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Forex Trading StrategiesMetals meltdown slams AUD for a loss. JPY pokes a bit stronger. Will today see a follow up on this action?
Canada Retail Sales the only data point on today's sparsely populated calendar.
MAJOR HEADLINES â€“ PREVIOUS SESSION
o Metals markets were shaken up yesterday by a dramatic decline in silver (largest in percentage basis since 1983), which went limit down in price on the futures market and triggered panic in the gold market as well.
o US Natural Gas Storage rose 47 bcf vs. 50 bcf expected as gas and oil prices eased lower
o US Philly Fed rose to 13.2 in April from 12.3 in March, but disappointed expectations for a reading of 14.0
o Japan Tertiary Industry Index fell -1.5% vs. -1.1% expected and the All Industry Index fell -0.9% vs. -1.1% expected
o The Australia Feb. Leading Indicators were unchanged vs. January.
o Australia Export Prices rose 5.1% in Q1 and the Import Price Index rose 1.8%
Market moves: LIttle movement overnight, though the USD did spike briefly to new highs in places before moving back into the range. AUD has been generally weak from the sell-off in metals prices and JPY has strengthened in the non-USD crosses.
THEMES TO WATCH â€“ UPCOMING SESSION
A historic day for metals markets yesterday shook AUD off its pedestal and any further damage to the commodities markets will certainly be felt in AUD crosses today and in the coming days. The purest currency play if you are looking for further weakness in metals, however, is the ZAR, with its huge mining industry. A EURZAR or USDZAR long may not be a crazy idea, though traders should certainly watch their leverage as trading ranges may be very large. As for AUD trades, EURAUD may be worthy a try with a fairly tight stop.
The Hu-Bush summit has offered little of interest. Just the typical statements about the need for this and the need for that, with nothing new on the table. Statements in the wake of this weekend's G-7 (likely to be dominated by worries about energy markets) may be more interesting however. The JPY seems to be pushing back a little bit, and a key reversal is almost in place if EUR/JPY pulls all the way back below 144.00. Reasons for that are more likely the easing of the commodities rallies and easing in the fixed income sell-off.
The USD view is worse than tricky. There's plenty of skepticism in the market on this latest EUR/USD rally - no doubt as market participants have been conditioned to disappointment with every rally recently getting heavily beaten back, even if the overall trend has been up - if painfully slow. Elliot wave models are likely giving the "wavists" a devilish time as well - as one can argue that we have completed a five wave down sequence and we're possibly looking for a new first wave that will begin a five wave up sequence now that we've seen this long period of consolidation. Others will argue that we haven't seen the fifth wave down that should take us to something like 1.1200. My position is to cautiously look for the new up-sequence. But even if this view is disappointed, the USD may not be able to make much headway beyond 1.2000 in the EURUSD. The key short-term level is 1.2200.
Hardly a catalyst on the horizon today - though metals and commodities in general will be in focus after the multi-decadal volatility event seen in the silver market yesterday. Also in focus will be CAD, which could be vulnerable to pre-weekend jitters in energy markets. Also up today is the latest Canada Retail Sales release. In general, Canadian numbers have been very strong of late, so a negative Retail Sales number would be a surprise. The question is what the focus is right now for CAD - oil or strong data. Could be a volatile day in CAD crosses.
Note: the support/resistance levels used in the matrixâ€™s of this document are levels derived from yesterday high, low and close. Reference in the text to other support/resistance levels will occur.
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