Forex Forecast

USDJPY Tests Lie Ahead FX markets were confined to fairly narrow trading ranges on Monday with limited tier-one data flow in Europe. Sight deposits held at the SNB increased by CHF +2.6bn last week to CHF 373.3bn.

Politicians At Loggerheads A Japanese holiday prevented USDJPY from making any further upward progress overnight, but US 10y yields did climb to a 4-month high on Friday, and even higher yields could be in store once the UST market finally opens today.

Focus On JPY EURUSD reached the highs of 1.317 on Friday during the New York hours as risk appetite remained robust and USD weakness continued for the second consecutive day following the Fed’s QE3 announcement.

Dollar Dejected The dollar continued to trade on a soft note overnight in Europe across the board. Risk assets were generally bid, all major equity markets pushed higher, following Asian equities while commodities and precious metals continued their rally.

The Dollar Groans The dollar struggled overnight as market participants digested yesterday’s FOMC decision. We see scope for stabilization at these levels however, given the dollar has already sold-off quite sharply since the August payrolls report.

QE3 Is Here The FOMC announced QE3 on Thursday and extended the fed funds rate guidance to mid-2015 while continuing Operation Twist. As part of QE3, the Fed will purchase agency MBS at a rate of USD40 bn per month – this will increase the total purchases of longer-term securities to USD85 bn per month, […]

Dollar Anxiously Eyeing Fed The dollar weakened further overnight as the countdown to today’s FOMC meeting continued. RBNZ Governor Bollard kept the policy rate unchanged at 2.5%, and again referred to the strong New Zealand dollar which he said “undermined export earnings”.

RBNZ Unchanged RBNZ Governor Bollard kept the policy rate unchanged at 2.5%, but again referred to the strong New Zealand dollar which he said “undermined export earnings”.

Another Hurdle Jumped Wednesday’s German Constitutional Court hearing offered little resistance for the bulls as the market risk-rally continued. As expected, the court ruled the ESM ratifications as constitutional.

Dollar Still Selling Off USD remained on a weakening trajectory overnight as the countdown to Thursday’s FOMC decision continues. Meanwhile the broad unwind of short euro positions is still underway in anticipation of a benign ruling from Germany’s Constitutional Court today.

German Court Ruling In Focus USD was weak across the board during the New York session, as risk appetite remained steady heading into the FOMC decision on Thursday. Investors continued to unwind their EUR short positions pushing EURUSD above the 200-day moving average of 1.2835.