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Bad news, good news, bad news….anything new?
By Grace Cheng on September 27, 2006 | More Posts By Grace Cheng | Author's Website
US new home sales unexpectedly climbed during August, breaking a string of three declines. Figure came in at +4.1% vs -2.5% consensus. Earlier, we got US durable goods figure at -0.5% vs +0.5% forecast. US dollar movements are still expected to be choppy before the release of more data tomorrow (Thursday) and on Friday. If USD/CHF can stage a sustained breakout past 1.2460, next target should be around 1.2500, then 1.2550. Later on, Fed Hoenig will be speaking on the US economy at 0:45 GMT. Tomorrow,…
US GDP and core PCE figures will be released at 1230 GMT.
Today, new Japanese Finance Minister Omi said that there is no need to act on current EUR/JPY levels, which should be put some downside pressure on the Japanese Yen. USD/JPY’s immediate resistance is around 117.45, then 117.80, then 118.00.
Meanwhile, GBP fell across the board on a revised lower Q2 GDP figure, despite UK retail sales hitting the highest level in 21 months. GBP/USD’s nearest support is around 1.8840, then 1.8800.
What is of interest to me right now is the Kiwi. From Cullen’s verbal warning sounded early this morning (see previous blog post), we could begin to see unwinding of NZD long carry trades, and that could present some shorting opportunities. Daily chart of NZD/USD shows some bearish divergence, and that could play out. Keep in mind that NZD/USD has fallen by 160 pips since his comments, and some pullback could take place.
P/S. If you do not know what a carry trade is, it involves the selling of a certain currency with a relatively low interest rate, and using the funds to buy a currency which gives a higher interest rate (like the mighty NZD), in an attempt to gain the difference between these two rates, which is known as the interest rate differential.
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