The Australian dollar has been on the rise from the beginning of September until around mid-month, when it leveled into a more-or-less range trading pattern. Much of the impetus for the Aussie strength has been due to expectations that the Reserve Bank of Australia could raise interest rates as early as this week. Also is the fact the currency is seen as a prime choice for FX traders when seeking riskier, higher yielding currencies than the USD.
In addition, there has been a significant rise in job advertisements in Australia. A private sector survey issued Monday showed job advertisements rose at their fastest monthly pace in 21 months in September. Official jobs data for September are due Thursday with economists expecting the figures to show a 10,000 job-improvement last month
Although risk-aversion in global equities markets has been a factor this month, it has been moderate and not very detrimental to the AUD. In the current environment, the Australian dollar's rise is just not expected to be slowed down by global risk sentiment. FOREX traders appear to be anticipating the RBA's move this week foremost, and even if they don't move this week, the FX market will speculate that they will boost rates next month.
Market participants are currently pricing in a 46% probability of a quarter of a percentage point rate hike Tuesday, up from 18% late last week. However, many economists don't expect the RBA (Reserve Bank of Australia) to raise rates until the November meeting. Please refer to the RBA -Reserve Bank of Australia website for more information like rates changes
Australian bond futures have been edging down in price, an indication of risk appetite in the Australian market. There appears to be some possible resistance in the pair at around 0.8765 to watch out for. However, from a technical and fundamental perspective, the mid-term outlook for the AUDUSD most certainly seems Bullish.
The USDMXN Market Commentary has been plummeting since early October, primarily on Dollar weakness. But today, the pair is lower after President Calderon sent riot police to take over state-owned Luz y Fuerza Del Centro. The Federal Electricity Commission (CFE) will now run the firm, which was reported to cost twice as much to operate as it earned. 44,000 Mexican Electricians Union employees will be laid off. The union is largely held responsible for the high costs and inefficiencies.
The USDMXN fell 0.76% from 13.29 (Friday's close) to 13.1890. At the moment the currency pair is quoted at 13.2040/70 in light, Columbus Day holiday trading. IFR Markets is short the pair at 13.392, targeting 13.14, which is just above support at 13.1320 (Sept. 16 low).
This afternoon Mexico reports July gross fixed income investment and Aug industrial production. Fixed investment is expected to be -12.10%, slightly better than the previous reading of -12.70%. Industrial production is expected to be -6.2%, also an improvement over the previous reading, which was -6.5%. June's reading was -10.6% and -0.2% a year ago.
The pair is likely to keep heading South on continued Dollar weakness.
SNB quarterly rate announcement The Swiss National Bank convened for their quarterly interest rate announcement. There was no change from the 0.25% deposit rate as the SNB decided to keep the rate at a record low as it tries to fight off deflation and a strong currency. The SNB did say though that Q2 was better than they had expected but deflation risks remain. The results were more or less as expected and Forex traders were mostly waiting to hear any additional rhetoric from the SNB regarding possible future intervention in the currency markets.
On the intervention front, the SNB singled out the Euro, and stated that they will fight to “prevent any strengthening in the Swiss Franc against the Euro.” These words caused a short spike lower in the CHF, but it has since traded higher as the overall tone of the SNB was surprisingly positive for the Swiss economy.
Forex traders for EURCHF The EURCHF is currently at 1.5185 after trading as high as 1.5225. It is possible that due to the Euro’s recent strength, Forex traders don’t expect the SNB to intervene in the market unless we see a return to the 1.5000 level. Therefore, traders that were long the EURCHF on a possible aggressive intervention policy may be selling on the news.
chf chart As the chart below shows, there remains solid support just above the 1.5100 level which is near the 76.4% fibo level from the big intervention induced spike that occurred in June. Some believe that the pair will continue to trade between the 1.5100 and 1.5250 levels.
Forex Frequently Asked Questions Q: How does forex trading actually occur? A: As opposed to stocks and bonds, there are no central exchanges for forex trading. Most forex trading occurs between banks and financial institutions, either online or by recorded telephone conversation. This forex trading system is known as the interbank market. Forex trading takes place around the world 24 hours a day from Monday to Friday.
Q: Is forex trading risky? A: Forex trading can be risky if a trader does not manage his risk properly. Just as with stocks and bonds, forex trading can potentially cause losses, and a trader should act to minimize his losses and maximize his gains.
Q: What is leverage and margin? A: In order to profit from forex trading, relatively large sums need to be bought and sold. Brokers provide traders with short-term loans in order to make trades which are returned when the trade is closed, and these loans are known as leverage. Effectively, the deposit in the client’s account is used as collateral or margin for his/her leveraged trade. Thus a forex trading client with a $5,000 account could trade, for example, $50,000 trades by leveraging his deposit 10 times. His $5,000 deposit is his margin and will be affected by his profit or loss on the trade.
Q: What is a stop loss order? A: A stop loss order is used in forex trading to limit the potential loss on a trade. After making the trade, the trader places an order to close his position at a forex rate that represents the maximum loss he/she is willing to take on the trade. If the market moves counter to what the trader thought it would, then the stop loss order will limit the loss automatically.
Q: What is a take profit order? A: As opposed to a stop loss order, a take profit order is placed to limit the profit on a trade. In forex trading, a take profit order is useful if the trader can’t stay online to monitor his trade continuously, and if he has a target rate at which he wants to close his position.
Q: Why are historical prices important to forex trading? A: Historical forex rates have reflected changing international economic conditions. Past changes in forex rates show how forex rates reacted to key events and are good indicators to how they will react to similar events in the future.
Move to te next forx step - Do and Not to Do in Forex
Ok so for I hope it was all clear ...
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Australian bond futures have been edging down in price, an indication of risk appetite in the Australian market. There appears to be some possible resistance in the pair at around 0.8765 to watch out for. However, from a technical and fundamental perspective, the mid-term outlook for the AUDUSD most certainly seems Bullish.
