Risk aversion drives commodity currencies lower

24 May, 2016

Risk aversion drives commodity currencies lower

Commodity currencies traded in red across the board early Tuesday as risk aversion and dropping commodity prices continued to weigh on high yielding currencies. The Aussie fell by more than 30 pips against the US Dollar to trade below 0.72 on RBA governor comments which kept the door opened for further rate cuts.  In his first appearance since May 3, Glenn Stevens reiterated his commitment to inflation targeting of 2-3% band, suggesting that medium term inflation targeting is not rigid and does not demand knee jerk reaction. Markets are already pricing-in another rate cut by the central bank, most likely in Aug after the release of June inflation report, but will remain to be seen whether more action will be required if prices continued to be stubbornly low. May 19 low of 0.7173 is a key level to watch for AUDUSD as a daily close below could renew selling pressures towards 0.7105 (March low) followed by physiological support of 0.70.  The Canadian dollar is not loved either, dropping for the 6th straight day as traders await Bank of Canada policy meeting on Wednesday.  Although rates are expected to remain unchanged at 50 basis points, the central bank’s assessment of Alberta’s wildfires on the economy and March weak consumer spending may continue to weigh on the currency.  Until then oil prices are likely to remain the main driver for USDCAD.

Weaker than expected data from Japan and hawkish comments from Fed Presidents James Bullard and John Williams Monday failed to drive USDJPY higher, in fact Japanese yen was the best performing major currency yesterday gaining 0.8% against USD. The currency pair traded in a very narrow range in today’s Asian session, and since Japans intervention in Yen doesn’t seem an easy option after G7 criticism, the classical play of risk aversion/appetite will continue to dominate the trade in the shorter run. However, the wider divergence in monetary policy between U.S. and Japan, especially if BoJ announces new easing measures by July along with fiscal easing, this will put a limit on JPY’s strength.

EURUSD was also stuck in 30 pips trading range as traders await German ZEW economic sentiment survey. According to Mondays Markit PMI, both manufacturing and services sectors gained some traction in May, with the composite index rising to highest level since December. This could lead to higher institutional investor sentiment and reading above 12 will likely support a short term relief for the Euro. Meanwhile Greece which introduced new pension and income tax reforms, as well as measures to privatize state assets is expected to receive the much needed 10 billion euros in new loans when eurozone finance ministers meet later today. 


Source link  
China trade truce optimism fades

U.S. investors got overexcited on Monday after Treasury Secretary, Steven Mnuchin, announced over the weekend that the trade war with China...

US-China trade talks in focus

Asian stock markets fell while the Japanese Yen held steady, as investors closely monitored tense trade talks between the United States and China, in Beijing...

Traders unshaken by equity volatility

We are not in a trade war with China, that war was lost many years ago by the foolish, or incompetent, people who represented the U.S. Now we have...


Risk aversion returns after Easter break

The fall in tech stocks and escalating trade tensions continued to rattle markets after the Easter break. The S&P 500 fell 2.2% on the first trading...

Powell comments bring USD bulls back

The US dollar lifted today on the back of Powell's first address to congress in relation to his new appointment to the head of the Federal Reserve...

Oil takes the spotlight

For oil bulls they've not been this high since 2015 and it's seeming like we may continue to see further highs in the long run. So far oil has pushed through resistance at 62.12 and is now...


FOMC give some life back to dollar bulls

The latest FOMC minutes have given the bulls something to be happy about, as the FED once again looked to keep the pace of rate hikes in the near future.

USD stages comeback on CPI and retail data

It's been a positive day for US economic data as retail sales surprised analysts lifting to 0.2% (0.0% exp). This shows a strong build up in the period...

Currencies bound ahead of Fed decision

It is a quiet Wednesday in the currency markets. Traders are favoring to remain on the sidelines ahead of multiple key risk events...


In the past 24 hours Bitcoin has lost -5.88% and reached $7612.5. Open your trading account with the best cryptocurrency brokers on special terms today.

In the past 7 days the EUR/USD pair has lost -0.6235% and is now at $1.1765. Start trading and making money on Forex today.

In the past 7 days Ethereum has lost -16.17% and is now at $590.874. Have the most popular cryptocurrencies compared online 24/7.


Top Brokers offering Daily Forex Market Reviews


Forex Currencies Forecasts


Top 10 Forex Brokers 2018

# Broker Review
1easyMarketseasyMarkets89%
2FXTMFXTM88%
3HYCMHYCM86%
4FIBO GroupFIBO Group81%
5FxProFxPro78%
6FXCMFXCM71%
7HotForexHotForex70%
8XMXM69%
9Alfa-ForexAlfa-Forex68%
10Grand CapitalGrand Capital65%
  


Share: