If Stronger Than Expected Inflation, Consumption, And Jobs Didn't Lift The Greenback, What Will?

Canadian Dollar: The Canadian dollar was the worst-performing major currency against the US dollar last week, appreciating by about 0.25%, which owed in full to the bounce (~0.35%) ahead of the weekend.  The greenback has slowly ground lower and fallen below CAD1.25 for the first time since March 23.  It held just above the $1.2475 area, representing a (61.8%) retracement of the rally from the multiyear low on March 18 (~CAD1.2365).  It is flirting with the lower Bollinger Band (~CAD1.2495).  The MACD is set to turn lower, while the Slow Stochastic turned lower earlier this month.  The Bank of Canada meets on April 21, and some adjustment of its forward guidance is likely given the increased confidence that a strong recovery has taken hold (FXC).  

Australian Dollar:  The Australian dollar stalled near $0.7760 in the last two sessions, after having begun last week near $0.7625.  It was the second consecutive weekly gain after falling in five of the previous six weeks.  The gains were sufficient to drive the five-day moving average above the 20-day for the first time in a little over a month.  The $0.7770-$0.7775 area offers nearby resistance, and a move above there spurs a test on the March highs (~$0.7830-$0.7850). Initial support is seen around $0.7700 and then $0.7675 (FXA). 

Mexican Peso:  The peso's 1.25% gain last week brought it back to where it started the year.  The dollar declined for the third consecutive week and the fifth week in the past six.  Falling US yields seemed to help, and the emerging market currencies have done well over this period.  The JP Morgan Emerging Market Currency Index rose by almost 1% last week, which, like the peso, was the third weekly gain in a row and five of the past six weeks.  The greenback looks poised to take out the mid-February lows (~MXN19.89) and could head back to the year's low set on Jan 21 near MXN19.55.  However, the technical indicators are stretched from the decline that began from around MXN21.6360 on March 8.  Mexico T-bills (cetes) pay over 4% annualized, while US bill yields hover near zero.  

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Read more by Marc on his site Marc to Market.

Disclaimer: Opinions expressed are solely of the author’s, based on current ...

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