Hi Viper traders
The NFP figures last Friday surprised to the upside after the previous 2 very disappointing releases and this has put a bottom under the Greenback, which had looked to be heading for a freefall prior to the numbers for February.I now expect the Fed to continue the tapering down of bond purchases at the same level as previously.
So where next? Well the market seems to be taking a “wait and see” approach to US$. On the one hand there has been some pullback against AUD, CAD and £ but the “mighty” Euro is still well bid.
The Euro was sent to new highs by Mario Draghi last Thursday after the ECB meeting and seemed to say the European economy is over the worst and growth will improve from here. Inflation, which is well below the ECB target of 2% will normalise meaning there is not likely to be any further change to interest rates.
The picture from my perspective remains the same , Germany is flying but the rest of the Eurozone is struggling. This means that there is an out of balance overall economy but still investors buy the Euro looking to invest in the Dax or maybe pick up nice Yields from Italian or Spanish Bond markets with low chance of losing on the Euro value while the ECB does nothing. So 1.4000 looks more than likely unless some really strong numbers come out from the US and gets investors heading stateside again.
I have a hunch that the 1.4000 level is what may move the ECB and get even the Germans to look at lowering the Euro. If this is the case then keep an eye out for talk about QE in Europe and / or negative deposit rates.
The US/JPY looks attractive here on any strong numbers from the US and to that end is the pair where I will look to buy the US$ with a target of 105.50 in mind.
The only beware warning here is any strong pullbacks in the stockmarket, however that is not looking that likely after shrugging off the Ukranian crisis and powering on regardless.
The UK Pound is at a crossroads before I believe continuing higher across the boards, while we await the Budget. This of course will sound the start of an election campaign in earnest that is likely to have many promises of tax cuts and business friendly rule changes. I expect the pound to strengthen on this and see the current level against the Euro 0.8350 as temporary and likely to turn lower very soon while cable looks headed to 1.7000 in the coming months.
The Aussie looks to be finding some support at this time but I still believe there is room for weakness in this currency and favour being short at this time against near neighbour the Kiwi which will begin raising interest rates this week.
A mixed bag I agree but as always keep your risk management tight and enjoy your trading