The U.S. Dollar finished lower against most major currencies on Friday as investors continued the trend of funding riskier assets with the lower yielding Dollar. The Dollar also took a hit following the release of a better than expected University of Michigan Confidence Survey. News that China's industrial output rose 12.3% was also a catalyst contributing to the Dollar's weakness.
The EUR USD finished slightly lower on Friday but up close to 2% for the week. Today's sell-off was technically based as this currency pair hit a key retracement level at 1.4622, encouraging long traders to take profits. Appetite for higher yielding assets was the primary reason behind the strong surge in the Euro this week.
The GBP USD continued its strong up move today as this market is basically playing catch up following last month's huge sell-off. Yesterday's news that the Bank of England would leave bank deposit rates unchanged helped fuel today's rally. Despite the current rally, the Pound should continue to lag the rest of the major currencies until the U.K. economy turns a corner or the BoE reduces government stimulus.
The USD JPY finished the week on a multi-month low as traders continued to use the Dollar as a funding currency rather than the traditional Yen. The current downtrend could accelerate to the downside now that the important 91.00 support area has been breached. Unless there is a dramatic turnaround to the downside in global equity markets, continue to expect pressure on the USD JPY.
Stronger demand for higher yielding assets helped support the Canadian Dollar today but gains were limited by the weakness in crude oil. Selling pressure has been on the USD CAD for several days but this currency pair has not accelerated to the downside. Traders are concerned that the Bank of Canada may take action to quell the Canadian Dollar's rapid rise because of its negative effect on the economy.
The AUD USD finished the week at its high for the year, but closed lower for the day. Increased appetite for risk helped boost the Aussie but gains were limited by the news this week that retail sales were down as well as exports. Both of these events encouraged traders to lighten up positions since the Reserve Bank of Australia was not likely to raise rates until December. Traders had been buying the Aussie in anticipation of a rate hike in October.
The NZD USD finished higher for the day and the week buoyed by stronger appetite for risky assets and perceptions that the New Zealand economy was poised for a recovery. Earlier in the week, the Reserve Bank of New Zealand left interest rates unchanged and hinted that additional rate cuts were possible. This threat apparently did not rattle investors who continued to push prices higher.
Please do not hesitate to contact us at 1-800-971-2440, with any questions.
DISCLAIMER: Forex (off-exchange foreign currency futures and options or FX) trading involves substantial risk of loss and is not suitable for every investor. The value of currencies may fluctuate and investors may lose all or more than their original investments. Risks also include, but are not limited to, the potential for changing political and/or economic conditions that may substantially affect the price and/or liquidity of a currency. The impact of seasonal and geopolitical events is already factored into market prices. Prices in the underlying cash or physical markets do not necessarily move in tandem with futures and options prices. The leveraged nature of FX trading means that any market movement will have an equally proportional effect on your deposited funds and such may work against you as well as for you. In no event should the content of this correspondence be construed as an express or implied promise or guarantee from Brewer FX, LLC and Brewer Investment Group, LLC or its subsidiaries and/or affiliates that you will profit or that losses can or will be limited in any manner whatsoever. Loss-limiting strategies such as stop loss orders may not be effective because market conditions may make it impossible to execute such orders. Likewise, strategies using combinations of positions such as spread or straddle trades may be just as risky as simple long and short positions. Past results are no indication of future performance. Information contained in this correspondence is intended for informational purposes only and was obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted.