MORNING SLICES
Fundys – Data out of the European and UK markets overnight helped to reinfuse some risk buying with the better than expected PMI out of the respective regions opening some steady buying. Eurozone retail sales were also released but failed to materially factor into price action. Also gaining attention was the proximity of gold to the critical $1000 mark, which helped to bolster the Australian Dollar back towards 0.8400. In Japan, the newly elected DPJ party came out saying that a strong Yen was basically good for the domestic economy. Meanwhile, the Sek was hit hard after the Riksbank kept its key rate unchanged at 0.25% but failed to provide any signal for a move to more restrictive policy. Instead, the Swedish central bank said that rates were expected to remain at current levels over the coming year. With the exception of the Yen, all major currencies are higher against the buck thus far on Thursday, led by the NZD. US equities point to a higher open, and commodities are also well bid. Looking ahead, the ECB will leave rates unchanged at 1.00% and the focus will shift to the subsequent Trichet press conference. ECB forecasts and accompanying central bank language will also generate some volatility after hints are given into future direction of monetary policy. US initial jobless claims (565k expected) and continuing claims (6125k expected) are due at 12:30GMT, followed by ISM non-manufacturing (48 expected) at 14:00GMT and ICSC chain stores sales at 15:00GMT.
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For information on the above tables, please visit our Guide to Morning Slices Quant section
Techs - EUR/USD No real change from the previous day and we continue to focus on the 50-Day SMA, with the moving average acting as a formidable support on a close basis for much of the rally from April 2009. As such, any close below would be taken as a medium-term bearish signal and open the door for a shift in the broader structure. However, price action remains quite choppy and we would not rule out the potential for a bounce on Thursday back above 1.4400. But ultimately, rallies to 1.4400 should be sold today, in anticipation of a deeper setback below the 50-Day SMA which comes in by 1.4165. Only back above the recent yearly high at 1.4445 negates. USD/JPY Continues to track lower with the market now eyeing a retest of the recent trend lows by 91.75 from mid-July. With the market now exceeding the 78.6% fib retracement off of the 91.75-97.80 move, we would now expect a full retracement and retest of 91.75 over the coming session. Any rallies should be well capped ahead of 94.00, with a break below 91.75 to expose the more significant multi-year matched trend lows at 87.15 further down. However, it is worth noting that the daily RSI is approaching oversold readings with any near-term test and break below 91.75 to likely force an RSI reading below 30. As such, we may look to buy on a dip over the coming sessions towards 91.75, in anticipation of a short-term corrective rally. GBP/USD More consolidation into Thursday following the previous weekly drop out from 1.6600. Key levels to watch above and below come in by 1.6380 and 1.6115, but our bias favors the downside and we view any rallies on Thursday towards 1.6400 as a good sell opportunity in anticipation of bearish continuation. Below 1.6115 exposes the 100-Day SMA at 1.6045 and then 1.5985 further down. USD/CHF Continues to chop around within a very well defined multi-week range with the price currently residing at the lower end of the range. We like the idea of looking to keep playing the multi-week range with any breaks to fresh 2009 lows seen as limited. Ultimately, only a close back below psychological barriers at 1.0500 would give reason for re-think. Back above 1.0715 should help to reaffirm constructive outlook and accelerate gains to next resistance by 1.0835. With the daily ATR currently residing at 110 points, we will issue a buy recommendation today on a dip back towards 1.0500.
Flows – Sovereign wealth fund bidding gold towards $1000; corporate and tech demand as well. Swiss bank, UK clearer and US prime name all bidding Aussie. Real money and Asian central bank offers in Usd/Cad. Corporate offers in Cad/Jpy. Middel Eastern buyers of Cable.
Trade of the Day – Usd/Chf: Continues to chop around within a very well defined multi-week range with the price currently residing at the lower end of the range. We like the idea of looking to keep playing the multi-week range with any breaks to fresh 2009 lows seen as limited. Ultimately, only a close back below psychological barriers at 1.0500 would give reason for re-think. Back above 1.0715 should help to reaffirm constructive outlook and accelerate gains to next resistance by 1.0835. With the daily ATR currently residing at 110 points, we will issue a buy recommendation today on a dip back towards 1.0500. [B]STRATEGY: BUY @1.0520 FOR AN OPEN OBJECTIVE; STOP AT 1.0320. RECOMMENDATION TO BE REMOVED IF NOT TRIGGERED BY CLOSE (5PM NY TIME) ON THURSDAY.
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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.
Additionally, please feel free to check out a [B]full profit and loss statement since inception on June 1, 2009[/B].
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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