FOREX TRADING

MAJOR HEADLINES

AUD

Overnight, the AUD stregthened considerably on back of a stronger than expected trade balance, coming out at -807M vs. -1200M expected. At the same time, prior figures were revised higher adding buying interest to the Aussie. Especially the continuing mining boomcontinued to push the exports higher, benefitting the total trade balance. The Reserve Bank of Australia kept rates unchanged at 6.25% as expected, which did not move the market. AUDUSD broke in June the highs from 1990 and next resistance is in the top of the channel at 0.8616 and then at 1989 highs at 0.8950. As USD keeps selling of we, do not see why the the first level should not be tested within the 1-month term.

SEK

SEK-crosses continued higher as the Riksbank minutes showed a continued hawkish stance sending EURSEK below the 9.20 level where we see a possible longer term target around 9.09. Raising the benchmark rate to 3.5 percent from 3.25 percent
was the only option, the Stockholm-based bank said in the minutes from the June 19 meeting released today. Oeberg entered a reservation against the bank's forecast for interest rates. `Oeberg's own assessment was that inflationary pressures would become stronger over the coming years than assumed in the main scenario of the report and that the policy rate therefore probably would need to be raised more than implied by the main scenario,' the minutes said.


CHF

Swiss-related crosses fell for the second consecutive day yesterday on back of rate speculation and inflation fear from the Swiss economy. USDCHF opened yesterday in 1.2206 and broke and closed below wave support at 1.2150. However as today's CPI came out lower than expected, investors sold off the CHF once again, making it one of the weakest currencies of the day. In our miond, we still consider the CHF to come back as SNB gradually will raise benchmark rates, increasing the borrowing costs and thereby reducing the willingness to sell the CHF, all other things kept equal. Our one-month forecast is at 1.21 in USDCHF and a close once again below 1.2150 would target 1.19 on the longer term.

GBP

Recent highs from April 18th in GBPUSD at 2.0133 was broken yesterday and as it looks like the confirmation of an increase in the yield spread against the USD will be widened will happen on Thursday as the BoE will announce rates. We, as well as most of the market participants, expect the BoE to hike rates by 25 basis points to 5.75 and judging by the interst-futures market, investors are betting for additional hikes. The BOE expects the economy to grow about 3 percent this year, the fastest pace in three years, and for inflation to slow from a decade-high reached in March, according to its May 16 forecasts. Gains in consumer prices will breach their target in two years unless borrowing costs rise again, the bank predicts. Our next target in GBPUSD is around 2.0250, if the pair is able to stay above the break-out level at 2.0133.