Currencies Slide Sideways as Aussie Rules

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Includes: ADE, CUD, ERE, FXA, FXB, FXC, FXE, FXF, FXY, JYN, SZE, UDN, UUP
by: The LFB

Overall, the currency market moved in mixed fashion during the overnight session, as the major currencies continue to trade on very thin volume. The pound declined against with the dollar, while the the euro, the cad and the swissy moved side-ways against the dollar. At the same time, the aussie strengthened. This de-correlation between the major currencies happens very rarely, and most of the time is due to the market’s lack of participants. Chances are that the currency market will continue to move this way going forward, and through the U.S. trading hours, as market participants remain on the sidelines.

The Euro (Eur/Usd) had a number of attempts to move higher during the Asian session, but failed to break-free from the 20-day moving average at 1.4200. Through the European session, the euro developed a side-ways range, as the pair moved on weak momentum, something also seen in the entire financial market.

The Pound (Gbp/Usd) lost 100 pips during the European hours to find support at 1.6620, being the session’s worst performer. This plays out as the market is preparing for the BoE’s inflation report on Wednesday, which might show that the bank foresees stronger deflation ahead.

The Aussie
(Aud/Usd) showed some strength during the overnight session, even though the other major pairs lacked a direction. During the Asian hours, the aussie advanced 50 pips, after an initial gap lower at the open, and then held the long side of the range for most of the European session. On the 4-hour chart, the aussie had developed a down-trend channel, that will be tested as 0.8440 is once again tested.

The Cad (Usd/Cad) held slightly above the neutral pivot point at 1.0805 during the overnight session. The same area acted as support during the prior U.S. session, something that makes it a reliable intra-day swing point. If the cad wants to break any lower, it will need to draw in much stronger momentum, and volume, than has been seen overnight.

The Swissy (Usd/Chf) traded around the 1.0835 area where it topped on Friday, and the 50-day moving average, during the overnight trading hours, following the entire market lacked a general direction. For now, the swissy has re-entered the 1.0750-1.0900 channel, which proved to be very volatile throughout the June-July trading period.

The Yen (Usd/Yen) lost 60 pips through the early Asian session, moving down to the 97.00 area, but since then, the pair spent the rest of the overnight session moving side-ways. On the daily chart, the yen is trading above all of the important simple moving averages, and at a two month high, something that denotes its strength in the near-term, even in the face of negative equity trade that historically impedes its movement and long momentum.

Disclosure: No positions