Forex Updates

Wednesday, December 3, 2008

Updates of Forex Market

RBNZ is up tonight and a 150 bps chop to the rate is expected, to bring the cash target to 5.00%. NZDUSD is hovering not far away from the 0.5000 level and AUDNZD has broken back up above its 200-day moving average. There's nothing to like about NZD these days - a currency sporting thin liquidity that needs strong foreign investment to prop up its large current account deficit...and one that is quickly chopping its high interest rates quickly. It would seem a try at 0.5000 in NZDUSD is in the cards if we resume the sell-off in global equities.

We remain in these trading ranges, but would like to see a break to new levels of strength in the USD and JPY by the end of the week to confirm our view that this is still the side of least resistance. Recognizing the treachery of the ranges, we need to set the levels that would cause us to neutralize our short term views. For example, if EURUSD manages to scratch above 1.2900 and GBPUSD above 1.5240, that would force us to neutralize the short term view of more USD strength.

Chart: EUR/CHF

The recent EURCHF sell-off appears to have been a one-day wonder so far, but we suspect that the pair could resume the sell-off in the coming days as the ECB meeting comes and goes. Look for a close back below the 21-day moving average (now around 1.5200) and a retry through the rising trendline as a trigger that the sell-off is ready to resume. Key resistance comes in at the 1.5385 if the top isn't already in here.


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