Vantage FX | Yen heads toward 100 as currency war hots up | 9th April 2013

April 9, 2013

I cannot predict the future,I can’t control what central banks do … I cannot control the value of other currencies that we compete with and I cannot predict what that will do to our business.

The above comment from the boss of the General Motors Australian satellite Holden speaks volumes about the distortions that the currency war that isn’t is having on the globe. Smaller open mature nations like Australia and New Zealand along with emerging markets need to be worried about the obvious self-interest being shown by the governments and central bankers of the developed nations and their beggar thy neighbour policies they are running.

I recently wrote a piece about the currency wars and noted that the G7 is saying don’t do as we do do as we say and if the problems with Holden and the “solution” in Cyprus doesn’t make this point explicitly  then I don’t know what does. Oh perhaps the chart of the Mexican Peso USD rate and the fact that Mexico has suspended USD auctions makes the point. Do as we say – INDEED!

This is a trading note so I won’t rant too much but as the USD/JPY closes in on 100 under the weight of overt currency manipulation and as Fed continues to hold the stock market up with its free money mantra traditional fundamental analysis seems to have less relevance now than at any point for a generation. It’s a very difficult time – the RBA says the Aussie should be lower but here we sit with every chance it is about to roar through 1.05 again.

At times like these you need to look to your charts for guidance – whatever your process you need to stick to it and if you are new to trading then you need to have a look at the benefits you can gain from looking at your charts. If you are new to trading and are not sure about what to look at drop me a line and i’ll send you some pointers – greg at globalfx.com.au

Anyway to the markets.

For the second trading day in a row US stocks came back from early weakness. The Dow finished up 0.33%, the Nasdaq was up 0.57% and the S&P 500 rose 10 points or 0.63%. Alcoa kicked off earnings season after the bell with its results beating Street estimates.

Across the pond the FTSE was up 0.44%, the Cac and Dax up a little less than 0.1% while stocks in Milan and Madrid fell 0.05% and 0.15% respectively.

On Global FX markets the Yen was weaker once again. It seems that there is no obvious barrier or reason to buy Yen in traders minds except perhaps the natural psychological barrier that 100 will offer sometime soon. We have a two touch trendline from the high back in 1997 that comes in at 107.50 and is roughly equivalent to the 200 month moving average which will offer resistance as well as will 102.00/500 which was a bottom a few years back but for the moment there is no obvious selling levels.

 

The Aussie has rallied hard as well trading up to 1.0425 overnight. As you can see in the chart below the Aussie has bounced nicely off the 0.382 Fibonacci support level and only a break below there will now point it lower. It is an interesting juncture technically as the Aussie is in a 1.0380 – 1.05+ range for the past month or so and nothing seems to knock it very far at the moment. It’s a question really of where else to put your cash it seems and both buyers and sellers are for the moment fairly comfortable with where the Aussie rests. A break of the top of teh range opens up a run toward 1.0640.

The Euro was also higher after German IP printed at +0.5% better than the +0.3% expected and a decent pick up on the fall of 0.6% the previous month. Euro sits at 1.3007 now having made a high of 1.3037. This is just a point above the level we highlighted yesterday as critical for the upmove to continue. Lets see how it goes but if Euro can break last nights high then it will be off to the races for a rally toward 1.31 and 1.3219 which are important Fibo levels from the recent down move.

On commodity markets crude was up 0.88% to $93.52 Bbl. Gold and Silver were both a little lower dropping 0.22% and 0.3% respectively. Copper rallied as well, up 0.84% while in the Ags Wheat roared 2% higher, Soybeans rallied 1.08% and Corn rallied 0.72%.

Data

It NAB Business survey day – this is my favourite piece of data, or should I say collection of data because it is the sub components which are the real strength of this index. Chinese CPI is also out today and then German trade data tonight will be important after the IP data last night. UK Trade data and IP will be very important for GBP and notions of where growth actually is at the moment. In teh US teh NFIB small business survey is worth watching as is housing starts, building permits and the Redbook.

 

Thoughts, comments, queries together with frank and fearless feedback all welcome. I’m happy to answer questions or comments on the comment stream wherever I can.

NB: Please note all references to rates above are approximate and should not be used for trade reference.

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