Uptrend in Commodity Currencies Come to an End

The trend of multi year highs in the commodity currencies have finally come to an end this week with the New Zealand, Australian and Canadian dollars suffering significant losses. The biggest losers in the currency market today were also the NZD and AUD. As warned by central bank Governor Bollard earlier this week, exporters are definitely beginning to feel the pain of a strong currency. Both imports and exports dropped significantly, turning the NZ trade surplus into a deficit.

Meanwhile there have been reports that model and momentum funds are aggressively selling the Aussie which means that they are no longer holding out the hope for a recovery in the high yielders and are instead either getting stopped out or initiating fresh short positions. Australia has retail sales next week which will be worth watching. Canada on the other hand has raw material and industrial product prices along with GDP and IVEY PMI. USD/CAD has bottomed out and we expect the bottom to hold.