Market action
The greenback remained on a weak footing for most of the NY session, as US treasuries tread water and equities sold off and then rebounded slightly. The JPY firmed on weaker risk appetite and finally noticed firmer Euro Bund prices that it ignored in the European session. CAD was the day's weakling as the Bank of Canada's David Wolf came out with a number of CAD-negative broadsides and as oil prices cooled sharply after posting new 15-month highs today.
The greenback remained on a weak footing for most of the NY session, as US treasuries tread water and equities sold off and then rebounded slightly. The JPY firmed on weaker risk appetite and finally noticed firmer Euro Bund prices that it ignored in the European session. CAD was the day's weakling as the Bank of Canada's David Wolf came out with a number of CAD-negative broadsides and as oil prices cooled sharply after posting new 15-month highs today.
Technical and other developments
USD - generally lower today, but most losses occurred in Asia, with no real follow through in later trading. AUDUSD is less than a figure off of its low for the cycle as this throwback rally is doing a full test of the top of the old rally, it seems, after all of the Fibo retracements have failed to contain the rally for long. Fitch said that it saw long term risk ("by second half of decade") of pressure on US's AAA rating if the US didn't do something to address its budget deficit over the next 3 to 5 years.
USD - generally lower today, but most losses occurred in Asia, with no real follow through in later trading. AUDUSD is less than a figure off of its low for the cycle as this throwback rally is doing a full test of the top of the old rally, it seems, after all of the Fibo retracements have failed to contain the rally for long. Fitch said that it saw long term risk ("by second half of decade") of pressure on US's AAA rating if the US didn't do something to address its budget deficit over the next 3 to 5 years.
CAD - the Bank of Canada's Wolf said in a speech today that housing market strength in Canada is "striking", that a housing revival is "desirable" and that it is "premature" to suggest that the housing market is in a bubble even if must be monitored. Mr. Wolf said that it was premature to raise rates now. "If the Bank were to raise interest rates to cool the housing market now - when inflation is expected to remain below target for the next year and a half - we would, in essence, be dousing the entire Canadian economy with cold water, just as it emerges from recession." This helped USDCAD reverse from its new multi-month lows.
Chart: USDCAD reversal
CAD was lower across the board today on the oil price decline and Wolf comments. The bullish candlestick comes in just ahead of the old lows for the cycle and may be followed up with more upside in the coming sessions barring a renewed spike in oil.
CAD was lower across the board today on the oil price decline and Wolf comments. The bullish candlestick comes in just ahead of the old lows for the cycle and may be followed up with more upside in the coming sessions barring a renewed spike in oil.
GBP - lost ground on the Euro again and is closing up close to recent resistance levels. A new downleg for the pound in store here?
Chart: GBPJPY
GBPJPY made an ugly reversal and close on the day (bearish shooting star and outside day, as the JPY sell-off has taken a breather on bond markets that have steadied of late. If risk aversion gets nervous on the first earnings reports in coming days, JPY crosses could see some further consolidation lower.
GBPJPY made an ugly reversal and close on the day (bearish shooting star and outside day, as the JPY sell-off has taken a breather on bond markets that have steadied of late. If risk aversion gets nervous on the first earnings reports in coming days, JPY crosses could see some further consolidation lower.
JPY - bonds are flashing a bit of a warning light here as bonds are continuing to consolidate. The reversal today in the likes of EURJPY and GBPJPY even more so, looks rather compelling for some possible short term strength in JPY (downside for JPY crosses).
CHF - responsed very little to the SNB's warning on intervention. Later, the CHF was a bit stronger as the SNB's Hildebrand
said that if interest rates are kept at the current rate for too long term, it would create problems and that the SNB has begun to withdraw liquidity.
said that if interest rates are kept at the current rate for too long term, it would create problems and that the SNB has begun to withdraw liquidity.
NOK - It would seem that EURNOK is at risk of consolidating on the reversal in oil prices, though the correction there may need to pick up the pace to add serious pressure on NOK after today's higher than expected inflation data. NOK managed to make a comeback after a spike lower early in the NY session
Looking ahead: Earnings season upon us
Besides the usua US corporate earnings are very much the focus with Alcoa traditionally kicking off the earnings season today. Stories abound on whether equities are fairly priced at present and to what degree corporate earnings will improve. The coming couple of weeks will be important for the asset markets as equity traders determine how comfortable they are with the expectations priced into the market relative to the earnings reports rolling in and companies' guidance.
Besides the usua US corporate earnings are very much the focus with Alcoa traditionally kicking off the earnings season today. Stories abound on whether equities are fairly priced at present and to what degree corporate earnings will improve. The coming couple of weeks will be important for the asset markets as equity traders determine how comfortable they are with the expectations priced into the market relative to the earnings reports rolling in and companies' guidance.
Another question we have for the shortest term is how much the market is willing to bid up EURUSD ahead of Thursday's ECB press conference...
Be careful out there.
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