The currency markets have reacted to the storm of events with a swift test of their ranges. The amount of important news that is affecting the broad markets cannot be over stated this morning. A simple list includes no less than the following Central Bank intervention via the BOJ coordinated with the G7, the Japanese crisis continuing, the military operations in Libya, demonstrations in the Middle East, and the financial concerns of Europe and the States. Throw into that fire the Existing Homes Sales data from the States will come today and a scheduled speech by ECB President Trichet and you will begin to get a feel for the dynamics that will ensue. Traders also should consider that Japan is on holiday today and will be quiet, meaning that the other Asian markets and Europe will have to react off of sentiment without being able to equate the Japanese factor fully.
The USD has been slammed against the EUR and the GBP the past two trading sessions. The USD is trading at the weakest points of its range against both these currencies even though the European Sovereign debt crisis has not been solved by any stretch. Crude Oil prices jumped back up over 100.00 USD a barrel before going into the weekend on the news that the North Africa situation involving Libya appears to be growing wider in scope. The price of Gold climbed back to around 1427.00 USD an ounce and looks as if nervous investors are positioning themselves for possible risk adverse moves. The JPY having lost value with the Bank of Japan intervention on early Friday finds itself actually gaining in value as of this writing. As mentioned, there is a banking holiday in Japan today. Investors have to take into consideration that more interventions are likely. However for the well trained investor with deep pockets a bet against a Central Bank will not be out of the question long term.
The AUD has also gained as of Friday coming off of its recent lows and now finds itself in what would have been considered a comfortable vicinity of its higher values. Asian traders must also know that China is more than likely to continue their interest rate hikes in the coming weeks as they battle inflation which is still rampant in their housing market.
Tomorrow the U.K. will publish a host of inflation data. The U.S. will bring forth New Home Sales on Wednesday. But the crux of trading sentiment today and all of this week is likely to come from international developments surrounding Japan, the Middle East, Libya, and last but not least Central Banks. More than anything investors like a clear framework in which they can make their forecasts and the window is cloudy at best presently. Short term trades may be completely different than long term viewpoints. Momentum is an important word going into this week’s trading.
The question and fear from investors centers around a game of what ifs. The equity markets in the U.S. performed particularly well going into the weekend. Perhaps this shows that there is an element of risk appetite still in the market, perhaps not. The currencies have plenty of volatility to take advantage of certainly and traders with the stomach to participate in the markets today will have to be ready for all things.
Written by bforex.com
