‘Risk on’ for currencies

(Andrew Lockwood – The City Traders)

The China reopening story is back on the front pages of the financial news this week as the pace of reopening continues. The weekend saw further easing of travel restrictions giving cause for a further push higher in the Chinese stock market and the Chinese Yuan. The China 50 is up a whopping 22% since the lows last seen in November 2022. But even more significant is the more accessible Hong Kong’s Hang Seng which is up a staggering 45% in the same period. Major structure daily resistance around the 19000 zone has now been breached and is likely to act as support. The exuberance of the China story is filtering through into the ‘Risk ON’ currencies. The Australian dollar, which is often seen as a proxy for the Chinese Yuan is surging against its peers. Oil prices, which are often seen as a barometer for Chinese growth, also seem to have found support against the backdrop of a possible global recession. This in turn is positive for the Canadian dollar which is also finding support from the strong job numbers last week. So this week kicks off in a ‘risk on’ mood and could well continue for the next few days and weeks ahead.

‘Risk on’ means we buy AUD, CAD, and NZD and sell the USD. A soft US CPI print this week will add fuel to these currency plays. The momentum meter chart shows the strength and weaknesses of the major 8 currencies. We can see the USD is clearly on the back foot. The AUD and the CAD are the strongest. Trend followers looking for an ‘edge’ are better suited to buy strong and sell weak, using price action to assist on entries.

Gold (XAU/USD) trying to break resistance on weaker USD – Good news for the Fed [Video]

(Brad Alexander – FX Large Limited)

Did you see the volatility in the USD last Friday? Why?

I’m Brad Alexander and in this week’s Market Blast Fundamentals let’s take a look at Natural Gas, GBPUSD, GBPCAD, Gold (XAUUSD), and EURUSD.

We have been talking about the “pivot” for the US Federal Reserve for months now, and it may be in sight.

Here is why.

Firstly, the US Non-Farm Payroll figures were higher than expected, which is good news for the global economy.

Secondly, the US Unemployment figures were lower than expected which is also good.

But, most importantly, the Wage Growth was slower than expected which means that inflation might be slowing.

Normally, with good NFP and Unemployment numbers, we see a stronger USD.

In this case, however, the slower wage growth may help the Fed decide to slow down Interest Rate rises, therefore the weakness.

So, tomorrow’s speech by Jerome Powell will be critically important as investors and traders will be listening for clues to the Fed’s next moves.

We will review the opportunities in tomorrow’s video.

Of course, this will affect Gold which, as well, based on a weaker USD, is trying to break resistance at around $1875.

Watch out this Friday for Manufacturing Production and GDP figures from London.

Tomorrow, as well, we will look at some technical opportunities to take advantage of this news and we see the GBP is weak against CAD, AUD, and JPY, and strong against the USD.

Incredibly, Natural Gas has fallen below $4 based on a milder winter in Europe.

Read Risk appetite finding some tailwinds

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