Currency overview.

It was mildly frustrating to arrive home to see today's trade stopped out before carrying on up, and I still think the near term direction of USD JPY is up. But whilst I await the next fresh catalyst to trade. Here are my current thoughts on the currencies.

USD: All the fundamentals suggest dollar strength (strong economy, hawkish hold from the FED) and I think it will only take another piece of data suggesting a strong economy to give the USD another burst of strength.

EUR: ECB board members have today pushed back on rate cut expectations, which has propped up the Euro. But with growing concerns about Eurozone growth, I think it will be an uphill struggle for the EUR to appreciate in the medium term and I currently think the ECB will be the first central bank to cut interest rates.

GBP: economic data has held up well considering the UK still has stubbornly high inflation. Which isn't good for citizens of the UK. But whilst the BOE remains hawkish (it currently looks like the BOE will be the last to cut interest rates). I expect the GBP to remain relatively strong over the medium term.

AUD: Traditionally a country with high interest rates. The RBA still remains fairly hawkish, and will always be a good risk on trade. The problem Australia has at the moment is concerns about Chinese growth, which could have a knock on effect on the Australian economy.

NZD: exactly the same as my thoughts on the AUD.

CAD: I often find the CAD particularly tricky to trade. It can track the USD, and it can be thrown around by the volitile oil price. Currently the BOC is trying to remain hawkish but similar to Europe, there are concerns about the Canadian economy. At the moment, I don't have a view on the medium term direction of the CAD. but it is tradeable as an 'in the moment news trade' when a piece of data (good or bad) can be matched up with some news from another currency. Which can happen when the US and Canada data releases are at the same time.

JPY: The JPY remains a good long option in times of panic risk off. But my preferred trade still remains the 'interest rate differential short yen' (carry trade). And with the recent soft data coming out of Japan and the BOJ seemingly in no rush to change policy, I expect that trade to work well over the medium term.

With data from china and NZD inflation expectations due during the Asian session. Plus US jobless claims tomorrow and CAD employment data on Friday, there are still potential trading opportunities before the week closes.

Please feel free to email any questions: johnelfedforexblog@gmail.com