MIDDAY SNAPSHOT & ANALYSIS OF SELECTED RATES
Currencies were relatively well bid against the USD and Yen heading into the US session of trade and have accelerated gains following the release of the much stronger than expected housing data. US pending home sales surged +3.2% on the month after analysts had been looking for a flat showing, while construction spending also impressed at +0.3% after consensus estimates centered on a 1.6% drop. This sent the commodity currencies, which were already outperforming on the day to fresh highs, with the Aussie leading the way to post 2009 highs by 0.7400. Usd/Cad also managed to just eke out yearly lows by 1.1760. Meanwhile the Euro broke back above figure resistance and well into the 1.3300’s while Cable flirted with 1.5000 barriers. Also seen bolstering sentiment this morning has been the news that Bank of America is not working on plans to raise US$10B in common equity. An earlier FT article had claimed that BofA and Citigroup were looking to raise new common equity for required capital resulting from the stress tests. Elsewhere, upbeat comments from ECB Papdemos were seen helping to prop the Euro after the central banker echoed earlier comments from EU Almunia of signs of stabilization within the Eurozone economy. Looking ahead, the [B]RBA[/B] is set to decide on rates later this evening (Tuesday 4:30GMT), with the consensus calling for an unchanged verdict at 3.00%. All major US equity indices are up some 2% heading into what would be the London fix (May Day Bank Holiday). Commodities are also doing well with gold up nearly 2% and oil up by 1%.
ANALYSIS OF SELECTED RATES
Usd/Jpy: The bounce out from the Ichimoku cloud top has been quite impressive with the pair rallying back into the 99.00’s thus far. However, any rallies above the critical psychological barriers at 100.00 are seen limited with the 78.6% fib retracement off of the 101.45-95.60 move ideally capping ahead of a resumption of setbacks. Fundamentally, the rally in the global equity markets over the past several weeks looks to be approaching overdone and we anticipate yet another wave of risk aversion and market uncertainty to take hold in the early days of May. We may not have seen equity showers in April but we believe a “hard rain is gonna fall” in May. Warnings from ex-MOF Sakakibara overnight of a higher Usd/Jpy rate could also be used as a good contrarian indicator after Sakakibara had called for a much lower rate to 80.00 back in November 2008. Strategy: SELL @100.20 FOR A 97.15 OBJECTIVE, STOP @101.65. Recommendation to be removed if not triggered by NY close (5pm ET) on Monday.
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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“Cross Country” – A Midday Fundamental Update, along with Technical Analysis of Selected Cross Rates.
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