Kruger Insights Wednesday – January 8, 2014 by FirstMacro

BinaryOptionsNow | Published on January 8, 2014 at 4:17 pm

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By: Joel Kruger

Loonie Bins – A lot of strange price action in the markets right now. The Euro isn’t really doing all that much and seems to be contemplating its next move, while the Yen has been trying to rally but continues to have a hard time on any attempts. Meanwhile, on the commodity bloc front, things are even more interesting, with Aussie relatively offered, Kiwi still very well supported, and the Canadian Dollar emerging as the standout relative underperformer in the group. The Loonie offers the least attractive yield of the three, and Canada has seen some softer data in the past 24 hours. This could be contributing to the lackluster CAD performance. However, I still believe the Canadian economy is more attractive than its commodity cousins, and while I do anticipate some weakness against the US Dollar going forward, this type of broad underperformance is not expected to persist. Still, USD/CAD has recently broken to its highest levels since 2010, and could be poised for a retest and break of the 2010 high, which comes in at 1.0850. As highlighted above, I believe we see USD/CAD upside over the medium-term, but at the same time, I wouldn’t be selling the Canadian Dollar against its higher yielding cousins over that longer-term time horizon. The anticipated rotation from higher yielding currencies on the back of a shifting Fed policy and deterioration in the emerging markets, should weigh more heavily on Australia and New Zealand.

kruger insights january 8, 2014

Jobs, Jobs, Jobs – Moving on, EUR/CHF has catapulted back towards 1.2400 in recent trade, and the SNB is breathing out a bit. However, I am not sure this cross rate is out of the woods just yet, and believe the market will once again find some very decent offers into 1.2400. I still believe we could see another sharp pullback towards 1.2000 in 2014. Elsewhere, GOLD is back under pressure after stalling out around $1250. I had warned that only a break above $1270 would alleviate downside pressures, and for now, it looks like the market could be carving a lower top ahead of the next downside extension back below $1180. Finally, US equities remain as stubborn as ever and refuse to relent, despite the surge to fresh record highs and need for a healthy corrective retreat. The S&P will need to break back below 1820 to trigger some stops and open the door for the anticipated reversal. Until then, there is no good reason to be feeling overconfident with the prospect for the most recent peak at 1850 to stay intact. The market will now start to position for employment data out of the US, and the results could do a good deal to influence price action going forward. ADP data will be digested on Wednesday, initial jobless claims Thursday, with everything culminating on Friday on the monthly NFP report. Market participants will assess these results and then speculate on what they feel this should mean for Fed policy going forward.

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