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Don't Buy these 3 Currencies

  • Kathy Lien
  • 13 August 2019

 

 

Daily FX Market Roundup August 12, 2019

 

This week's calendar is a jammed with market moving economic data but these releases will not alter the current trends in the market. For example, USD/JPY is very weak - it has been falling for seven out of the last eight trading days and is trading at its lowestt level in 7 months. This decline reflects the anxiety in the markets and the expectation for a response from the central bank. It is also reinforced by the persistent decline in Treasury yields and sell-off in stocks. Investors believe that with the deterioration in US-China trade relations and the turn in the markets, the Federal Reserve will have no choice but to lower interest rates next month. In fact, according to Fed Fund futures, traders are pricing in two full rate cuts before the end of the year. That won't change even if consumer prices or retail sales surprise to the upside because the thought is that inflation and consumption will be curtailed by recent developments. And they are absolutely right - if markets continue to sell off and trade tensions worsen, corporate profitability and consumer wealth will be negatively affected. So if the dollar rallies against the Japanese Yen or the Swiss Franc on the back of better data, its better to look for opportunities to fade rather than follow the move. Now is not the time to buy USD/JPY and USD/CHF because it should only be a matter of time before 105 in USD/JPY is broken.

 

Investors should also avoid the Australian and Canadian dollars.Although AUD/USD hit a 10-year low last week we believe that the market is underpricing the chance of a rate cut this year. According to interest rate futures, there's only a 60% chance of a quarter point rate cut by December and we think it will be hard for the RBA to avoid easing by October. The RBA is aware of the risks in the market right now and they said they would cut rates if the labor market or inflationary conditions worsen. It is difficult to see the central bank's arguments for keeping rates steady. Service and manufacturing activity slowed significantly in the month of July and there's a very good chance that this week's labor market numbers will fall short of expectations. So we believe that the RBA has no choice but to ease. They've already admitted that if all central banks go to zero, they will need to consider it too. However before everyone gets to zero additional easing by the Fed, ECB and RBNZ could push the RBA to take rates below 1% especially if the global economy is contracting and markets are crashing. Therefore more losses are likely for A$ particularly against the US dollar and Japanese Yen.

 

Rate cuts could also be coming for Canada after last week's employment report.The market was looking for job growth to return in July but employment fell by -24.2K, the largest drop since August 2018. Full time and part time work declined, pushing the unemployment rate up to 5.7% from 5.5%. USD/CAD shot higher immediately after but turned sharply lower as selling of US dollars resumed. USD/CAD finally stabilized today and we think it is headed higher. With that said, the better opportunity may be to sell Canadian dollars against the Japanese Yen and Swiss Franc.

 

 

 

 

 

 

 

 

For more information, they can be reached at http://www.bkforex.com/.

 

 

 

The information, including Commentary and Trade Ideas, provided on BKAssetManagement.com should not be relied upon as a substitute for extensive independent research which should be performed before making your investment decisions. BKForex Advisors LLC and BKAssetManagement.com are merely providing this information for your general information. The information and opinions presented do not take into account any particular individual's investment objectives, financial situation, or needs. All investors should obtain advice based on their unique situation before making any investment decision and should tailor the trade size and leverage of their trading to their personal risk appetite.

BKForex Advisors LLC will not be responsible for any losses incurred on investments made by readers and clients as a result of any information contained on BKForex Advisors LLC. BKForex Advisors LLC do not render investment, legal, accounting, tax, or other professional advice. If investment, legal, tax, or other expert assistance is required, the services of a competent professional should be sought.

 

 

 

For more information, they can be reached at http://www.bkforex.com/.

 

 

 

The information, including Commentary and Trade Ideas, provided on BKAssetManagement.com should not be relied upon as a substitute for extensive independent research which should be performed before making your investment decisions. BKForex Advisors LLC and BKAssetManagement.com are merely providing this information for your general information. The information and opinions presented do not take into account any particular individual's investment objectives, financial situation, or needs. All investors should obtain advice based on their unique situation before making any investment decision and should tailor the trade size and leverage of their trading to their personal risk appetite.

BKForex Advisors LLC will not be responsible for any losses incurred on investments made by readers and clients as a result of any information contained on BKForex Advisors LLC. BKForex Advisors LLC do not render investment, legal, accounting, tax, or other professional advice. If investment, legal, tax, or other expert assistance is required, the services of a competent professional should be sought.


About the Author
Kathy Lien
Kathy Lien is Managing Director and Founding Partner of BKForex. Having graduated New York University’s Stern School of Business at the age of 18, Ms. Kathy Lien has more than 13 years of experience in the financial markets with a specific focus on currencies

Ms. Kathy Lien is Managing Director of FX Strategy for BK Asset Management and Co-Founder of BKForex.com. Her career started at JPMorgan Chase where she worked on the interbank FX trading desk making markets in foreign exchange and later in the cross markets proprietary trading group where she traded FX spot, options, interest rate derivatives, bonds, equities, and futures.

In 2003, Kathy joined FXCM and started DailyFX.com, a leading online foreign exchange research portal. As Chief Strategist, she managed a team of analysts dedicated to providing research and commentary on the foreign exchange market.

In 2008, Kathy joined Global Futures & Forex Ltd as Director of Currency Research where she provided research and analysis to clients and managed a global foreign exchange analysis team. As an expert on G20 currencies, Kathy is often quoted in the Wall Street Journal, Reuters, Bloomberg, Marketwatch, Associated Press, AAP, UK Telegraph, Sydney Morning Herald and other leading news publications.

She also appears regularly on CNBC’s US, Asia and Europe and on Sky Business. Kathy is an internationally published author of the bestselling book Day Trading and Swing Trading the Currency Market as well as The Little Book of Currency Trading and Millionaire Traders: How Everyday People Beat Wall Street at its Own Game all published through Wiley. Kathy’s extensive experience in developing trading strategies using cross markets analysis and her edge in predicting economic surprises serve key components of BK’s analytic techniques.