The U.S. Dollar eased a bit on Monday against most major currencies as investor sentiment shifted back toward putting “risk on.” News today centered on Greece’s effort to shore up its finances by offering five-year bonds. Apparently the offering was well received by the investing public as demand exceeded 20 billion Euros. Early expectations were for demand of 3 to 5 billion Euros. This indicates the European investing community has faith and confidence in Greece’s ability to pull out of its fiscal mess.
The GBP USD traded sharply higher all session ahead of tomorrow’s GDP report. Today’s action looked a little stronger than short-covering so speculators could be anticipating a robust report. The U.K. economy was the driving force behind this market’s recent weakness. Oversold conditions are likely to help the Pound strengthen over the near-term or until more bad economic news hits the wires. Traders are looking for GDP to increase by 0.4% after a 0.2% contraction.
The USD JPY traded higher following a volatile week which saw the Greenback lose ground. News that Bernanke would be reappointed helped to support demand for higher risk assets. This pressured the Japanese Yen. The Bank of Japan is expected to leave interest rates and stimulus alone at this week’s meeting, but could threaten to intervene if this currency pair drops below 90.00.
The USD CHF traded lower throughout the day after continuing last week’s late reversal. The chart pattern suggests that this market is likely to continue to weaken until it reaches a key support zone at 1.0312 to 1.0269. Traders should also watch the Euro. A sudden drop in the Euro versus the Swiss Franc could lead to renewed talk of intervention by the Swiss National Bank.
The USD CAD continued to rally despite firm gold, crude oil and equity markets. Technically, this market is overbought which should begin to weigh on its value. The chart indicates that a break through 1.0546 is likely to trigger an acceleration to the downside.
Weaker demand for commodities and equities helped to pressure the AUD USD and NZD USD last week. The weakness was triggered by activity in China which signaled the start of a tighter monetary policy. This move is likely to lead to less demand for Australian and New Zealand exports.
On Monday, firmer gold and equities led to short-covering rallies in both the New Zealand Dollar and Australian Dollar. Throughout the day, demand for higher risk assets seemed to pick up, giving the Aussie and Kiwi a boost. This week the Reserve Bank of New Zealand is likely to leave interest rates unchanged while remaining committed to leaving rates low until late 2010.
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