Some mixed price action with the Euro, Swissie, Yen, Kiwi and all offered against the buck, while Sterling, Cad and Aussie have managed to rally to fresh 2009 highs against the greenback. Cable has been the standout performer after finally managing to clear key psychological barriers at 1.6000 overnight, with much of the bid tone stemming from cross related selling in Eur/Gbp.
MORNING SLICES
Fundys – Some mixed price action with the Euro, Swissie, Yen, and Kiwi and all offered against the buck, while Sterling, Cad and Aussie have managed to rally to fresh 2009 highs against the greenback. Cable has been the standout performer after finally managing to clear key psychological barriers at 1.6000 overnight, with much of the bid tone stemming from cross related selling in Eur/Gbp. Data our of the region seemed to have little impact on price action after the [B]BBA mortgage approvals[/B] came in roughly as expected following an upward revision to the previous month. BoE Bean was on the wires commenting on the tight state of the UK lending market, saying it was quite understandable that banks were not inclined to lend in the current market environment. Meanwhile, there was some more currency talk overnight with ECB Bini Smaghi saying that China’s connection to the USD is a bigger problem given the recent depreciation in the buck, and that China must let the Yuan fluctuate. This was somewhat in contrast to later comments from S&P Kraemer who said that there was no contender to the USD as a reserve currency at present. Recall earlier in the week, both China and the UAE reaffirmed their preference for the USD. ECB Liikanen comments were cited from some of the Euro selling after the central banker said that fixing a floor on rates was not a part of central bank policy. The Yen remains offered into Wednesday with many citing the weakness to the escalating tensions with North Korea in light of the nuclear testing. In New Zealand, the budget deficit is set for release and Fitch has been expressing their concern for the economy which could be at risk for a downgrade. This in conjunction with recent comments from NZ FinMin English who said that the budget was in worse shape than December, have weighed on the antipodean, despite the better than expected business confidence overnight, which turned positive for the first time since September 2008. Downbeat comments from the PBOC overnight have failed to materially weigh on US global equities, after the Chinese central bank said that the world economy had not bottomed out and that the Chinese economy still faced serious downward pressure. On the commodity front, oil finally broke above the 200-Day SMA for the first time since September 2008. Looking ahead, existing homes sales (2.0% expected) are due at 14:00GMT, along with the house price index (0.2% expected). MBA mortgage applications were out earlier and showed a 14.2% drop versus a previous +2.3% print.
Quant –
For information on the above tables, please visit our Guide to Morning Slices Quant section.
Techs - EUR/USD could finally be starting to roll over after breaking above psychological barriers at 1.4000. A break below 1.3860 will be required to confirm short–term topping. Key level to watch above over the coming session comes in by 1.4060. USD/JPY starting to show signs of a potential base by 93.85 with the market well supported ahead of the key 93.55 trend lows. Fresh upside is now seen back towards the 96.20-70 area over the coming sessions. Only back under 94.50 negates. GBP/USD (See below). USD/CHF bullish reversal day on Tuesday suggests that we could finally be looking to base out by 1.0810. A Break back above 1.0930 will be required to confirm.
Flows – German bank and UK clearer selling Eur/Gbp. Japanese spec accounts on the offer in Usd/Jpy. CTAs buying oil. US names offering Usd/Cad; Canadian corporates on the bid. French name buying Cable. Russian accounts selling Euro.
Trade of the Day – Gbp/Usd: With daily studies so remarkably stretched, we continue to look for opportunities to establish counter-trend short trades on overdone intraday rallies. The market has finally broken above critical psychological barriers at 1.6000 and any gains beyond this barrier are seen limited with the greater risk for a more significant corrective pullback. As such, we will apply daily ATR (Average True Range) analysis which projects a daily high just over 1.6100, to isolate our ideal entry point. Strategy: SELL @1.6120 FOR A 1.5520 OBJECTIVE, STOP @1.6270.
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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“Cross Country” – A Midday Fundamental Update, along with Technical Analysis of Selected Cross Rates.
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