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Bullish Pacific Currencies? JPY-AUD-NZD Market Forecast

March 30th, 2009 Posted in Aussie - Kiwi Bookmark and Share

JPY
The JPY has experienced a rough week of bearish trading against the majors. The JPY is currently down by about 60 pips against the USD, as investors sway away from the Japanese currency. The Yen is also down against most of its main currency pairs both today, and this week, as investors continue to lose confidence in the Yen. However, there are a number of other reasons for the Yen’s weakness apart from exports slumping by almost 50% recently. Even though other leading economies are in decline, their governments have been more aggressive in tackling the economic crisis.

This week, the main reason for the weak Yen is that traders have dropped the Yen for stocks and other riskier assets, as the Nikkei has jumped 26% since March 10. This was spurred by the recent rallies on Wall Street in the past 2 weeks due to positive economic figures from the U.S., indicating that the economic slump in the U.S. may have abated. As for the coming week, the Yen may actually go bullish against its major currency pairs. This may be the case as investors come to terms with the weak economies of Britain and the Euro-Zone. However, the Yen may stabilize against the Dollar as it could reach the 100.00 level by the middle of this week.

AUD
The Australian Dollar continues its monthly bullish trend against the U.S. Dollar this week. It is currently trading up today by 40 pips versus the USD. The AUD also has increased dramatically against a number of its other major currency pairs, such as the GBP and Yen, as Australia continues to keep their Interest Rates at 3.25%. Investors continue to be attracted to this high-yielding currency. For example, Interest Rates in the U.S. and Japan are 0.25% and 0.10% respectively. Additionally, the AUD’s strength as of late owes to a diverse economy, despite the global economic situation.

Many analysts expect the AUD’s bullish trend to continue throughout next week’s trading. Kevin Rudd, Australia’s Prime Minister, hints that the current economic slump will be short lived. This helped put confidence back into the AUD last week. Forex traders are advised that the AUD is likely to extend its winning streak against the majors going into the middle of this week, as traders continue to pour into the Australian Dollar as Australia continues to outperform countries such as Japan, the U.S., and Britain economically.

NZD
The NZD is near a 10-week high vs. the USD, as confidence continues to rise in the New Zealand Dollar, following U.S. Treasury Secretary’s plan for a public-private partnership of purchasing toxic bank assets. The NZD is trading up by 50 pips at 0.5795 against the U.S. Dollar so far today. It seems that the more positive economic news that comes out of the U.S., the more the U.S. currency slides vs. the NZD. For example, the NZD rose dramatically yesterday against the USD, after the release of positive consumer confidence data.

There is a likelihood that the NZD’s bullish trend against the USD will continue into the end of this week’s trading, as analysts foresee that traders will continue to favor the higher yielding assets, such as the AUD and NZD, rather than lower yielding ones like the JPY and USD. However, these gains may start to dissipate from the latter half of next week, as traders start fleeing from the NZD, as they could begin to fear a further deterioration of the New Zealand economy, as the current account deficit recently hit 9% of GDP.

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