The Euro has mounted a decent comeback into Wednesday after the EU FinMins agreed that Greece must work to reduce its budget deficit to help restore investor confidence. Comments from a Greek FinMin that there was no actual need for a bailout, were also seen helping to prop the single currency, which has finally broken back above the 10-Day SMA and poised for some additional corrective upside.
MORNING SLICES
FUNDYS
The Euro has mounted a decent comeback into Wednesday after the EU FinMins agreed that Greece must work to reduce its budget deficit to help restore investor confidence. Comments from a Greek FinMin that there was no actual need for a bailout, were also seen helping to prop the single currency, which has finally broken back above the 10-Day SMA and poised for some additional corrective upside. The Australian Dollar has been well bid on similar themes, while a hawkish report from RBA watcher McRannn has also been seen generating additional demand for the higher yielding commodity currency. Data in Australia overnight has not hurt the antipodean, after the leading index of economic activity and job vacancies both came in healthy. Meanwhile in Japan, things were mixed, with the Tankan showing manufacturers turning the least pessimistic since 2008, while the tertiary activity index faltered.
Relative Performance Versus USD on Wednesday (As of 10:30GMT) –
[B]
- AUSSIE -0.01%
- CAD -0.05%
- KIWI -0.18%
- STERLING -0.19%
- EURO -0.21%
- SWISSE -0.23%
- YEN -0.49%[/B]
In the European session, UK employment data came in on the whole better than expected, which helped to give the Pound a minor boost, but the release of the BOE Minutes helped to keep the single currency somewhat offered, after revealing that despite the 9-0 vote in favor of leaving QE steady, there was still some strong arguments for additional QE. This, in conjunction with the disclosure that credit conditions would remain tight for some time, ultimately kept the market in check. In the Eurozone, construction output showed an improvement from the previous month, while the trade balance came in narrower than expected. Although worries over Greece seem to have died down, there is now some contagion spilling over into Spain and market participants are begin to worry about a sever threat to the Spanish economy. Elsewhere, German DIHK has upwardly revised its 2010 growth forecasts, while in Sweden, FinMin Borg has upwardly revised the outlook on public sector finances. On the official circuit, ECB Quaden was out promoting a gradual removal of stimulus.
Looking ahead, that calendar is stacked in the North American session, with mortgage approvals kicking things off at 12:00GMT, followed by housing starts (4.1% expected), building permits (620k expected), and import prices (0.8% expected) at 13:30GMT. Also out at 13:30GMT are Canada wholesale sales. At 14:15GMT more US data comes out in the form of industrial production (0.8% expected) and capacity utilization (72.6% expected). Finally, the much anticipated FOMC Minutes are scheduled for release at 19:00GMT. US equity futures point to a higher open, while commodities are mixed with oil bid and gold taking a rest.
GRAPHIC REWIND
TECHS
EUR/USD Has finally managed to close back above the 10-Day SMA for the first time in over a month, with the move suggesting that the market could be preparing for some fresh corrective upside over the coming days. Next key resistance comes in at 1.3840, which coincides with the 09Feb high and 20-Day SMA. A break of this level will then expose 1.4000 further up, while inability to hold above 1.3840 will suggest that the market is poised for some bearish resumption.
USD/JPY The violent pullback from several days back certainly dents our outlook in which we had been projecting significant upside over the medium-term. However, the market has still not managed to close below 89.00 and it will be interesting to see how things play out from here. In some ways, the recent whipsaw price action makes it a little easier to call. A break back below 88.55 will confirm bearish resumption, while above 91.30 should accelerate gains to the topside and put the constructive outlook back in play. Until then we remain sidelined.
GBP/USD The market has finally taken out the key October lows just over 1.5700 to likely open the door for some medium-term setbacks over the coming weeks. However, daily studies are now looking quite stretched and there is a risk for some choppy consolidation before any renewed weakness. Any rallies are expected to be well capped ahead of 1.6000.
USD/CHF Just like the Euro, here too we are in the process of undergoing a short-term correction with the market finally closing back below the 10-Day SMA. While there is certainly scope for additional weakness over the coming sessions, look for a fresh higher low to carve out in the 1.0400-1.0500 area before a bullish resumption towards our medium-term objective at 1.1000.
FLOWS
M&A related demand for Gbp/Usd on rumors that US equity firm looking to buy UK trading house. German and Canadian bank buying Usd/Jpy; CTAs and Japanese spec offers. Local banks selling Usd/Cad. Spec and Asian sovereign bids in Eur/Usd.
TRADE OF THE DAY
No Trade: Currently running a long Eur/Cad position and no new set-ups just yet.
PORTFOLIO OVERVIEW
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Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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