With the situation between Russia and Ukraine worsening seemingly by the hour, traders are likely to gravitate back to safe haven currencies. While many will look at the USD, CHF and JPY are also two which should outperform. CHF (Swiss franc) is one that is overvalued, however in times of concern valuation means very little and its 12% current account surplus, strong banking system and economy will trump all.
The pair broke and closed below the February uptrend last week, also completing a triangle pattern that could target 100.43. While traders will be better buyers of JPY, it is worth pointing out that in US trade today we get personal income and spending and that could cause a bit of a move in the USD as well.
The market is pushing this pair around with great vigour at present and if you like volatility there is no asset which is seeing greater intra-day ranges. With the National People’s Congress in China on Wednesday, many will be keen to see if there will be changes to the PBoC’s growth forecasts. However many have also been speculating that we could see a widening of the daily trading band from 1% to 2%, thus providing the scope for greater intra-day volatility and also paving the way for a fully free floating currency. The pair opens after the PBoC has conducted its daily ‘fix’ at 12:15 AEDT.
Gold fell on Friday and doesn’t seem to be getting much traction from the geo-political drama which is unfolding. On the upside traders will be keen to see if the downtrend drawn from the 2012 high at $1363 holds, while the 200-day moving average at $1300 could be big support this week if the bears take hold. I will be looking at gold for my ‘one to watch’.
Given the moves already seen in the interbank forex trading session we could easily see downside in US futures. A sizeable move lower in US futures could be pivotal for the rest of Asia and could put back bone into the selling for other markets like the ASX 200 or Japan. US futures open at 10:00 AEDT.
Despite a slightly stronger China manufacturing PMI on Saturday at 50.2 AUD/USD is finding good selling on open today. It will be a busy day for AUD traders with new homes sales on the docket, while inventories data is due at 11:30 AEDT and the commodity price index at 16:30. A close below 0.8920 (the 38.2% retracement of the 4.9% rally in January to February) could see 0.8820 come into play.