Huge US dollar reversal catches the market on the hop

April 9, 2014

A monster night for the Us dollar which was absolutely poll axed last night.  In cricket parlance it was the equivalent of a David Warner innings as it was hit all over the park losing ground against the Aussie dollar, Euro, Pound, Gold, Crude, Copper, Singapore, Kiwi and Canadian dollars. That’s before we even discuss the Yen which some say is the real culprit in the huge move overnight after the BoJ passed on the opportunity to balance the new taxes being introduced with more accommodation monetary policy.

So as we sit here this morning I am losing money on a short Euro position and a short Aussie position and getting very close to stops in both positions.

Looking at the scoreboard we see that the Aussie is above 0.9350, USDJPY is below 102, the Euro is back near 1.38, the Pound surged to 1.6750 and the Singapore, Kiwi and Canadian dollars all rose sharply.

Here are a couple of charts worth looking at:

AUDUSD: – near resistance but is 97.50 in the frame as some say?

USDJPY: technical selloff on trend line break unsupported by fundamentals. 

Euro: bounces off support

Turning to other markets now and we see that in th US it was a bit of a messy day with the Dow opening higher, falling into the red back into the black, then read before the three big US indices closed higher on the day. The S&P 500 rose 8 points to 1,852 for a gain of 0.43%, the NASDAQ closed up 0.84% to 4,113 while the Dow ended the day at 16,256 up just 0.11%.

Locally the impact was a rise of 24 points on the June SPI 200 contract overnight to 5428 bid.

In Asia today it is going to be an interesting day with the lack of stimulus from the BoJ and the big Yen move dragging the Nikkei sharply lower yesterday and then again in overnight trade. Japanese stocks are likely to open sharply lower. Yesterday in Shanghai stocks rose 1.90% and are likely to retain some sort of bid tone even if the Nikkei sells off but the Straits Times index in Singapore could come under pressure from the move in USDSGD to just above 1.25 – the strongest the Singapore dollar has been since December 2013.

In Europe UK industrial production bested expectations printing 2.7% against 2.2% which was expected which helps explain the Pound surge but the FTSE didn’t like it falling 0.48% to 6,591. The DAX lost 0.21% to 9,491 while the CAC lost 0.25% to 4,425. Milan and Madrid came under heavy selling losing 1.46% and 1.18% respectively.

On commodity markets the falling US dollar was also a big driver with Nymex Crude up 1.91% to $102.36, gold up 0.79% or $10 oz to $1,308.30 while Dr Copper rose another 2 cents to $3.08 lb. On the Ags there was also strong moves with corn up 1.45%, soybeans p 1.25% while wheat lagged at up just 0.70%.

On the data front today the release of the Westpac – MI Consumer Sentiment index will be watched closely as will the home loans data. Tonight German trade is going to be important for this Euro rally, as will UK trade be for the Pound. Tonight in the US the Fed minutes will dominate but mortgage applications are also important.

Have a great day and good hunting

Greg

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