Tuesday 12 February 2013

Shocks & Surprises Weekly FX Observations

Although nobody knows how to forecast fx movements with consistent success, a statistical approach to deviations from measured trends does at least allow us to say what is happening now, and when existing trends are under threat. Here are this week's observations, issued with the usual caveats - these are just empirical observations, if you use them to trade, and lose money, don't blame me:

Trend Breaks / New Trends
Australian Dollar: After spending two weeks on watch, A$ movements this week broke the strengthening trend, most probably establishing a new weakening trend.  Do not expect to see 0.96 again any time soon.

Strengthening Trends
US Dollar: Strengthening trend vs SDR in place since early January is still gathering momentum.
Euro: Strengthening trend in place since mid-Sept is not under threat, and is possibly accelerating. The current floor has risen to around 1.31.
Renminbi: The strengthening trend which has been in place since early Oct is still in place, but is perhaps morphing into stability vs the rising dollar. But for the Chinese New Year holidays, this would be a candidate for the Watch List.
Turkish Lira:  Strengthening trend in place since mid-Sept is still in place and not under challenge. The floor is now probably around 1.785.

Weakening Trends
Yen: There's no threat to the Yen's weakening, in place since mid-Dec.  The current ceiling of 84.03 is coming down rapidly. 
Sterling:  The weakening trend which has been in place since mid-Jan is strongly in place and possibly still accelerating. Sterling is not coming back to 1.60 to the dollar any time soon.
Gold: The new weakening against the dollar, in place since mid-December, is not under threat. The ceiling  has now probably come down to 1,701.
Commodities: Despite the run-up of the CRB Index during the last two months, this has not been sufficiently strong to reverse the weakening trend which has been in place since early Dec 2012.  Expect a short-term challenge to around 298.

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