FX CashFlow Team Blog

GBP/USD:The latest break back above 1.5800 now compromises a multi-week consolidation, with the pair now looking to break towards next key resistance by 1.6000. However, despite the upside move, we see any additional gains from here as limited and would look for a topside failure somewhere ahead of 1.6000 in favor of a bearish resumption. [...]

Trading the News: New Zealand Employment Change
What’s Expected:
Time of release: 02/08/2012 21:45 GMT, 16:45 EST
Primary Pair Impact: NZDUSD
Expected: 0.4%
Previous: 0.2%
DailyFX Forecast: 0.2% to 0.3%
[...]

• Dollar Finds Relief in Dows Restraint after Friday’s Drive
• Euro: Another Day, Another Delay for Greece’s Reconciliation
• Australian Dollar Rallies after the RBA Unexpectedly Holds Rates at 4.25 Percent
• British Pound: Will the Drive to Austerity Push the UK into Recession?
• Swiss Franc Awaits SNB Jordan’s Comments on Growth, Really Want Intervention News
• Japanese Yen Traders Show Little Reaction to News of ‘Stealth Intervention’ in 4Q MoF Data
• Gold Slips for a Second Session but Selling Volume Temperate

[...]

EUR/USD: Although gains in this market have been quite impressive in recent days, the price action is still classified as corrective with the market locked in a broader underlying downtrend. From here we would still leave the door open for additional upside to test the 100-Day SMA by 1.3340, but any additional gains should be well capped below 1.3500 on a daily close basis in favor of the formation of the next major lower top ahead of bearish resumption. [...]

• RBA catches markets off guard and leaves rates on hold
• Central bank maintains dovish tone but Aussie well bid on news
• Euro/Aussie cross rate drops to yet another record low
• RBA decision in question and we feel was mistake to not cut
• Greek talks linger on; still no agreement; increases risks of default

[...]

The Canadian Dollar boasts a strong correlation to Silver prices, while S&P 500 Volatility Index traders my look to the Australian Dollar as a proxy for positions on the comparatively illiquid VIX.

The short-term correlations between the Australian Dollar/US Dollar exchange rate the S&P 500 Volatility Index trades near record strength, while much the same can be said for the Canadian Dollar and Silver. Given that the US Dollar (ticker: USDOLLAR) holds one of the lowest interest rates of any G10 currency, long Aussie Dollar and Canadian Dollar positions against the USD offer the advantage of positive yields.
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1.) Is a deal on Greece’s second bailout already priced in the markets? Will the focus move to Portugal?

It is impossible to fully price in the outcome of the Greek situation. It is simply too complex. When we have big reactions to event risk, the change in price is the adjustment to the new ‘fair value’. When we didn’t see significant development coming, we get the biggest market reaction. [...]

S&P 500 – Prices put in a Hanging Man candlestick below trend-defining resistance in the 1346.90-1362.90 area, hinting a move lower may be ahead. Negative RSI reinforces the case for a downside scenario. The first layer of significant support lines up at 1305.40. Alternatively, a daily close above 1362.90 would go a long way toward neutralizing the bearish tone of overall positioning established since May.
[...]

• RBA maintained interest rate at 4.25 percent
• RBA Board cited inflation close to target, growth close to trend, and strong U.S. economic data among reasons for continuing rates at current level.
• Analysts expected 75 percent probability that RBA would cut key interest rates 25 basis points
• Dovish rhetoric suggests that RBA will cut rates in the future in order to foster economic growth.

[...]

Talking Points

• Markets Positioned for Successful Greek Accord as Stock Index Futures Rise
• German Industrial Production May Surprise Higher After Pickup in PMI Data
• Australian Dollar Soars as RBA Unexpectedly Holds Interest Rates Unchanged
• Japanese Yen Down After MoF Reveals Five “Stealth” Interventions in Q4

[...]