Not a lot to talk about following a very quiet session of overnight trade. The only key release came from German PPI which produced an as expected result, although the annual rate did manage to fall to the lowest level in 22 years. Aussie and Sterling on the other hand were both relatively well bid, with Aussie leading the way, up some 1% against the USD, while Sterling was higher by 0.65%. The market now looks to digest Canada retail sales data.
MORNING SLICES
Fundys – Not a lot to talk about following a very quiet session of overnight trade. The only key release came from [B]German PPI[/B]which produced an as expected result, although the annual rate did manage to fall to the lowest level in 22 years. However, this failed to materially factor into price action with the Euro adhering its recent ranges. Aussie and Sterling on the other hand were both relatively well bid, with Aussie leading the way, up some 1% against the USD, while Sterling was higher by 0.65%. Some of the Sterling strength was rumored to be driven by the news that the BBA had changed the definition of LIBOR to expand the amount of participants to include those outside of London as well. On the other side of the coin, the Yen was once again the laggard, dropping by 0.40% against the buck. Swiss price action has also been noteworthy of late, particularly after seeing the currency sell-off quite sharply against the Euro on Thursday following the speculated SNB intervention. All eyes are now keenly focused on SNB Jordan, who is slated to speak at 13:45GMT. On the official front, both ECB Gonzalez-Paramo and Bini Smaghi echoed similar sentiment regarding the need for regulation to help offset the current financial turmoil. Bini Smaghi specifically mentioned the need for regulation to extend to hedge funds, investment banking and derivatives. Overnight comments from Bank of Canada Carney were also interesting after the central banker said that rates were likely to be on hold for another full year and that while intervention was an option, he didn’t really see it as an effective tool over the long-run. Looking ahead, the only economic release slated for the North American session on Friday, comes in the form of Canada retail sales (-0.1% expected) due at 12:30GMT. US equity futures point to a higher open, while oil leads the was on the commodity front, up well over 1%. Gold trades marginally higher.
Quant –
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Techs - EUR/USD continues to consolidate with the key levels to watch over the coming session by 1.4000 and 1.3870. While there is scope for some additional short-term gains beyond 1.4000, our bias still favors additional weakness over the coming weeks. USD/JPY looks to be attempting to put in a fresh medium-term higher low by 95.55, with the market recovering nicely over the past 2 days and eying a retest of the key trend highs by 98.90. Next resistance comes in by 97.90 with any intraday setbacks now seen supported by 96.50. GBP/USD tracking higher thus far on Friday with the market once again eying key topside resistance above 1.6500. However this level has managed to cap rallies over the past several days and we would expect to see renewed selling on approach once again. Back under 1.6185 will accelerate declines. USD/CHF locked within the previous daily range and going nowhere at present. Key levels to watch above and below come in by 1.0900 and 1.0760 respectively.
Flows – UK clearer and US prime name buying Cable. German Bank on the offer in Eur/Usd. UK Clearer demand for Usd/Jpy. German bank selling Eur/Gbp. Asian sovereigns on the bid in Aussie.
Trade of the Day – Aud/Usd: Although the market has been struggling to break down since double topping by 0.8240 on June 11, we still retain a bearish bias and look for opportunities to sell into rallies towards the 0.8240-0.8265 area. A fresh lower top is now ideally sought out below 0.8240, ahead of the next drop through 0.7825-50. Nevertheless, we do not want to be too aggressive with our entry and will look to be more conservative by incorporating some ATR (Average True Range), and fibonacci analysis to isolate an ideal sell entry point for Friday. The ATR for the pair currently stands at 170 pips, and as such, based on the current daily low by 0.7980, would project a potential high today by 0.8150. Additionally, the 78.6% fib retrace off of the latest 0.8240-0.7850 also comes in directly by 0.8155 to provide an ideal technical confluence for our trade. Any gains beyond 0.8150 are therefore expected to be very well capped. Strategy: SELL @0.8145 FOR AN OPEN OBJECTIVE, STOP @0.8285. Recommendation to be removed if not triggered by NY close (4pm ET) on Friday.
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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Quant section prepared by David Rodriguez, Quantitative Strategist for DailyFX.com
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Joel Kruger publishes 6 daily pieces:
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“Indicator of the Day” – A Feature Report that Highlights our Most Significant Technical Indicator of the Day.
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