Currencies Absorb Weaker Housing Data (Midday Snapshot)


The positive sentiment and bid in higher yielding currencies overnight on the back of the news that some of the major US banks would be looking to repay TARP, fizzled out somewhat in early New York, with the [B]much weaker than expected housing data[/B] once again weighing on investor confidence. Overall housing starts fell to a new record low with a 12.8% decline to a 458k annualized rate. However, heading into the London fix, there was good demand for currencies on dips, as equities also managed to find their way back into positive territory. The biggest gainers on the day have been the antipodean currencies, with the higher yielding Kiwi leading the way. Commodity price action has also been encouraging with oil trading above $60 earlier and gold tracking marginally higher on the day. An OPEC member from Ecuador sees oil price stabilizing between $60-65, while Libyan OPEC officials see room for additional strength on the improving economic outlook. Looking ahead, ABC consumer confidence is due at 21:00GMT. On the official circuit, Fed Stern is scheduled to speak in Minnesota at 17:15GMT, while President Obama should also be speaking on fuel efficiency standards in a bit. While most traders are aware of the fresh 2009 highs in Aud/Usd and Gbp/Usd today, Aud/Cad has also posted 2009 highs on M&A related activity after Canada’s Viterra has agreed to buy Australian ABB Grain for Aud1.6B.



Gbp/Usd: We expect there to be some form of a pullback off the first test of the 200-Day SMA in the pair since July of 2008 and with the daily RSI nearly overbought, we will look for an opportunity to fade any rallies above the longer-term SMA on Tuesday. Strategy: SELL @1.5620 FOR A 1.5220 OBJECTIVE, STOP @1.5820. Stops to be trailed to cost on a break back below 1.5570. If trade triggers and 1.5570 not broken, position to be closed out at NY close (5pm NY time) on Tuesday. Recommendation to be removed if not triggered by NY close on Tuesday.

Written by Joel Kruger, Technical Currency Strategist for
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