USD managed to hold its gains during the Asian Session and key resistance levels were in its grasp as tumbling oil prices, a lack of indications there would be an immediate rate hike from the ECB and a series of soft US data prompted selling of higher yielding currencies. If upcoming US job data prompts investors to trim their growth expectations and to wind back growth-leveraged positions the USD could gain further, while the same factors would likely push the JPY near a 7 week high versus the USD hit in the previous session.
EUR was pressured after ECB chief Jean-Claude Trichet did not give any signals that there would be a rate rise in June, by steering clear of using the key words “strong vigilance” in his comments on inflation. EUR/USD opened the Asian Session trading at $1.4525 and moved as high as $1.4586 after shedding more than 2% to as low as $1.4509 yesterday, its lowest in over a week.
AUD jumped over 1% today after the RBA warned of a rate rise at some point to keep inflation in check. AUD/USD jumped from an opening price of $1.0559 to as high as $1.0733. RBA raised underlying inflation forecast to 3% by year-end in a hawkish policy statement and said it would likely further tighten at some point. Traders had been buying commodities on the view that money printing by the Fed should boost their value, which in turn was fueling inflation worldwide, prompting some central banks to raise rates. For the reason that some traders had built up long positions in the AUD and the EUR, based on the rise in commodities, further falls in commodities could mean more position unwinding in currency markets.
USD rose 0.6% to 80.60 yen today, away from its 7 week low of 79.55 yen. Analysts expect some buying from Japanese at the current USD level, however they do not see big moves today due to the upcoming US Job data.
Gold rose by more than 1% to $1489.9 an ounce bouncing from a 5% drop a week earlier, its worst week since March 2009. A worse than expected figure from the upcoming US job data could further fuel the commodities sell-off by deepening fears that the world’s largest economy is not out of woods yet, although it could benefit gold as a safe haven. Analysts support that gold is a better bet than silver or oil, as losses would be capped by its safe-haven status.