Forex Crunch Commodity Currency Break Out After Chinese Move

Commodity Currency Break Out After Chinese Move

Posted: 21 Jun 2010 02:41 AM PDT

The Chinese announcement rocks the markets at the beginning of the week. Commodity currencies are enjoying risk appetite, while European currencies are only experiencing small gains against the dollar. Updates about the breakouts in the loonie, Aussie and kiwi.

While there are still doubts about the depth of the Chinese move, the yuan already began appreciating against the dollar, fueling hopes of global recovery. Speaking of fuel, the price of oil jumped above $78, the highest levels since May 6th. The Canadian dollar likes it:

USD/CAD broke below the 1.02 support line and is getting closer to parity. The break continues a move from last week, and at 1.0160, parity is getting close once again. Canada enjoys a strong economy, and with risk appetite and the rising price of oil (Canada’s main export), the C$ has more room to rise.

Below parity, the next lines of support are 0.98 and o.97, but it’s important to state that parity is a very tough area which the pair struggled with beforehand.

AUD/USD also made a significant breakout – the pair jumped over 0.8735 (December’s low) and passed the 0.88 line. At 0.8840, the Aussie next target is the round number of 0.90 that worked as support line in the past.

Above, the next line is 0.9135 and below 0.8735 the next big support line is 0.8567. Currently there’s a gap in the chart, that probably won’t be filled soon.

Australia’s main trading partner is China. With a stronger Chinese yuan, China can now buy even more Australian iron, gold and other commodities.

NZD/USD is also on the move. After settling above the important 0.70 line last week, the pair was capped by the 0.7080 resistance line. This was broken at the wake of the new week.

With a gap in the chart, NZD/USD now trades at 0.7134 and aims for the next level – 0.72. A break above this line will open the road for 0.7320. A drop below o.70 will send the pair towards 0.6910.

The kiwi also enjoys trade with China, with many types of commodities. Similar to the Aussie, it also enjoys a high interest rate and a status of a “risky” currency that is bought when there’s optimism.

Note that also the Euro and the Pound saw gains, but the gaps in the charts were filled quite quickly. The Euro-zone and the UK both suffer from severe debt issues, that are limiting any rise in their currencies.

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Forex Daily Outlook – June 21 2010

Posted: 20 Jun 2010 02:00 PM PDT

Starting the week with a few highlights, Jean-Claude Trichet testifies in Brussels, UK’s earliest report on House Price Index is released and in Japan All Industries Activity is changing. Let's see what's up for today.

In Europe with Jean-Claude Trichet, European Central Bank (ECB) President, testifying on Economic and Monetary Affairs before the European Parliament, in Brussels; and as head of the ECB, affecting the short term interest rates regarding future monetary policy;

For more on the Euro, read the EUR/USD forecast and Casey Stubbs' latest analysis.

Moving on to Great Britain, Rightmove House Price Index (HPI) is 0.7%, this is the UK’s earliest report on housing inflation which measures the change in the asking price of homes for sale.

Read more about the Pound in the GBP/USD forecast.

In Switzerland, Governing Board Chairman Philipp Hildebrand speak at the Swiss American Chamber of Commerce, in Zurich; and As head of the central bank, has an effect on controls short term interest rates.

In Australia, New Motor Vehicle Sales, a Monthly report that measures the change in the number of new cars and trucks sold domestically; It’s a sign of consumer confidence in their future financial position

For more on the Aussie, read the AUD/USD forecast.

In New Zealand, Visitor Arrivals, a monthly report that measures the change in the number of short-term overseas visitors who arrived in the country; an important report since tourism plays an important role in the economy and effect also the GDP.

In Japan, All Industries Activity is about to rise up from -0.8% to 2.1%, a monthly report that measures the change in the total value of goods and services purchased by businesses; It’s a leading indicator that can be an early signal of future economic activity such as hiring, earnings, and investment;

That’s it for today. Happy forex trading!

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