Thursday, October 4, 2012

Forex Daily Review: New Japanese Finance Minister, Risk for FX Intervention Rises

02 Oct 2012• Matti Williamson, FX and commodities analyst      The RBA Cuts Rate

As expected from early daily reviews, the Reserve Bank of Australia (RBA) slashed its cash rate by 25bps (0.25%) on global slowdown, particularly in China. AUD/USD dropped immediately and is expected to continue its downtrend although the current intraday indicators are in oversold territories at the time of this writing. There is a fair chance we may witness another cut by the end of 2012. The market will begin pricing in the probability for the RBA to continue its monetary easing, which will weigh on the Australian dollar throughout October.

 

EUR/USD

The US ISM Manufacturing PMI was a positive surprise for the markets as it blasted above 50.0, taking the US indices for a snappy bullish ride. There appears to be positive momentum through Europe, also noted in EUR/USD despite recent weakness. There is faint talk that Spain may ask for bank aid any time, which the market views as a positive act. Moody's credit rating agency warned that the banks recapitalisation may be insufficient and can publish their rating review for Spain at any time may counter any strong gains in Euro-dollar and the leading European indices. The bullish trend may be sustained through today's session in EUR/USD but it is likely to be short-lived. Beware of bullish spikes.


Koriki Jojima

Japan has a new Finance Minister, Koriki Jojima. I believe he may be employ a more aggressive stance regarding FX rates for JPY pairs and crosses. The risk for FX intervention may intensify in October, USD/JPY should remain fairly supported unless Jojima supported. All JPY pairs and crosses will be affected should the Ministry of Finance (MOF) fire the signal to push the 'red button.'


AUD/USD Technical Trading Strategy



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