Thursday May 20, 2010 - 19:23:03 GMT
Share This Story
Forex Hound - www.forexhound.com
Lack of Clarity, Weak Global Outlook Driving Commodity-Linked Currencies Sharply Lower
Traders are dumping higher risk assets at the mid-session,
driving commodity-linked Forex markets lower while pushing up demand for the
lower yielding Japanese Yen.
The lack of clarity regarding proposed regulatory
legislation and the surprise curbing of short sales by Germany is
making investors nervous. Throughout the entire Greek debt crisis, investors
have been looking for clarity and conviction from the European Union. Each time
the EU has made a proposal, they have failed to explain to investors the logic
behind the move. This weekâ€™s move by Germany to forbid the shorting of
bank stocks is a good example of what is triggering the fear in the market
Institutions are confused by the action in Germany because
the regulators have basically changed the rules of the game. Institutions are
worried that the proposed changes in U.S. regulations are going to make
it more difficult to protect risky positions in equity markets. What this means
is large investors are unsure how they are going to hedge their exposure in the
markets and instead have chosen to pare back positions to reduce the
possibility of large losses. Without knowing what the regulators are going to
allow them to do, it doesnâ€™t make sense to take on added risk so liquidation
seems to be the only viable option.
In addition to confusion over regulatory issues, investors
are blowing out of risky commodity-linked currencies because they feel the Euro
Zone debt problems are going to derail the global economic recovery. This means
the real possibility of a global double-dip recession.
Hedge funds and large investors continue to divest out of
the commodity-linked Australian and New Zealand Dollars. Traders feel that the
spread of Euro Zone debt woes will curtail the global recovery and lead to a drop
in demand for raw materials.
Technically, downside momentum in the Aussie Dollar could
trigger a sharp decline to 50% of the October 2008 bottom to the November 2009
top. This range is .6008 to .9405 with a minimum target price of .7706.
Based on the monthly main range in the New Zealand Dollar of
.4892 to .7635, traders should look for this currency to correct to .6263 if
downside momentum continues at its current pace.
Falling crude oil is triggering a huge rally in the USD CAD.
This morningâ€™s surge has put this market in a position to take out the recent
top on the daily chart at 1.0738. This is a minor point on the long-term chart.
A drive through the February 2010 top at 1.0780 is likely to trigger more
short-covering which will threaten the structure of the bull market in the
Forex Trading News
Daily Forex Market News
Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."