The overnight session was less data influenced and more price driven, with market participants continuing to eye the key 2009 highs in Eur/Usd by 1.4340. Despite some lower equity futures, currencies did manage to extend gains, with the Aussie outperforming and trading to a fresh 2009 high, while the Euro managed to clear psychological barriers at 1.4300.
Fundys – The overnight session was less data influenced and more price driven, with market participants continuing to eye the key 2009 highs in Eur/Usd by 1.4340. Despite some lower equity futures, currencies did manage to extend gains, with the Aussie outperforming and trading to a fresh 2009 high, while the Euro managed to clear psychological barriers at 1.4300 before stalling out. Some of the relative outperformance in the Aussie on Tuesday was aided by upbeat comments from central bank governor Stevens. Kiwi however did not fare as well, with the much weaker trade balance forcing some cross related buying in Aud/Nzd. Despite posting gains against the USD, Sterling was the underperformer in overnight trade, with the weaker CBI retail sales report and discouraging land registry house prices report weighing. Elsewhere, the [B]Swiss UBS consumption[/B] indicator showed a rise from the previous month. This was the first increase in the data series in three months. Although currencies did manage to post gains overnight, the Yen was well bid too, which could be a red flag for a reversal in investor sentiment. Looking ahead, Case Shiller (-17.90% expected) is due at 13:00GMT, followed by consumer confidence (49.0 expected) and Richmond Fed (8 expected) at 14:00GMT. On the official circuit, Fed Yellen is slated to speak on the US economy at 15:30GMT, while Part 2 of Fed Chair Bernanke’s Town Meeting is set to air at 22:00GMT. US equities point to a lower open and commodities are unchanged.
For information on the above tables, please visit our Guide to Morning Slices Quant section
Techs - EUR/USD inching closer to 1.4340 after managing to break above 1.4300 thus far. Back under 1.4220 now required to take pressure off of the topside. USD/JPY putting in bearish reversal day after failing to extend gains on Tuesday and retreating to take out Monday’s low. A lower top could be in place by 95.40 ahead of the next drop towards 91.75. Next support comes in by 94.00. GBP/USD testing recent range highs above 1.6500 as the market considers a potential assault on the 2009 highs by 1.6745. Key levels to watch over the coming session come in by 1.6585 and 1.6380. USD/CHF continues to trade with a heavy tone as the market consolidates above the 2009 lows at 1.0590. A break below will open a fresh drop, while back above 1.0770 now required to take pressure off of the downside.
Flows – French bank offers in Eur/Usd; sovereign bids. Japanese name and US investment house selling Usd/Jpy. Bids from local importers and real money accounts in Usd/Cad; corporates on the offer. Asian and spec offers in Kiwi.
Trade of the Day – Eur/Aud: We came in this morning and saw the market very overextended intraday after just managing to take out the previous yearly lows by 1.7150 from early June. The daily Average True Range (ATR) for the cross has also been exceeded and we would expect any additional pullbacks intraday to be well supported. In the event that we do see the start to a significant corrective bounce over the coming sessions, there is the potential for the formation of a major medium-term double bottom with an eventual break back above 1.8100 to trigger the basing pattern and open fresh upside towards the 1.9000 area. Fundamentally, the cross has been inversely correlated to global equity and commodity prices and any sign of a pullback in these markets should generate some sizeable profit taking from shorts. With US equities now trading above the 70 handle on the daily RSI, we like the potential upside that the trade offers. POSITION: LONG @1.7150 FOR AN OPEN OBJECTIVE, STOP @1.6950.
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.
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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