MIDDAY SNAPSHOT & ANALYSIS OF SELECTED RATES
Weaker earnings out from some of the financials this morning have been offset by stronger economic releases, in the form of a much better than expected Canadian retail sales and a US home price index which also bettered consensus estimates. The result has been a relatively mixed session of trade with currencies chopping around. Fed Chair Bernanke has begun his testimony in front of the Senate Banking Committee but is not expected to move markets after already sitting in front of the House Panel on Tuesday. The Yen and Canadian Dollar are the only major currencies to show gains against the USD today, while the Australian Dollar has been the clear laggard. While the market looked like it could really roll over early on in favor of some broad based USD appreciation, the buying of currencies ahead of the fix has begun to dampen these prospects. US equities and gold trade slightly bid, while oil is marginally offered.
ANALYSIS OF SELECTED RATES
Gbp/Usd: While our gut is telling us that a major USD rally could be on the verge of playing out, we prefer to stay on the sidelines for now and will instead look to sell into an intraday rally back over 1.6500. The 1.6500 area has offered itself as formidable internal range resistance and this in conjunction with a 78.6% fib retracement off of the latest moves, along with a projected ATR high just above the figure, sets up a playable short trade over the coming hours. Overall, we favor the formation of a right shoulder of a major head & shoulders top, with renewed weakness projected back below 1.6000 over the coming days. Ultimately, only back above 1.6745 negates. Strategy: SELL @1.6510 FOR AN OPEN OBJECTIVE, STOP @1.6675. RECOMMENDATION TO BE REMOVED IF NOT TRIGGERED BY NY CLOSE (5pm ET) ON WEDNESDAY.
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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