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Don’t Buy These 3 Currencies

By Kathy LienForexAug 12, 2019 07:15PM ET
www.investing.com/analysis/dont-buy-these-3-currencies-200454371
Don’t Buy These 3 Currencies
By Kathy Lien   |  Aug 12, 2019 07:15PM ET
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Kathy Lien, Managing Director Of FX Strategy For BK Asset Management

Daily FX Market Roundup August 12, 2019

This week’s calendar is a jammed with market moving economic data but these releases will not alter the current trends in the market. For example, USD/JPY is very weak – it has been falling for seven out of the last eight trading days and is trading at its lowest level in 7 months. This decline reflects the anxiety in the markets and the expectation for a response from the central bank. It is also reinforced by the persistent decline in Treasury yields and sell-off in stocks. Investors believe that with the deterioration in US-China trade relations and the turn in the markets, the Federal Reserve will have no choice but to lower interest rates next month. In fact, according to Fed Fund futures, traders are pricing in two full rate cuts before the end of the year. That won’t change even if consumer prices or retail sales surprise to the upside because the thought is that inflation and consumption will be curtailed by recent developments. And they are absolutely right – if markets continue to sell off and trade tensions worsen, corporate profitability and consumer wealth will be negatively affected. So if the dollar rallies against the Japanese yen or the Swiss Franc on the back of better data, its better to look for opportunities to fade rather than follow the move. Now is not the time to buy USD/JPY and USD/CHF because it should only be a matter of time before 105 in USD/JPY is broken.

Investors should also avoid the Australian and Canadian dollars. Although AUD/USD hit a 10-year low last week we believe that the market is underpricing the chance of a rate cut this year. According to interest rate futures, there’s only a 60% chance of a quarter point rate cut by December and we think it will be hard for the RBA to avoid easing by October. The RBA is aware of the risks in the market right now and they said they would cut rates if the labor market or inflationary conditions worsen. It is difficult to see the central bank’s arguments for keeping rates steady. Service and manufacturing activity slowed significantly in the month of July and there’s a very good chance that this week’s labor market numbers will fall short of expectations. So we believe that the RBA has no choice but to ease. They’ve already admitted that if all central banks go to zero, they will need to consider it too. However before everyone gets to zero, additional easing by the Fed, ECB and RBNZ could push the RBA to take rates below 1%, especially if the global economy is contracting and markets are crashing. Therefore more losses are likely for A$, particularly against the US dollar and Japanese yen.

Rate cuts could also be coming for Canada after last week’s employment report. The market was looking for job growth to return in July but employment fell by -24.2K, the largest drop since August 2018. Full time and part time work declined, pushing the unemployment rate up to 5.7% from 5.5%. USD/CAD shot higher immediately after but turned sharply lower as selling of US dollars resumed. USD/CAD finally stabilized and we think it is headed higher. With that said, the better opportunity may be to sell Canadian dollars against the Japanese yen and Swiss franc.

Don’t Buy These 3 Currencies
 
Don’t Buy These 3 Currencies

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syfu ddin
syfu ddin Aug 16, 2019 6:46AM ET
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hmm
Paja Theboss
Paja Theboss Aug 15, 2019 9:12AM ET
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BOED strategy at USD/CAD works great! only oil keep cad alive, but oil ll crash soon and this ll cross 1.34
Majors RTM
MRTM Aug 15, 2019 2:57AM ET
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No wonder every trading book I know advises never to listen to any expert advice. As AUD soars higher......
IronMan Trader
IronMan Trader Aug 14, 2019 5:43PM ET
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Someone that thinks
Dante Valerian
Dante Valerian Aug 13, 2019 8:47PM ET
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Congratulations on being wrong as usual.
Augustine Sambo
Augustine Sambo Aug 13, 2019 7:25PM ET
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Kathy seems right on this.
George mour
George mour Aug 13, 2019 3:29PM ET
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and the usd/jpy explodes
Wail Emad
Wail Emad Aug 13, 2019 3:29PM ET
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Lovely
Stephen Fa
Stephen Fa Aug 13, 2019 1:03PM ET
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Buy bitcoin $BTC
Abimbola Obadare
Abimbola Obadare Aug 13, 2019 11:48AM ET
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thanks kathy
Kaushalya Priyanjith
Kaushalya Priyanjith Aug 13, 2019 11:15AM ET
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what suddenly happen to USD/JPY?? :O can someone explain?
Alexandru Popovici
Alexandru Popovici Aug 13, 2019 7:56AM ET
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EURJPY and EURCHF pairs should start rising out of significant lows set yesterday and today respectively --> this means not only EURUSD rising sharp from 1.1217 now but also USDJPY and USDCHF rising at least for few days.
Patrick Njobvu
Patrick Njobvu Aug 13, 2019 5:25AM ET
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Thanks for I have been helped
Alzaamil Rasheed
ALZAR Aug 13, 2019 5:04AM ET
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high respect for this lady. the best analyst ive known so far. keep up the good work.
Majors RTM
MRTM Aug 13, 2019 5:04AM ET
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Define "best"? For all the fancy "fundamental" analysis, the markets (again) did the opposite of what she said
Kenneth Thrash
Kenneth Thrash Aug 13, 2019 5:04AM ET
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MRTM An analyst who is mostly always wrong is as good as one who is mostly always right....as long as you know which one they are.
Edy Logan
Edy Logan Aug 13, 2019 4:01AM ET
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thanks
HIMANSHU SHARMA
HIMANSHU SHARMA Aug 13, 2019 3:56AM ET
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thanks cathy
Partap Singh
Partap Singh Aug 13, 2019 3:05AM ET
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thank you Kathy
Robert Nowogórski
Robert Nowogórski Aug 13, 2019 2:05AM ET
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Cryptocurrency.
Marita Karin
Marita Karin Aug 13, 2019 1:37AM ET
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if almost all currency wanna rate cut, who will up in the end?
vaisagh PM
vaisagh PM Aug 13, 2019 1:37AM ET
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have little doubts.. could u help
Zain Butt
Zain Butt Aug 13, 2019 12:55AM ET
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Didn't say anything about Eurusd?
EXOTIC PIP
EXOTICPIP Aug 13, 2019 12:53AM ET
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Thank Kathy
Luu Hung
Luu Hung Aug 12, 2019 11:31PM ET
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Then Short it lol
Leandro Romero
Leandro Romero Aug 12, 2019 10:13PM ET
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What about arg peso
Jared Bornman
Jared Bornman Aug 12, 2019 9:41PM ET
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or we could just buy BTC
Nam Seungmin
Nam Seungmin Aug 12, 2019 9:06PM ET
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I am noob...so buy yen or sell?
Tèo Phan
Tèo Phan Aug 12, 2019 9:03PM ET
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thanks
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