Thin Trade Makes Follow Through in the Forex World

Some points to consider today in the Forex world:

• Forex swings will be occurring thanks to thin holiday trade volume. Struggle through will be problematic.
• New Zealand Dollar (NZD/USD) shines on rising yields. Demand is firm in a new bond sale.
• AUD/USD falls lower after the CAPEX sets a new record fall in the third quarter.

Welcome to the pre-Thanksgiving day data schedule as the Forex world will receive a number of very low impact releases out of Europe and the financial markets in the United States are closed today. This could be a day of directionless drifting throughout the G-10 currency pairs. One thing traders should be aware of today are the knee-jerk swings we could see thanks to thin trade volumes. Especially if surprising event risks shock the financial markets. However, should these knee jerk moves happen they will struggle to find follow through and should unwind after institutional traders return from the Thanksgiving Day Holiday.

The New Zealand Dollar has been strong today in quiet overnight trading. This comes after a strong auction of New Zealand 2020 bonds hit the market with the average yield climbing to 2.87 percent. They had been at 2.73 percent at last month’s auction. Demand strengthened causing rates to climb. This could mean improving monetary policy expectations from the Reserve Bank of New Zealand (RBNZ) as well as investors wanting more NZD assets.

The Australian Dollar gapped lower in early Asian trade. This comes after the ABS report showed that private capex spending fell 9.2 percent. This is the largest decline since record keeping in 1987. The AUD/USD tracked the falloff in front-end Australian government bonds. This result sparked renewed bets that the Reserve Bank of Australia (RBA) will cut rates soon. However, after the selloff, the AUD/USD went into a predicted pre-holiday quiet consolidation thanks to thin liquidity and lack of follow through.