MORNING SLICES (Abridged)
Fundys – It is once again the Australian Dollar in the spotlight, with the shockingly strong employment data forcing a move in the single currency to fresh highs against the buck on the year, above critical psychological barriers at 0.9000. The report should help to reaffirm the recent move by the RBA to raise rates this week, with the country being the first across the globe to shift back into a tightening cycle. Price action in the broader currency, market, risk appetite, and surging gold prices above $1050, have also helped to accelerate Aussie gains on Thursday. Key event risk for Thursday now comes in the form of the ECB and BOE rate decisions due up later, but ultimately, no change is really expected with either central bank, and we do not expect the outcomes to generate much volatility. Data in the European session was extremely light, with the main release coming in the form of German industrial production (not released at time of print). In Sweden, industrial orders were well weaker and have weighed on the krona which has already come under some pressure in light of the fears over exposures to Latvia. The Times Shadow MPC has come out with a unanimous 9-0 decision to leave rates on hold at 0.50%, while one member felt that the BoE should reduce its quantitative easing measures. Elsewhere, Russia has been apparently buying foreign currency to offset Rouble appreciation. Once the BoE and ECB decisions are out of the way, there is a slew of economic releases scheduled in North America. US initial jobless (541k expected) and continuing claims are due at 12:30GMT, along with Canada housing starts (146.5k expected). US wholesale inventories follows at 14:00GMT, with ICSC chain store sales capping things off at 15:00GMT. US equity futures are pointing to a strong open at this time, while commodities are also well bid.
Techs - EUR/USD The market has now broken back above the 78.6% fib retrace off of the latest moves with the break above 1.4765 to likely now open a more significant rally back towards initial resistance by the 2009 highs at 1.4845. From there, we expect to see an acceleration to challenge critical psychological barriers at 1.5000, with gains ultimately now projected into the 1.5200’s before considering the possibility of any form of a meaningful pullback. Only back under 1.4650 will negate. USD/JPY Any hopes for a short-term base have been wiped away, with the market now breaking back below key short-term support at 88.25, to 88.00 thus far. A break below 88.00 will now expose a retest of the major 87.15 matched trend lows from late 2008 and early 2009. Only a break back above 90.00 will now be required at a minimum to take pressure off of the downside. GBP/USD The market is in the process of a bearish consolidation with the more likely outcome from here, an eventual drop back below 1.5770 to open a fresh downside extension towards 1.5000 over the coming weeks. However, with the USD still broadly offered across the board, we cannot rule out the possibility for an upside break of consolidation through 1.6130, back towards the 1.6400-1.6500 area. USD/CHF Any hopes for a recovery have all but been wiped away, with the market unable to bounce out from the 1.0250 area 78.6% fib retrace and now trading back into the 1.0200’s. Look for a break below 1.0235 to open a direct retest of the 2009 lows at 1.0185, with deeper setbacks seen below to expose critical psychological barriers at parity. Only back above 1.0360 negates.
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Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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