they should keep the risk rally going.

Charts to Watch USDJPY: What we wrote on Friday “In February, the combination of strong US employment figures and monetary stimulus actions from the Bank of Japan triggered a multi week rally that saw the USDJPY gain from 76.00 to 84.00. With Fed Chairman Ben Bernanke and co. putting the central bank on hold, we could see a similar return of demand to the USDJPY if today’s Non Farm Payrolls figures show an upside surprise.” As one would have expected, the USDJPY moved higher on the NFP results, hitting a high of 78.75. However, it has since faded back towards its pre-NFP pricing. Nonetheless, with the 78.00 figure well supported. The pair looks like a solid long term hold, especially if Thursday’s BoJ Meeting shows Japan returning to monetary stimulus actions.

EURUSD : For a change it was up on US news rather than EU headlines. Overall though, this may not bode well for the EURUSD as it is vulnerable to another drop towards 1.2200 if overall risk selling hits the market. One bright spot though from Thursday’s drop was that the pair did find support at 1.2200 after its initial selloff.

No comments:

Post a Comment