MORNING SLICES
P&L Update and Overview: Many of you have been asking for a way to better track trading results and open positions. In response to these requests and in an effort to be fully transparent, a simulated portfolio was been created in June to track and mirror all recommendations and trades. Below is a return on equity curve since inception on June 1, 2009, along with an open and closed position tracker. I am hopeful that this will make things easier for you all.
Additionally, please feel free to check out a[B] full profit and loss statement since inception on June 1, 2009[/B].
Fundys – Any overnight selling currencies and buying of the USD on presumed profit taking has abated heading into the US morning, with the market seemingly still content on being positioned against the buck. However, unlike yesterday, the Yen lags and is now weaker than even the beaten down Dollar on the day. The Euro and Sterling have been the outperformers thus far, but these gains have only been marginal, with the respective currencies still confined to the previous daily ranges. Overnight data has failed to materially factor into price action with Eurozone CPI coming in more or less as expected and the UK trade deficit widening. More attention in the UK has been given to Moody’s confirmation that Britain would retain its AAA rating. On the whole, a pretty quiet session of trade, with some additional comments coming out from various ECB officials about the need to think of an exit strategy, but not yet act on one. US equity futures point to a flat open, while commodities are also relatively unchanged. Looking ahead, key economic releases come in the form of Canada housing starts (139.5k) at 12:15GMT and the Fed Beige Book later in the day at 18:00GMT. On the official circuit, Fed Evans is slated to speak in New York on the inflation debate at 12:00GMT. All eyes will then turn to the RBNZ rate decision due late afternoon in New York. The RBNZ is widely expected to leave rates unchanged at 2.50%, although some direction may be given for future monetary policy.
Techs - EUR/USD Has extended gains to now post fresh 2009 highs beyond 1.4500 thus far by some trend-line resistance off of the early June highs. There is no significant topside resistance now until 1.4720 and scope does exist for a move back to this level over the coming sessions. As per the usual however we continue to look for opportunities to sell into rallies, with the hope of catching a sizeable corrective pullback. A short was established on Tuesday at 1.4525 and stops are now at cost to eliminate risk. Should this level be taken out, there is the potential for gains to extend to test next figure resistance by 1.4600 today. Anything above 1.4600 is considered an ideal short-term sell entry on Wednesday. We will also pay close attention to the daily RSI which is approaching overbought readings by 70. Anything above 70 will intensify our bearish outlook. USD/JPY Tuesday’s sharp setbacks once again put the focus on the downside with the market still eyeing a break of the July trend lows at 91.75. While the overall structure is grossly bearish, we are not inclined to sell the pair at current levels which are already close to oversold and therefore not offering a compelling risk/reward trade. Instead, we will wait for a break below 91.75 to potentially catch a playable long trade in anticipation of a correction, or wait for another rally from current levels to look to sell back into the strong downtrend. Key resistance above comes in by 93.30 with a break of this level now required to take the pressure off of the downside. GBP/USD Bulls have no reason to get too excited at current levels with the market still very well confined to a multi week range below the 2009 highs. We continue to hold onto a more bearish bias with any rallies viewed as a good sell opportunity in anticipation of a major topping formation on the daily chart that ultimately could project declines back towards the 1.5000 area over the coming weeks. Nevertheless, we will proceed with caution and only look to establish short positions on overbought intraday readings. With a daily ATR of nearly 200 points, an ideal level to look to sell on Wednesday comes in by 1.6685 which also directly coincides with the 61.8% fib retracement off of the 1.7045-1.6115 move. However, we will not issue a formal recommendation at this time and will stand aside. USD/CHF Tuesday’s break below critical psychological barriers at 1.0500 definitely delays are constructive outlook and potentially now exposes next key support from December 2008 at 1.0370. We still do not recommend selling at current levels and instead will look for a dip towards 1.0370 to look to establish a counter-trend long trade. 1.0370 should offer strong support and a move to this level over the hours will also more likely than not result in a daily RSI by the oversold 30 level.
Flows – US investment house buying Eur/Usd; Asian central bank offers. Model fund bids in Eur/Gbp. Sovereign, real money model and retail offers in Cable at 1.6600.
Trade of the Day – NO TRADE: No new recommendation yet today. We already have exposure in Eur/Usd, Usd/Cad and Gbp/Aud and will only look to initiate fresh positions if a compelling opportunity presents.
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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