We continue to look to sell risk rallies
30/05/10 23:03
Hello Traders;
Leading into Fridays trading, we saw a host of institutional orders stacked on AUDUSD .8540 and above. Efforts to move above .8540 were weak showing limited buy flows. We expect more sellers, as we are, at levels above .8500 on AUDUSD and the corresponding levels for AUDJPY. Running tight correlations, we are watching equities patterns for signs of withdrawal.
After the turmoil across markets in May, the week ahead is a good test to see if fundamentals come back into focus. But it still might be premature for backward-looking data to help the Eurozone. US labour data is expected to remain strong and though the RBA will likely remain on pause, the BoC decision will be much closer. G20 finance ministers and central bank governors meet in Korea and we think financial sector regulation will dominate the conversations, with Eurozone worries and Korean Peninsula tensions serving as the backdrop.
Leading into Fridays trading, we saw a host of institutional orders stacked on AUDUSD .8540 and above. Efforts to move above .8540 were weak showing limited buy flows. We expect more sellers, as we are, at levels above .8500 on AUDUSD and the corresponding levels for AUDJPY. Running tight correlations, we are watching equities patterns for signs of withdrawal.
After the turmoil across markets in May, the week ahead is a good test to see if fundamentals come back into focus. But it still might be premature for backward-looking data to help the Eurozone. US labour data is expected to remain strong and though the RBA will likely remain on pause, the BoC decision will be much closer. G20 finance ministers and central bank governors meet in Korea and we think financial sector regulation will dominate the conversations, with Eurozone worries and Korean Peninsula tensions serving as the backdrop.
We expect the RBA to leave rates unchanged as recent
minutes indicate policymakers will be on-hold after
six 25bp hikes in seven months. AUD has been hampered
by recent de-leveraging and could weaken vs NZD and
CAD as we think central bank policy differentials
will come into play. Long-term BoC expectations have
been scaled back sharply due to general risk
aversion, but the Canadian economic outlook should be
relatively resilient. We do not expect a rate change
but it will likely be a close call as officials could
use recent turmoil as a reason not to shift policy.
Eurozone preliminary Q1 GDP should show continuing
expansion but backwards-looking data will have
minimal impact given recent events. Even if investors
begin to respond to data in other countries, this may
not hold for the Eurozone. We expect EURUSD lower in
the medium- to longer term. The rate at which
negative news flows out of weaker Eurozone regions is
difficult to anticipate, but we remain prepared for
lower levels into the distant future. We
continue to look to sell risk rallies.
Chris Lori CTA
Chris Lori CTA