Good morning traders,
Bringing the attention back to the Euro, the currency pair focus for the day is the EUR/NZD currency pair. This pair seems to be on the threshold on reaching an all-time low today. This comes due to the growing divergence in two monetary policies between the Reserve Bank of New Zealand (RBNZ) and the European Central Bank (ECB). The interest rate is at a good place in New Zealand at 3.5% and the Eurozone charges 0.05%. A further weight on the Euro (EUR) will be the launch of its QE stimulus program later this month. This leaves us on a bearish trend due to the growing interest rate discrepancy between these two continents.
What’s even more perplexing to me with personal spending, personal income, construction spending and ISM manufacturing all disappointing expectations is how is it that the greenback (USD) is still on a bullish trend? Seems that the forex market and its investors are totally discounting all the negative US data that has surfaced in the past 2 days. Both the European economic data has done well for the Euro (EUR) and the Citigroup’s economic index for Europe at its highest level since 2013, has proven worthy for the Euro (EUR), in contrast to all the negative US data.
Next to its majors the USD is almost hitting its highest levels in 11 years, and the EUR / USD pair closed at its lowest level yesterday since 2003. Monday’s data as negative as it’s been did not flinch in the least. This makes me worry as I hope that this will not come crashing down with fury in the next few months, I know that with all the news surrounding the Federal Reserve that the USD is edging into vulnerable territory.
I would from next week perhaps err on the side of caution as rate hikes are inevitable later this year. Also, the positivity and liquidity that is slowly surrounding the European stocks higher and the EUR lower, and the USD is essentially underperforming compared to its rival the EURO. This leaves me to wonder whether there will be or won’t be in the near future a huge market flip.
What could very well challenge the USD in the next coming days is the movements of the Canadian Dollar (CAD). I say this as the North American trading session earned the majority of the attention in the early trade of the day. The forecast increase for the Canadian Gross Domestic Product (CGDP), can increase higher than expected at 0.3% in December, 0.1% more than expected.
Today’s trading tip
As per my mention, to err on the side of caution with regards to the USD I guess this will be in the weeks to come, my money is still on selecting the CALL for the USD. The other pair I will look at sending a PUT on is the EUR / NZD, just not quite making it these days. Even though I am certain by next week my attitude towards the Euro will change….
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