Lack of Direction in Currencies
18/03/10 20:54
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Traders...
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We view the lack of direction in currencies at present as a function of the macro environment. Central banks' exit strategies are stymied by growth risks and investment is being held back by tight credit and heightened caution on the economic outlook. But clues to future direction can be found in watching commodity prices. Those are often better indicators of inflation and growth expectations, and, hence, currency direction in turn. We to take short JPY positions on JPY rallies against AUD, NZD and USD*. We will continue to cover the AUDJPY strategies in Pro Traders Club
Watch Chris Lori on Tradingviews TV Network!
Chris Lori, CTA appears regularly on MB Trading's TV network called TradingViews "The Interactive TV Network for Serious Traders"
Click this link for access:
http://www.tradingviews.com/trading/email/MRI-1291_lori_experts.html
We view the lack of direction in currencies at present as a function of the macro environment. Central banks' exit strategies are stymied by growth risks and investment is being held back by tight credit and heightened caution on the economic outlook. But clues to future direction can be found in watching commodity prices. Those are often better indicators of inflation and growth expectations, and, hence, currency direction in turn. We to take short JPY positions on JPY rallies against AUD, NZD and USD*. We will continue to cover the AUDJPY strategies in Pro Traders Club
The dollar firmed against the EUR overnight as concerns over Greece resurfaced. Constant talk of IMF involvement is threatening the recent framework agreed upon within Europe and the market is choosing to price in a higher risk-premium. The news served as yet another reminder of the underlying risks in the fiscal space globally. Risk appetite is weak, and EURUSD traded in a range of 1.3648-1.3741 while USDJPY in a range of 89.76-90.45. This issue will likely not end at Greece... and we anticipate as bad news unfolds out of Portugal, Spain and others will continue to weigh on EUR, thus we look to short above 1.4000 TBD.
We remain constructive on the dollar as we believe US payrolls data is poised to turn strongly positive which should encourage the Fed to continue its journey towards policy normalization. We expect a major milestone in this process will be reached in September when the first rate hike is delivered well ahead of equivalent moves by the ECB, the BoE and the BoJ.
In an overnight press conference the Greek PM said there still hopes for support at the EU summit next week, but said the country would keep its options on aid open and called for an IMF-style loan mechanism to be established. Regardless of the true state affairs, it is clear that consensus on the matter is lacking and the EUR will likely continue to trade heavy in such an environment.
Source: UBS, Bloomberg