'There is a Very Good Possibility of a USD Sell-Off in June' - Nenad Kerkez, Admiral Markets

'There is a Very Good Possibility of a USD Sell-Off in June' - Nenad Kerkez, Admiral Markets

Nenad Kerkez is an analyst and trader who has been in the market since 2008 and works closely with Admiral Markets as their Head Lecturer and Market Analyst. He is well known in the FX Community, ranking in the top 10 traders and analysts in the Forex Factory High Impact Members Ranking.

Nenad covers over 25 currencies on an intraday basis and has a Masters in economics. He also developed CAMMACD TM, a proprietary trading and analysis strategy. Further, he is the co-founder and head of Elite Currensea Trading, an educational website for currency traders.

EURUSD is experiencing a steady fall: How low can it go?

EURUSD is tanking in anticipation of ECB meeting that is expected to be held on June 2. Weekly chart shows an equidistant channel support now, and 1.1085 could hold it. If we don’t see a steady break of 1.1085 I don’t exclude a retracement towards 1.1230. However, ECB should not increase money supply because it would lower the value of currency further.

Do you expect a big USD sell-off before the June Fed meeting or will the market bet on a rate hike?

Yellen's latest media conference last Friday (27 May 2016) gave a hint that the US Fed would like to normalize rates if the economic conditions became apparent.  She suggested that the US has made good ground since the last GFC with the labour market (unemployment at 5%) and financial stability of the finance sector making good improvements. However, she did indicate that there was a large amount of lower paid jobs and part-time employment making up the employment numbers in the US, signalling more room for improvement in the US economy.  I think there is a very good possibility that there could be a USD sell-off in the month of June, as I do not think the US has the inflation data to suggest a rate hike this soon.

What's the biggest event of June for the markets: Fed's decision on interest rates, OPEC meeting or EU referendum in UK?

I think the OPEC meeting is becoming less important as the supply and demand of Oil has started to re-balance with the price making steady gains.  In recent history, whenever there is downward price shocks to the Oil price due to weakening economies, these price shocks are usually temporary.  I think the US Fed may not hike rates until the decision on the EU referendum in the UK has been resolved.  The risks associated with a Brexit could cause instability and panic in markets connected to the EU and Britain, as there would be uncertainty of the broader EU initiative, and it would also casue many risks to the British economy including its local currency, property market, labour conditions, etc.The US Fed are likely to delay an decision in June until the result of the EU referendum.

The Pound is trending up lately instead of down as many market players were expecting. Do you still see potential for a GBP fall before the EU referendum?

I presume that a dip in GBPUSD pre referendum will be bought into. If we don’t see any surprise ( UK should stay in EU ), then GBPUSD will be probably heavily bought on dips.

With the prospect of the RBA eventually cutting rates again this year, do you think AUDNZD parity is a possibility in the mid-term?

There is a good possibility that the RBA will continue to cut rates given the latest Earnings data from the Australian Finance sector showing more signs of weakness in the local economy as they provision for more bad loans.  The RBA are very conscious of the need for the Australian economy to reduce its dependence on the Mining Sector given the price slumps in raw commodities exported due to the conditions in China.  In that respect the RBA will be looking for lower borrowing costs to alleviate any financial stress within the domestic economy, but also to lower the value of the AUD to generate more foreign investment opportunities and expanding exporting capabilities. Technically, AUDNZD needs to break 1.05 (October 2015 lows) before it approaches parity, where it was nearly tested in April 2015. However, I do not expect the RBNZ to maintain its status quo with regards to its monetary policy if the AUDNZD reached parity, as its major export market is Australia, so I would expect them to intervene to maintain their export competitiveness in the Australian market.