Forex Trading: Market Update

EUR/USD EUR/JPY USD/JPY
The Euro pushed higher against the Dollar today as there was USD weakness across the board except against the Yen. The Yen pairs were being sold, pushed higher by USD/JPY in expectations of the senate passing the bill to extend the debt ceiling. When the bill passed, USD/JPY immediately pushed higher (from 91.55 to 91.80 in 6 minutes.)

The move higher in EUR/USD was more from the USD weakness than Euro strength today, which can be proven by looking at the cross rates. In the European & US sessions EUR/GBP traded sideways/down, EUR/NZD & EUR/CAD fell, and EUR/AUD traded sideways. It's worth a note that this is the second day in a row the European equity indices have fallen. Most notably the FTSE MIB down around (-3.50%) yesterday and the Ibex (-2.45%) today. EUR/USD could be vulnerable to a pullback IF (and that's a big IF) we see some USD strength come into the market.

NZD/USD
Yesterday we had a rate statement where the RBNZ chose not to cut rates due to strong HPI data. That gave the currency strength throughout today, and was further bolstered after RBNZ's Wheeler made positive remarks about the economy in a speech today. Ironically, Wheeler wants a much lower exchange rate but regularly causes the Kiwi to strengthen with his remarks. If he possessed adequate knowledge about how the markets functioned, he would realize that he could cause his currency to depreciate simply by jawboning without actually having to take concrete steps to devalue it. He's scheduled to give a speech on currencies on Feb. 20th. Maybe he'll figure it out by then.

AUD/USD
We just had Chinese PMI released, and there was a surprising divergence between the government's PMI number and HSBC's PMI number.

8:00pm CNY Manufacturing PMI                       Actual 50.4,   Est. 51.1,   Previous 50.6

8:45pm CNY HSBC Final Manufacturing PMI      Actual 52.3,   Est. 52.1,   Previous 51.9

Out of both numbers, we think the government's PMI number carries more weight, because they are typically suspected of tweaking the number to slightly above positive, and would probably not release a print lower than the consensus estimate unless they wanted to keep the number they were releasing and the actual number in the same ballpark. This should cause the Aussie to further weaken across the board going into February's RBA rate decision. AUD/USD is currently in an uptrend, and may be forming a bottoming pattern above the 200 day EMA on the daily chart. If the bottoming pattern does hold, then we favor the Aussie higher through the 1.0650. The number to watch on the downside is the .618 fib at 1.0370. If that breaks, then 1.3050 should follow quickly and the 200 day SMA at 1.0315 should temporarily serve as support.