FX Week Ahead – 15th June 2009
The weekend G8 meeting saw finance ministers focusing on their exit strategies from this highly reflationary environment. Moving in such a direction is particularly positive for currencies of nations that have been implementing quantitative easing. So we have seen USD has opened firmer this week. EUR/USD will have its initial major support around $1.38.
Commodities are retesting the break higher that occurred last week. The break may not be sustainable as equities were unable to make further headway – the S&P500 was largely unchanged on the week. Commodity outperformance which we’ve also seen in the commodity currencies has been driven by Chinese data.
The latest IMM speculative positioning data released last Friday building up in AUD and CAD against the USD. This futures positioning is now stretched and given no Chinese data this week, the commodity currencies of AUD, NZD and CAD are open to a deeper correction lower. (Aussie dollar will fly south)
The key data release for the USD’s direction this week is the CPI report. An above consensus report would likely trigger a rise in US yields, weighing on equities and commodities (triggering risk aversion) leading to the USD strengthening.