Your Friend LLC

* Times listed are GMT

For readers of the Daily Currency Focus, it should be no surprise that the dollar has continued to weaken. On Wednesday, we said that the actions by the Federal Reserve have cemented the downtrend in the U.S. dollar. Given how currency traders have responded to previous Quantitative Easing threats and announcements, the EUR/USD could realistically hit 1.40 (see charts). Although equities have given back its gains and bond yields have rallied, the moves in the currency and commodity markets indicate that the Fed’s actions will have a lasting impact on the financial markets. As we look forward to more dollar weakness, it is worthwhile to consider how a weaker dollar impacts the global economy.

The AUD and its cousin the NZD, moved to new yearly highs late in Asian trading yesterday and then again broke through those levels and made new highs today ahead of the Asian equity market open and maintained their bid on multi-year highs for the Australian consumer confidence reading. However, the move was short-lived as both currencies sold off on worse than expected retail sales and home loan figures from Australia. The instant reaction and modest follow through on these back dated July releases continues to give the feeling of a thin market moving toward stops rather than on fundamentals. On the charts below, we see the AUD/USD pair move toward yesterday’s top and the NZD/USD doing the same. The markets continue to perplex, but perhaps the first full day off fall trading is not indicative of things to come.

The BOJ’s Miyako Suda stated that Japan’s economy has stop worsening, but he notes that they need to keep an easy money policy for now. He also made the following comments:

• The role of unconventional measures is falling.
• An expansionary policy risks boosting the economy more than expected.
• Downside risks in the near future are falling.
• The Japanese economy is steadily heading towards a pick-up.
• There is still a high level of uncertainty about the economy.
• The Capital expenditures environment remains severe.
• There is a high risk of prices falling more than expected in the near future.
• CPI falls within expectations thus far.
• The doubt over fiscal discipline may push up long- term rates.
• The global financial market still remains unstable.
• Corporate funding conditions are clearly improving.
• Must watch longer-term inflation expectations.

Australia’s Retail Sales and Home Loans for the month of July were worse than expected and the market immediately sold off after being bid up on a better Aussie consumer confidence reading. The details of the release are as follows:

• Retail Sales (MoM) - Survey: 0.5%   Actual: -1.0%   Prior: -1.4%
• Home Loans - Survey: -1.5%   Actual: -2.0%   Prior: 1.1%
• Investment Lending - Actual: -4.0%   Prior: -1.8%

Australia’s Westpac Consumer Confidence for the month of September was 5.2% versus its prior release of 3.7%. This was the highest reading since July 07. The Aussie recieved a light bid on this release, already trading on yearly highs.

The Euro versus Dollar pair traded calmly after reaching 1.4535 with the formation of a bearish technical pattern with a pivot support at 1.4475, as seen in the secondary image. This pattern, alongside the negative signs appearing on stochastic, may pressure the pair to correct slightly to the downside towards…

The EUR/JPY pair has traded off the 21 day moving average and 38.2% retracement of the last move ahead of the Nikkei open, however was unable to penetrate as the Nikkei and US equity futures trade lower. A break could lead to stronger technical support at these levels.

Riskier assets were initially back in vogue in Asia today, with the Aussie and Kiwi Dollars both pushing to new yearly highs at the expense of the US Dollar. AUD/USD began the day soaring to a 0.8660 high, but poor Retail Sales and Home Loans sent the pair on an…