US equity futures has been pointing to a lower open until the release of the ADP report which came in much better than expected, with a job loss total which was the smallest since October of 2008. This helped to bolster investor sentiment and force a fresh wave of risk related buying in currencies with higher yielding FX benefiting as a result. Looking ahead, Fed Yellen is scheduled to speak at 21:30GMT.
MIDDAY SNAPSHOT & ANALYSIS OF SELECTED RATES
US equity futures had been pointing to a lower open until the release of the much better than expected ADP report, with a job loss total which was the smallest since October of 2008. This helped to bolster investor sentiment and force a fresh wave of risk related buying in currencies with higher yielding FX benefiting as a result. Meanwhile in Canada it was a case of worst to first, with the loonie surging in the US session on the back of an excessively better than expected building permits release and way better Ivey PMI. Meanwhile, FDIC Bair was on the wires arguing for a multi-agency council to oversee systemic financial risks, with the Fed taking the lead and the FDIC expanding its power. Fed Stern also generated some attention after warning that failure to address systemically important financial firms would impose large costs on the US economy. Elsewhere, the Norges Bank cut rates as expected by 50bps to 1.50% but also retained a relatively upbeat tone, while Riksbank Ingves was more balanced than might be expected after being critical of lower rates. Oil is up some 2.50% while gold trades 1.25% higher. The Australian Dollar (NOK and SEK stronger) is the strongest major currency on the day while Sterling has been an underperformer. It is also worth paying attention to the Real which is the overall top performer. Looking ahead, Fed Yellen is scheduled to speak at 21:30GMT.
ANALYSIS OF SELECTED RATES
Eur/Cad: We can’t get enough of the Canadian Dollar and will look for an opportunity to sell it against the Euro today if given the chance (buy Eur/Cad). The cross has come under some intense pressure of late and has broken to fresh 2009 lows below 1.5600 on Wednesday. However, daily studies are showing oversold and just like in Usd/Cad, the cross is on the verge of posting a 30 print on the daily RSI. A closer look at the broader structure shows that price action longer-term is far from bearish and the 1.5500 area has offered itself as a formidable support zone going back to November 2008. As such we will look to buy on a deeper setback towards 1.5500 in anticipation of a major upside correction over the coming days. Strategy: BUY @1.5530 FOR A 1.5930 OBJECTIVE, STOP @1.5330. Stops to be trailed to cost on a break back above 1.5630. If trade triggers and 1.5630 not broken, position to be closed out at NY close (5pm NY time) on Wednesday. Recommendation to be removed if not triggered by NY close on Wednesday.
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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