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发表于 2010-4-1 09:20 PM
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Does anyone in HT follow this guy?
Dollar Retracement Gains Momentum Ahead of a Speculatively-Charged NFPs
John Kicklighter, On Thursday April 1, 2010, 8:25 pm EDT
• Dollar Retracement Gains Momentum Ahead of a Speculatively-Charged NFPs
• Euro Strength Uneven in Sentiment Upswing, Keeping EURUSD Relatively Anchored
• British Pound Rides Investor Optimism, Receives a Boost from a 15-Year High in Manufacturing
• Japanese Yen Extends its Decline as Risk Appetite Advances, Funding Status Reinforced
• Swiss Franc Endures a Wild Ride with Expected SNB Intervention
Dollar Retracement Gains Momentum Ahead of a Speculatively-Charged NFPs
The dollar fell for the fourth time in five days (that single up-day doing little to correct the otherwise clear trend) Thursday. This week’s pullback has convincingly reversed the breakout that the greenback had worked so hard to forge last Wednesday. However, this pullback was not unexpected. without a meaningful compliment to the dollar’s strength in the form of a collapse in risk appetite (highlighting its value as a safe haven) or a particularly aggressive upgrade to Fed interest rate forecasts, this standout advance would not persist for long. At the very least, momentum would flag. As the week has progressed, the benchmark currency has not only regressed to meet its speculative bearings; but risk appetite has actually accelerated and encouraged a more aggressive correction. With much of the speculative market going offline at the close of Thursday’s session in observance of the Good Friday holiday, speculators made a move to leave things off on a particularly strong note. The Dow Jones Industrial Average would market a new 18-month high, crude would see a dramatic bullish breakout to 17-month highs, while both the US dollar and Japanese yen tumbled against higher yielding currencies. Yet, it wasn’t necessarily the pace and particular levels these different benchmarks reached that was noteworthy. Instead, it was the fact that different asset classes were moving in tandem towards a common appreciation in risk appetite that is remarkable.
Will this sudden burst of volatility evolve into a true trend? Such an answer will be largely decided by sentiment itself. Today, a fundamental boost was offered through a global round of manufacturing data that would uniformly support the outlook for a global recovery. The US-based ISM activity survey for March would itself rise more quickly than expected to a 59.6 reading – the highest level for the series since July of 2004. The breakdown would further bolster forecasts with notable improvements in production, new orders and new export orders components. From a macro perspective, though, this single indicator was merely the cap on the day’s bull wave. Starting in the morning, the Chinese factory activity report reported growth for a 13th consecutive month, the Euro Zone version touched a three-year high and the United Kingdom’s reading forged a 15-year high. Alone, the US data would have bolstered the greenback’s appeal by leveraging growth and interest rate expectations. However, with the global economy finding the same bearing, a general rise in risk appetite would wash out the dollar’s individualist strength.
Looking ahead to Friday’s session, we have a very unique set of circumstances. By the time the US session starts to take over, liquidity will be almost completely drained from the markets. With the holiday, European markets are closed and US equities will also be offline. Therefore, it will be up to currency and bond traders to respond to a potentially extraordinary March non-farm payrolls (NFP) release. According to Bloomberg’s official consensus, the economy is expected to have added 184,000 jobs last month. While it would be just a drop in the bucket when it comes to replacing the 8.4 million jobs lost over the last two years (while simultaneously keeping pace with the new entrants to the labor pool each month), a number that meets or bests the forecast would be considered a significant stride towards putting the United States back onto the path of job growth. From a fundamental perspective, this reading would offer a definitive step in the recovery of a vital component of the broader economy. On the other hand, for the speculator, such a shift would be construed as progress on the primary issue that is keeping the Fed anchored on its interest rate policy. Yet, between these two distinct functions this single indicator could play, we are met with conflict. Will the dollar respond as a currency that is moving up the yield curve or a safe haven? Furthermore, will the lack of liquidity mute volatility and trend, or will a concentrated speculative interest leverage the response? Only time will tell.
Related: Discuss the US Dollar in the DailyFX Forum, Watch the US NFPs release and its impact on the dollar Live
Euro Strength Uneven in Sentiment Upswing, Keeping EURUSD Relatively Anchored
While it is easy to imagine what was happening with EURUSD given the weakness in the dollar, it is difficult to gauge the overall health of the euro itself from this highly liquid pair. On the other hand, despite the dollar’s exaggerated weakness, the benchmark pair would see relatively modest progress (at least compared to GBPUSD, USDJPY and others). But, what about the market’s second most liquid currency? The only scheduled event risk on the docket was the revisions to the manufacturing activity indexes. An unexpected improvement in the Euro Zone PMI reading to a three-year high bolstered the region’s growth outlook; but it would do little to offset financial instability and miserable rate forecasts. The market has not ignored the fact that Greece has failed to lower its borrowing costs; and the implications this has on stability for the region.
British Pound Rides Investor Optimism, Receives a Boost from a 15-Year High in Manufacturing
A week ago, the British pound was on the verge of returning to 10-month lows against its US counterpart. From a fundamental perspective, the outlook for the currency was dismal and the assessment would carry significant weight with risk trends otherwise secure. However, with the return of risk appetite and a pickup in global economic activity, the United Kingdom’s forecast doesn’t look so dark. From the pound’s own docket, the March factory activity survey advanced to a 15 year high and offered a much-needed strong sign of recovery.
Japanese Yen Extends its Decline as Risk Appetite Advances, Funding Status Reinforced
While both the US dollar and Japanese yen retain a role as funding currencies in the currency market, the 12-month forecast for the former’s benchmark lending rate projects approximately 90 points of tightening. In contrast, there is virtually no changed expected of the Japanese rate. This unique position is not uncommon an uncommon one for the Japanese yen; but it has even greater meaning when the world is on the verge of a hawkish policy shift and the currency is still remarkably overvalued on a historical basis.
Swiss Franc Endures a Wild Ride with Expected SNB Intervention
Taking a look at 12 months worth of daily EURCHF price action, it isn’t difficult to spot those times when the Swiss National Bank (SNB) has intervened on behalf of its currency. This time last year, the central bank saw considerable success with selling its currency on the open market. However, more recent efforts have proven less and less effective. Is the SNB defenseless against the franc’s steady appreciation? Probably. |
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发表于 2010-4-1 05:14 PM
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