The Chinese may be trying to curry a bit of favour before tonights currency report. They have fixed the Yuan at a new record high of 6.6497 against the USD.
Elsewhere the USD is giving back some of its earlier gains against the majors and I suspect that we’ve already seen the range extremes for this session.
The momentum seems to be waning and I don’t think we are going to see the same volatility that we saw yesterday. Jananese MoF and BoJ officials continue to fill up the newswires with lots of comments but until they actually do something their credibility will continue to suffer.
On the order front, talk of stops below .9870 in the AUD/USD which might come in for some attention.
The USD continues to make some early gains in Asia with the AUD/USD now back below .9900
Someone pass a pinch of salt please.
EUR/USD and AUD/USD have dropped 40 pips in tha last hour driven by profit taking ahead of some major event risks later tonight during the NY session.
Next support in the EUR/USD is yesterdays break-up levels at 1.3980 and in the AUD/USD at .9880
We are closer to the bottom that the top of this range at the moment so I’d prefer to be in a dip-buying mode intraday. The fact that USD/JPY is finally showing some willingness to bounce is moderately encouraging to the bulls out there but the dominant downtrend is still in control. Play the ranges and wait for the edges is my best guess.
As Jamie mentions in his wrap below, Mr Bernanke will be talking on Friday at the Boston Fed when he is expected to put some meat on the QE2 bones. Comments from Kocherlakota and from Hoenig earlier in the week certainly do put some doubt in my mind as to what or how much the Fed will do and with Chinese tensions on the rise, there is a very fine line that needs to be walked.
- Do too much and cause a further extensive run on the USD (maybe this is really what the Fed wants)
- Do nothing and run the risk of the economy sliding sharply south but keeping in mind that the positive economic effects of any QE2 may well be marginal at best
Helicopter Ben’s famous juggling act makes its appearance at 12:15 GMT.
Once it became clear that there was some serious barrier protection ahead of 1.00, hedge funds started unloading very profitable AUD/USD long positions, driving it down 100 pips before the market bounced after the Google earnings.
It’s difficult to advise going long or short at these crucial levels but if you’ve made 500 or 700 pips on a long position, why not book some profits and enjoy a stress free weekend.
- Argument to be made for Fed to raise inflation target
- Raising inflation expectations could have pitfalls but could affect real yields
- Unemployment will take some time to reduce
These and other comments would seem to be downplaying possible effects of QE2
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