The major currency pairs were left with mixed dancing moves against Ms. USA as she was dragging while American traders and economists were out on Labor Day Holiday and the trading floors were closed on Monday.
But Tuesday morning brought sexy back to the trading crowd and we are seeing plenty of volatility and interesting dance moves to the rhythm of different news and data.
Asia had a positive overnight session with Japan’s Nikkei leading the way after Mr. Japanese Yen weakened to its lowest level since January. We are finally reaching our long term goal of 105 on the forex dance floor! The sharp move higher in USDJPY led to a move higher across the board for the US Dollar, with fresh lows printed in EUR/USD and Mr. British Pound.
Mr. Aussie Dollar also suffered against the Ms. USA (AKA US Dollar,) despite the Reserve Bank of Australia announcing that they were keeping interest rates on hold and their monetary policy approach neutral. Recent data from Australia is quite a confusing mixture of progress. China, their largest trading partner, is pretty similar. Last night we saw some disappointing manufacturing numbers out of China, but these were treated fairly neutrally as deteriorating economics could mean more stimulus from Beijing – another classic example of bad meaning good, which the markets have come to rely on.
Europe looks like it’s going to have to step up sanctions on Russia, as Angela Merkel admits that fighting in Ukraine is no longer a domestic affair but a “conflict between Ukraine and Russia”.
Forex & Equities
Today is the first official trading day of September in the US. The Wall Street Journal ran an interesting article yesterday which points out that over the last 20,50 and 100 years September is the only month that shows an average decline in stock markets. The data has a couple of analysts concerned that we could see that happen this year, as investors come back to the market with post summer blues and see the global economic conditions as they are which, to most rational people, would justify a sell off.
Since every financial transaction requires the use of currency, forex is inevitably related to each and every asset class. Therefore, a rise or decline in a particular domestic equity market would lead to increased/ decreased confidence in that country and thus lead to inflows of foreign investment into that country and consequently, increased demand for the country’s currency. So, movements on equity markets will undoubtedly affect the forex markets.
Coming up Next
On the economic calendar, today the ISM manufacturing PMI could shake the US dollar pairs at 3 PM GMT. Wednesday will bring with it a crowded economic data with Chinese non-manufacturing PMI set to release at 2 am GMT, Australian GDP at 2:45 am, UK services PMI at 9:30 am and Bank of Canada rate statement at 3 PM during the American session.
Intraday Forex Technical Levels
AUD/USD 4-hour: Teasing 76% Fibonacci Level
Invest Diva likes: Long positions above 76% Fibo level at 0.9282 with targets 0.9293 and 0.9325 in extension.
If pair goes nuts: Below 0.9282 look for further downside with 0.9271 and 0.9249 as targets.
What’s up on the forex dance floor: The pair is testing the 76% Fibonacci level below the Ichimoku cloud. The RSI has yet to approach the overbought zone.
Supports and resistances:
0.9282 pivot point
GBP/USD 4-hour: Continues down.
Invest Diva likes: Short positions below 1.6616 with targets at 1.6497 and 1.6460 in extension.
If pair goes nuts: Above 1.6616 look for further upside with 1.6672 and 1.6735.
What’s up on the forex dance floor: The pair is dancing on a downtrend below the Ichimoku cloud.
Supports and resistances:
1.6616 pivot point