Morning View: USD, Back on Top

April 10, 2015

Morning Recap:
Overnight we saw broad USD strength across forex markets, with price now settling at lows on most of the majors. Although still sold off it’s highs, the AUD has surprisingly held up the best of the bunch, with the Aussie’s attracton attributed to the ever present ‘carry trade’.

In the markets eyes at least, USD strength has been driven by several FOMC members making comments keeping the market on it’s toes for a rate hike sooner rather than later despite the mixed data. On the back of this expectation, the US Dollar Index (USDX) broke through it’s recent technical swing high last night.

Yesterday on the @VantageFX Twitter, I did a comparison between the current EUR/USD and USDX 4 hour charts:



As you can see, they are basically inverted versions of the same chart, highlighting just how much USD moves on the back of Fed expectations are driving the majors.

Insert Greece Headline Here:
Yes I apologise for doing this, but here’s another Greece related headline that I have to mention from last night:

“Greece made a €450 million payment to the International Monetary Fund”

But Greece is still broke and won’t be able to continue to pay it’s bills. Just in case you hadn’t heard…

On the Calendar Today:
A bit on the calendar today to ease markets into the weekend. CPI data out of China being the release with the highest expected impact on Asian markets. Keep an eye on the Australian home loan number as well.

Later on, the UK backs up their no change decision on interest rates with manufacturing data followed by some Canadian specific releases to keep you going into the night.

AUD Home Loans

GBP Manufacturing Production
CAD Employment Change
CAD Unemployment Rate

Chart of the Day:
A follow up to yesterday’s Chart of the Day.

Overnight, the BOE left rates on hold as expected. The big fundamental driver in GBP weakness however is increasing concerns over the UK election outcome. A hung parliament is still on the cards and the uncertainty that this brings will continue to weigh on Cable.

GBP/USD 4 Hourly:
Click on chart to see a larger view.
GBP/USD was rejected off that GBP/USD supply zone we had been watching in yesterday’s Morning View, and kicked it down through trend line support.

Price now makes its way towards FOMC meeting lows where we thought the Fed was maybe less hawkish than expected. With yesterday’s price action on the back of renewed talk of an early rate hike, I can’t see this level holding for too long.

Let us know what you watching or trading? Leave a comment below or mention @VantageFX on Twitter.

Dane Williams – @VantageFX

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