UP Down Turnaround.

Up Down Turnaround

Global markets returned from various Mayday celebrations with a risk-friendly spring in their step and were rewarded as equities were buoyed by good US earnings results and had another run at making all all-time highs before retreating slightly. For the most part, markets continue to trade in tight ranges ahead of FOMC, NFP and the French elections later this week.The US dollar storylines remain numerous and shifting sentiment continues to pull the greenback in every which direction.

Japanese Yen

Price action in the US bond market with 30-year yields topping 3.02% saw USDJPY touch 112.30 before the 30-year yields faded post-Mnuchin’s long end supply headlines after April US car sales plummeted. Supporting the headline USDJPY, there has been a focus on the EURJPY which broke its trendline resistance at 122.20/25. With French election surprise very unlikely, we could see a push higher on EURJPY which will underpin USDJPY. Overall, the headlining pair remains positioned for a move higher, and with equities and risk trading well, we should expect dips to stay supported.  

As for trading tonight, FOMC should provide some interest but will offer little in the way of a surprise with the market more focused on the language surrounding June. Overall, I suspect traders are looking past tonight’s release, preferring to focus on Friday’s NFP as one of the key barometers for the Fed June rate hike.

Australian Dollar

Making “ Cents” of the Aussie dollar moves can be challenging at times, even more so with typical short-term indicators becoming notoriously unreliable, so we take what the market gives us and trudge on.

AUDUSD has been in the limelight post-RBA after the bank held base rates steady. Lately, expectations had shifted slightly to the dovish side expecting that the balance of likelihoods may see a cut as the next move from the bank rather than a hike. The RBA is sounding a tad more upbeat while maintaining the constant theme of a glass half full approach to growth and underlying inflation, was enough to convince the market that chances for a rate cut are very unlikely and the AUD pressed to .7550.

Traders are keeping an eye on .7550-75 levels as there may be some more AUD shorts to get unwound in the days ahead. This could be aided by how well the cross JPY pairs are trading, underpinning the AUDUSD headline pair.

Aussie bulls continue to bank on a rebound in risk, commodity prices as the AUD pairs have continued to lag the moves in global equity prices.With risk rebounding, the interest rate picture a bit more clear and commodity prices apparently basing, we could see an extension of the current moves but could  run into a supply of offers near .7575-7600  level as it’s unlikely we’re in the midst of any longer term move on the AUD


    May 5 – [from midnight] Poll blackout

    May 7 – Second round of French presidential elections. Last polls close at 19:00 BST / 14:00 EDT, with an exit poll result announced immediately.

    May 11 – Official proclamation of the new President.

    May 14 – [from midnight] End of Francois Hollande’s mandate

    June 11 – First round of legislative elections

    June 18 – Second round of legislative elections.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Stephen Innes

Stephen Innes

Head of Trading APAC at OANDA
Stephen has over 25 years of experience in the financial markets and currently based in Singapore as the Head of Trading Asia Pacific with OANDA. Stephen's market views focus on the movement of G-10 and ASEAN Currencies. His views appear in Bloomberg, CNBC.Reuters, New York Times WSJ and the Economist. His media appearances include Bloomberg TV & Radio, BBC International, Sky TV, Channel News Asia, ASTRO AWANI and BFM Malaysia. Stephen has an extensive trading experience in Spot and Forward FX, Currency and Interest Rate Futures, Money Market Derivatives and Precious Metals. Before joining OANDA, he worked with organisations like Nat West, Chemical Bank, Garvin Guy Butler, and Sumitomo Mitsui Banking Corporation. Stephen was born in Glasgow, Scotland, and holds a Degree in Economics from the University of Western Ontario.
Stephen Innes