This text is from blog famous currency strategist Joel Kruger .
IT’S ALL RELATIVE – Back into the swing of things on Wednesday and definitely pleased with the price action. The post Fed USD selloff seems to be losing momentum and I suspect the buck will soon find some heavy renewed interest over the coming days and weeks. When it comes down to it, FX is a game of relative value. If a currency has reason to be fundamentally weak, it doesn’t necessarily always translate into currency weakness. If there is another currency out there with less compelling fundamentals, markets will opt for the lesser of the two evils and trade into the stronger of the two.
RELATIVITY APPLIED – This is the story of the US Dollar versus all of the other major currencies. While the Fed has implemented an aggressive dose of ultra accommodative monetary policy, which might on the surface weigh on the buck, the implementation of similar measures by other central banks is an offsetting factor, which ultimately benefits the US Dollar. After all, the US financial markets are the most sophisticated and developed in the world, and the flight to safety lure of the US Dollar can often trump any weighing yield differential variables.
Forex technical analysis video by Joel Kruger :
BOJ EXPANDS ASSET PURCHASES – Most recently, the Bank of Japan has come out overnight to announce an expansion of its asset purchase program, with an extra Yen 10 trillion in liquidity. We have already seen the Yen pullback in response, with any demand for the Japanese currency post Fed QE3 seriously mitigated by the latest BOJ action. Comments from FinMin Azumi that the move will have a stabilizing impact on the FX markets have further added to Yen weakness on Wednesday, while the central bank’s downgraded assessment of the local economy has also contributed. USD/JPY has broken back over 79.00, with sights set on a break and close above next key resistance at 79.65.
MARKETS TO KEEP AN EYE ON – On the strategy front, I am looking for the Euro to put in a material top somewhere around the recent highs just shy of 1.3200, with further confirmation to be given on a break and close back below 1.3000. Meanwhile, I am long USD/CAD from 0.9790 and will be looking for some significant gains over the coming days and weeks. The market has been showing signs of basing over the past few days, and a break and close back over 0.9800 would help to reaffirm bullish prospects and accelerate gains back over parity. Finally, a daily close above 79.00 in USD/JPY would be quite bullish and could set the stage for a major upside breakout in this pair.
EQUITIES OF INTEREST
Golden Star Resources, Ltd. (AMEX: GSS)
This stock has been on the move and has managed to rally from some pretty depressed levels in recent weeks. While the daily RSI is now well overbought, tracking above 80, it seems as though the price action is worth some attention and could be pointing to further gains. The fundamentals for the gold miner have been more encouraging of late, and there seems to be room for a push back towards the $5 mark over the medium-term.