Monday March 6, 2006 - 07:23:15 GMT
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Tricom Futures and Foreign Exchange -
Forex: The BOJ continues to play silly buggers with the market.
The yen fell sharply on Monday as some investors bet that Japanese interest rates would stay far lower than those of other major currencies even after an expected end to the Bank of Japan's ultra-loose monetary policy.
The BOJ is seen ending its five-year-old "quantitative easing" policy as early as this week, and many market players expect the central bank to raise rates from virtually zero by the end of the year.
But the dollar's failure to hold convincingly below 116 yen last week despite mounting speculation for a BOJ policy shift encouraged investors to pile back into higher yielding currencies including the U.S. and Australian dollars.
The dollar hit one-month lows against the euro, Swiss franc and sterling earlier today, dented versus the euro-zone's currency by growing expectations that the European Central Bank will keep boosting interest rates.
The euro built on a 2 percent gain against the dollar last week, boosted in part after the ECB raised rates to a three-year high and the central bank chief, Jean-Claude Trichet, revised up his inflation forecasts for 2007.
The USD continues to lose ground, as the market starts to eye other central banks commencing a rate rise cycle (ECB, BOJ). Now all we need is for the Fed to signal that they are nearing the end of their cycle, then look out for the USD to accelerate its slide.
Saying that, lets not get carried away with selling this USD to quickly just yet. We've seen this sort of move over the last few months, only to have the USD rally back on the back of strong US data, or weak Euro data, or central bank comments.
Today's Economic Release:
US: Pending Home Sales
US: Factory Orders
Today's Top Trades
- Sell USD/CHF around 1.2970-80, with stops above 1.3025
- Buy EUR/USD around 1.2030, with stops under 1.1980
I know these levels are about 50 pips away from current levels, but I suggest caution, rather than jumping in here, and having to place too wide a stop.
P.S. I will be presenting an on-line seminar tomorrow on the Fxstreet website at 07.30GMT. Check out the website for more details.
For more ideas send me an email, [email protected]
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