Currencies Regain Bid Tone into US Open (Morning Slices)

The choppy directionless trade continues into Wednesday, with the USD selling off into the US open, mostly driven by an on the whole better than expected batch of data overnight. Eurozone and German PMI were stronger than forecast, while UK and Swiss PMI were also better.

MORNING SLICES

Fundys – The choppy directionless trade continues into Wednesday, with the USD selling off into the US open, mostly driven by an on the whole better than expected batch of data overnight. Eurozone and German PMI were stronger than forecast, while UK and Swiss PMI were also better. However, there was still some room for concern after yearly German retail sales figures grossly disappointed. UK index of services data was also not encouraging. More reserved talk on the outlook for the global economy, with German FinMin Steinbrueck conceding that things could get worse in the second half of 2009 for the German economy, while Ex-BOE member Lomax predicted that the recovery would be more slow and gradual like a “W” rather than a “V”. Meanwhile in Japan, S&P came out to affirm the country’s stable outlook. Also seen generating some attention was the news that the Norges Bank had signed a loan agreement with Iceland’s central bank. This helped to propel the Scandi currencies to the top performing currencies on the day. US mortgage applications continue to show extreme volatility after coming in at -18.9% versus a previous +6.6% reading. Of the major currencies, the Canadian Dollar has also been strong, while the Yen lags. Looking ahead, Challenger job cuts are due at 11:30GMT, followed by ADP (-394k expected) at 12:15GMT. More data follows at 14:00GMT with ISM manufacturing (44.0 expected), pending home sales (0.0% expected) and construction spending (-0.6% expected). US equity futures point to a higher open, while commodities are also well bid.

Quant –


For information on the above tables, please visit our Guide to Morning Slices Quant section

Techs - EUR/USD has shown no downside follow through thus far following Tuesday’s bearish price action, with the market seemingly content on continuing to consolidate. Key levels to watch over the coming session come in by 1.4155 and 1.3980. USD/JPY (See below). GBP/USD tracking lower following Tuesday’s bearish outside day. Look for a deeper drop now towards next key support by 1.6185 over the coming sessions. Intraday rallies should be well capped ahead of 1.6600. USD/CHF locked in some sideways trade following Tuesday’s bullish price action and a higher low is now sought out by 1.0780 ahead of the next upside extension through 1.1025. In the interim, key levels to watch come in by 1.0890 and 1.0780.

Flows – Spec bids on dips in Eur/Chf. Middle Eastern accounts bidding Eur/Usd.

Trade of the Day – Usd/Jpy:
Although the market has broken higher on Wednesday to trigger an inter-day double bottom, we do not see gains ultimately extending much beyond 98.00 and favor the idea of looking to sell into the current rally. We are looking for the current up-move to stall out by former support just over 97.00 from June 9, 10, 11, which also happens to coincide with the 61.8% fib retracement off of the most recent 98.90 to 94.90 move. The average daily range for the pair comes in at 117 points, which projects a daily high on Wednesday that also directly coincides with the mentioned fib retracement. As such, we will look to sell into this technical confluence above 97.00 today, in anticipation of some bearish resumption back towards 94.90. Strategy: SELL @97.35 FOR AN OPEN OBJECTIVE, STOP @98.35. 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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Quant section prepared by David Rodriguez, Quantitative Strategist for DailyFX.com
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Joel Kruger publishes 6 daily pieces:

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