Play of the Day : GBPUSD Keeps Rising

After highlighting the GBPUSD earlier this month when it broke out of its three month trading
 range between 1.5600 and 1.6000, the GBPUSD continues to gather momentum.  As you can see from the chart below, demand levels continue to rise in the GBPUSD. The pairs breakout above its trading range was telegraphed a few days earlier with support building at the 1.5800 level.  After surpassing 1.6000, the GBPUSD then went on to find support at this level.  The most bullish indicator though was last week, when the GBPUSD quickly reversed a drop below the 1.6100 figure following worse than expected UK GDP figures.

Looking ahead, as long as demand levels continue to move higher in the GBPUSD the pair will be a solid buy on the dip candidate as Forex traders continue to be rotating funds towards the pound.  Currently, we would be buyers of the GBPUSD ahead of the 1.6200 figure with bids around 1.6220.

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Play of the Day : NZDUSD, AUDNZD & RBNZ

Yeah sure, the Fed is holding their FOMC Meeting today. You want to trade it, go ahead. While we love the volatility of every FOMC Meeting and believe it can set the upcoming trend in the Forex markets, trading during the news is usually not the easiest of all activities. At SwiftTick we are focusing on what could be a much simpler trade; the upcoming RBNZ Interest Rate Meeting.

This is why we are excited about this economic release

For the first five weeks of 2012, the NZDUSD was a big winner in the Forex markets, rallying over 8.0% at its highs. Similarly, was the AUDUSD which gained over 5.0%. However, the AUDUSD has since fallen back to around unchanged levels for the year. Triggering the fall in the AUDUSD has been talk of a slowdown in China’s economy, as well as rate cuts and “dovish” statements from the Reserve Bank of Australia. In contrast, the RBNZ has actually spoken about raising interest rates. As such, the NZDUSD continues to be holding up well and is still gaining around 4.0% for 2012. The pair’s weakness has been more of a result of overall dollar strength, than kiwi weakness.

Look to the past for the future

NZDUSD in 2012Using the AUDUSD as a guide, the NZDUSD could be similarly vulnerable to further selling if the RBNZ reverses its tone uses any “dovish” language during their statement. Any mention of a slowdown in New Zealand could be interpreted by Forex traders as the RBNZ’s way of saying they won’t hike rates anytime soon. On such a situation, the NZDUSD could see selling pressure take the pair back below 80.00.

AUDNZD Opportunity

Turning things around, if the RBNZ continues with their “hawkish” rhetoric, one possible longer term trade will be to short the AUDNZD. Such a position would take advantage of forecasts of higher interest rates in New Zealand, versus static, or lower rates in Australia. Also, with Forex traders always eager to apply carry trades at each opportunity, the kiwi could see higher demand from traders as it may be viewed as less volatile than the aussie. Also, by trading the AUDNZD instead of just buying the NZDUSD, Forex traders can remove US dollar risk from the trade, and won’t be exposed to randon Bernanke comments sending volatility higher.

*** While we are looking beyond the FOMC Meeting. We do believe that is should be factored in the NZD. As such, if today’s FOMC Meeting does send the US dollar falling, the overall move may make it hard to trade the NZDUSD. In such an environment, we would favor only trading the AUDNZD.

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Play of the Day : USDJPY at the Crossroads

Ok, maybe not so much a play of the day, as much as the week.  We mentioned the USDJPY in our Friday commentary.  The idea being that it really didn’t react as expected following Thursday’s poor slate of US economic figures.   After initially heading slightly lower on Thursday’s figures, the USDJPY reversed and headed towards 82.00.  However, that move was short lived as it fell back towards Thursday’s lows on Friday.  That left us the weekend to ponder whether Friday’s drop in the USDJPY was part of the overall weakness in the dollar that day, or were we seeing Forex traders having a delayed reaction to Thursday’s US news.

Today’s overnight and morning trading appears to have settled the debate as the USDJPY has easily fallen below Thursday’s news lows to trade round 81.00.  The fact that the current momentum was triggered during the Asian session is important as it shows that Japanese Forex traders were trimming dollar exposure and may not be ready to go full steam ahead with the whole US recovery thing.

However, the initial momentum has since died down as the USDJPY has been unable to mount much of a move below 81.00. As such, we are watching tonight’s overnight trading.  If the pair trades and holds below 81.00, the momentum could be expected to continue until Wednesday’s FOMC Meeting.  On the otherhand, if 81.00 continues to hold, it would indicate that Forex traders aren’t just yet sold on which direction the USDJPY is headed.  In such a scenario, the pair could be dead in the water until the FOMC Meeting provides some sort of new direction.

 

Play of the Day : Gold Head & Shoulders

After falling hard earlier in the month, prices of Gold have stabilized and created a solid support base around 1630 (see chart).  Along with the support though, Gold charts are also showing a bearish Head and Shoulder trading pattern.  As such, with both bullish and bearish technical indicators, Gold could be set to soon make a big move after traders decide which direction price are headed.

This important today as the US is set to release three key economic figures; Initial Claims, Existing Homes Sales, and the Philly Fed Manufacturing Index.  As such, if the data disappoints, it could lead to increased chatter of upcoming Fed stimulus, and drive the dollar lower.  Such a move would be expected to lead Gold higher with any rally easily carrying the metal to 1660.  On the other hand, if today’s data is favorable for the dollar, a break below Gold’s current support level of 1630 could trigger a move towards 1600.

Gold with Head and Shoulder Pattern

Play of the Day: GBPUSD Again

Ok, going back to the GBPUSD for the Play of the Day. BoE MPC Minutes and UK Employments were released about an hour ago, with Forex traders taking the results as hawkish news. On the news, the GBPUSD has jumped to a high of 1.5992, after trading earlier today just below 1.5900. As such, we are back around the 1.6000 resistance level for the GBPUSD. The question now for traders is whether there is enough momentum left in the GBPUSD to trigger an upside breakout if we do crack above 1.6000 today.

As the chart below shows, the GBPUSD has been in a 3 week range between 1.5800 and 1.6000. As such, Forex traders should keep their eyes on where we close the US session today. If the GBPUSD does manage to trade and close above 1.6000 today, it will indicate that some of that demand from 1.5800 level is willing to step up, which could be enough to take us out of the current range and trigger a new upward trend on the GBPUSD. On the other hand, failure of the GBPUSD to continue its news related momentum will reveal that the range is holding and selling pressure remains on any rally.

Will the GBPUSD Trading Range Hold

More on the UK’s Economic data from FX Street

FXstreet.com (Barcelona) - BoE Minutes from the MPC monetary policy meeting held on 4 and 5 April and released today reveal that the Committee voted unanimously in favor of maintaining the interest rate at 0.5%.

As far as the proposition to continue with the program of asset purchases totaling £325 billion is concerned, eight MPC members voted in favor while one voted against. David Miles who voted against preferred to boost the QE program by £25 billion to a total of £350 billion.

According to the minutes further aggravation of the European debt crisis and “persistently weak growth might impair the future supply capacity of the economy through hysteretic effects” which risk could be reduced through an aggressive easing of policy in the near term. In case inflation was bound to rise above target in the medium term “the Committee could subsequently withdraw some of the monetary stimulus.”  Read More