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Major currencies focus on tapering

The FX space saw some disjointed moves in US trade with the USD failing to gain traction despite another positive day on the economic front.

All trading involves risk. Losses can exceed deposits.

The most notable release from US trade was the weekly unemployment claims which dropped to 292,000; a six year low. However, analysts have warned that the numbers aren’t very reliable and perhaps waiting for more data over the next few weeks - for confirmation that this drop in jobless claims is accurate - is a smart strategy.

Meanwhile, the US budget deficit grew but still came in well ahead of estimates. Despite all these positive readings, the US dollar didn’t really exhibit the kind of strength we would generally expect from the effect it has on tapering expectations. This suggests the market is now content with the tapering notion.

Data is limited today but we will have US retail sales, consumer sentiment and inflation expectations to look out for. Yen crosses experienced the most significant moves with USD/JPY slipping to test support in the 99 region before bouncing strongly to 99.82. It certainly looks like the pair is headed back towards 100 in the short term.

AUD/USD has been in a tight range after a big slip on the back of jobs numbers yesterday. The pair is still in a short term uptrend and we feel traders might be looking to buy the dips at the moment. AUD/USD is currently sidelined at 0.926 and near term resistance remains in the 0.9350 region.

EUR/USD was mostly sidelined at 1.33 but has since lost its grip in Asian trade and dropped to a low of 1.328. On the economic front we have employment change, eurogroup meetings and ECOFIN meetings as well. A major concern for risk currencies in the short term is the massive drop we saw in gold prices. Gold slid from around 1,360, where it was trading at the end of local trade yesterday, and is now trading at 1,324. The precious metal is playing catch up to vastly changing fundamentals.

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