Looking at the current market condition, I am seeing most traders along with their liquidities returning this week, which may provide some excellent market conditions as we kick off our own trading this week.
The last two weeks of 2009 was very quiet in the sense of scheduled news and unexpected news as most traders took some time off in celebration of yearend holidays. We saw USD maintaining its gains since the last rally, as the market has been at more or less a standstill… Equity market maintained its gains until the last trading day of 2009, and Crude Oil reclaimed the $80 mark once again.
With the market condition returning back to normal, I think we should keep our eyes on the big picture and don’t get caught up on what took place in the last 2 weeks. We should acknowledge that JPY’s strength is probably over and USD should be leading the currency market once again for recovery. Therefore, I think for 2010 we are going to be looking at the following:
- Return of JPY carry trades, or LONG on EUR/JPY, GBP/JPY, AUD/JPY
- Return of USD Strength against both EUR and JPY
As I believe US economy will improve along with its employment data, the world will be looking for the Federal Reserve to start hiking interest rate soon, and which will not only make USD stronger against all majors, but will also leave JPY as the only carry currency to fund other currencies; back to its role as before sub-prime crisis.
I also expect to see EUR/USD returning back to the 1.20 levels as investors favor the greenback for its security and better fundamental outlook. Other currencies such as the AUD, CAD, and NZD may suffer against USD to a degree, but the blunt of depreciation should be with the EUR unless ECB hikes rate before the FOMC, which may or may not take place.
Therefore, I’d pay more attention on this week’s NFP as it will definitely kick off this year’s market with high volatility. If NFP surprises to the upside, expect to see EUR/USD move down as USD resumes its bullish rally… If the opposite is true, expect the market to remain range bound.
Related posts:
- Market Economic Outlook as of 10/12/09
- Forex Fundamental Economic Outlook 08/10/09
- Forex Market Weekly Analysis March 22, 2010
- FOREX – NFP Nonfarm Payroll (12/04/09) and Market Analysis
- Forex Market Update & Analysis – 06/01/10
- Forex News Trading – Fundamental Analysis & Technical Analysis
- Forex Market Update & Analysis 06/07/10
- Upcoming Forex News Trade For the Week of January 3 ~ 7, 2011
- Forex News and Market Trend Wrap-up – Thanksgiving Week, Dubai World, UAE Support, JPY Strength…
- RBA Cash Rate decision 03/01/2010
{ 2 comments… read them below or add one }
i am a nigerian, i traded the US ISM Manufacturing PMI and i lost. i cant understand why. pls, your answer will save lots of agony. you are doing great.
Udoka:
Market is still in low liquidity and nothing seems to be moving in the right direction after the news, but I expect all will be back to normal next week, at the very least, after NFP on Friday.
However, if you sold EUR/USD after the news, you had a chance to get out with little profit, or at the very least, with a manageable loss.