Currency Trading Review of the Week Ahead

Currency Trading Review of the Week Ahead
August 24, 2015

 
It’s an important week ahead for the FX markets as the Jackson Hole symposium is to take place at the end of it and it is not unusual for participants to make statements that influence markets. While the symposium is a closed one where press representatives are not permitted to take part, it is a common for central bankers from around the world to give interviews or snippets in between the events. This makes trading in this period very challenging.

Last week ended with a mixed US dollar picture as the whole market was influenced by the slide in equities. It was one of the biggest drops of recent times, with Dow Jones and the S&P 500 going into the red, and of course that the USDJPY pair followed.

We’ve said here many times, that the path of least resistance for the USDJPY is more likely to the 120 than to the 125 area, and here we have a weekly close below the 122 mark. Expect some more in the same direction in the days to come.

One of the big surprises came from the EURUSD pair last week as it closed near the 1.14 mark. Those looking for the pair to reach parity will have a nasty reality check. The thing is that the Euro as a currency is now being viewed as a hedge against the commodities drop, and this can be illustrated with the almost vertical move higher in EURCAD and EURAUD.

Speaking of commodities, AUDUSD and USDCAD were the only major currency pairs that showed US dollar gains. this was a bit surprising from my point of view as Gold is having one of its best weeks in months.

Coming back to this week, we have a bit of everything ahead of us. As all eyes are on China and equities, for signs of market consolidation or even recovery. US data should also give us more clues about what the Fed is going to do in September. The US GDP release this week is the key for September rate hike bets and the consensus is that the previous release is going to be sharply revised higher.

It remains to be seen if that is the case but from my point of view everything can be downplayed by the wild card Jackson Hole event represents. Considering that the symposium ends next Saturday, I strongly advise anyone trading FX markets to go as light as possible over the weekend, in order to avoid a nasty gap next Monday.

After all, better safe than sorry as it is not the first time when markets are influenced by fundamental factors that are happening over the weekend. Remember Greece?

Sammy

Sammy

Sammy is our forex expert, with over 20 years experience in the financial sector, she will be keeping you up to date with the ups and downs of currencies around the world


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