Currencies Finally Show Signs of Exhaustion (Midday Snapshot)


A batch of slightly [B]weaker data[/B] out from the US this morning including [B]mortgage applications[/B],[B] ADP[/B], [B]ISM non-manufacturing[/B] and [B]factory orders[/B], have only helped to fuel additional profit taking in currencies, with the [B]USD[/B] as the prime beneficiary of the broad based market reversals.[B] US equities[/B] and [B]commodities [/B]have also come back under pressure and many now speculate that we have reached an inflection point. [B]Fed Chair Bernanke [/B]has been on the wires all morning in his testimony in front of the [B]House Budget Committee[/B]. Bernanke says warns of the ever widening federal deficit and stresses that fiscal imbalances need to be addressed. The Fed Chair also says that while there have been some signs of improvement in the economy, he still sees rates markets and financial institutions under pressure. On inflation, Bernanke says that he expects inflation to stay within the bounds of price stability. Meanwhile,[B] PIMCO’s Gross[/B] has been heard talking down the US economy, while also recommending a diversification out of USDs. Gross warns that the dynamics have changed and the [B]Chinese [/B]will no longer be able to fund the US budget. As a sign of a dramatic short-term shift in sentiment, there has been a heavy exodus from the [B]higher yielding currencies[/B], with all of the [B]Yen crosses[/B] putting in bearish outside days. It is no shocker that [B]Kiwi[/B] is the weakest currency on the day, down some 2.60% against the buck, while the [B]Yen[/B] has been the relative outperformer. US equities are all lower, with the [B]S&P[/B] hit the hardest down well over 1%, while [B]oil[/B] and [B]gold [/B]both trade lower in sympathy.

[B] Eur/Aud:[/B] The cross has come under some intense pressure over the past several weeks with the market tanking to fresh 2009 lows by 1.7295 on Wednesday, ahead of the latest minor bounce. However, failure to extend declines beyond 1.7300 is a significant medium-term development with the lower 1.7000’s to now likely act as a formidable former resistance zone now turned support. A closer look at the chart below which goes back into 2007, shows how well offered the market had been at current levels on multiple attempts. We now see a base likely forming at current levels and would even look for Wednesday’s short-term reversal and bullish outside day for initial confirmation. Look for the break back above 1.7540 today to open fresh upside back towards 1.8000-1.8150 over the coming days, with a break of 1.8150 to confirm medium-term basing prospects. Only back under 1.7295 delays.

[B]Written by Joel Kruger, Technical Currency Strategist for
If you wish to receive Joel’s reports in a more timely fashion, e-mail [/B][B][email protected][/B] [B]and you will be added to the [/B][B]“distribution” [/B][B]list.[/B]

Joel Kruger publishes 6 daily pieces:

[I][B]“Tech Talk”[/B] – A Daily Video Highlighting Technical Developments in the Overnight Session of Trade. [/I]
Monday-Friday (between 5:30am-6:30am EST)

[I][B]“Morning Slices”[/B] – Morning Overview using Fundamental, Technical, Flow, and Quantitative Analysis (Includes “Trade of the Day”).[/I]
Monday-Friday (between 6:30am-7:30am EST)

[I][B]“Indicator of the Day”[/B] – [/I][I]A Feature Report that Highlights our Most Significant Technical Indicator of the Day. [/I]
Monday-Friday (between 8:00am-9:00am EST)

[I][B]“Cross Country” [/B]– A Midday Fundamental Update, along with Technical Analysis of Selected Cross Rates. [/I]
Monday-Friday (between 10:30am-11:30am EST)

[I][B]“Scandi Daily”[/B] –[/I] [I]A Specialized Daily Fundamental and Technical Overview of the Nordic Currencies. [/I] (This report is only distributed through email. Please contact [email protected] if you would like to be added to distribution.)
Monday-Friday (between 11:30am-12:30pm EST)

[I][B]“Daily Classical”[/B] – A Daily Technical Overview of the Major Currencies. [/I]
Monday-Friday (published between 2:00pm-3:00pm EST)