The Euro was well bid overnight with stable equity prices and better than expected data helping to prop the market back above 1.4200. Impressive German IFO and stronger Eurozone and German PMI results were seen as the main catalysts on the data side, while some very weak data out of the UK helped to open a surge in cross related Euro interest through Eur/Gbp.
MORNING SLICES
Fundys – The Euro was well bid overnight with stable equity prices and better than expected data helping to prop the market above 1.4200. Impressive German IFO and stronger Eurozone and German PMI results were seen as the main catalysts for the Euro buying, while some very weak data out of the UK helped to open a surge in cross related Euro interest through Eur/Gbp, which also helped to bolster the Euro.UK GDP came out much weaker than had been forecast and resulted in an underperformance for Sterling on the day. Elsewhere, the Canadian Dollar remained quite firm following Thursday’s release of the Bank of Canada monetary policy report which disclosed the central bank’s opinion that the recession would end in the third quarter. Comments from the Canadian trade minister that the stronger Loonie was hurting exports has failed to weigh on the currency thus far. ECB Gonzalez-Paramo said that rates were appropriate, while both ECB Nowotny and Orphanides said it was too early to talk of recovery. Looking ahead, the focus will very much be on the US equity markets, with the direction there to dictate the direction of the FX market. Michigan sentiment (65 expected) is due at 14:00GMT, while Fed Chair Bernanke and Treasury Secretary Geithner testify in front of the House Financial Services Committee at 14:30GMT. US equity futures and commodities are trading modestly higher into the US open.
Techs - EUR/USD Inching even closer towards the 1.4340, 2009 highs, with the market taking out Tuesday’s 1.4280 high to open an assault on figure resistance by 1.4300 which guards against 1.4340. Inability to establish above 1.4340 followed by a break back below 1.4155 will be viewed as bearish and once again put the pressure back on the downside. We remain sidelined until a clearer opportunity presents. USD/JPY Remains locked in a downtrend off of the yearly highs by 101.45 and a lower top is now sought out below 97.00, ahead of the next drop. We had thought that the 94.80 level could act as the next lower top, but with this level now taken out, additional upside is now seen back into the 95.00’s. The internal trend-line in the chart above shows the next potential lower top now coming in by 95.65. Only back above 97.00 will ultimately force a shift in our outlook. GBP/USD Despite the recent rally back into the 1.6500’s we do not rule out the potential for a failure ahead of 1.6745 as we still hang on to the possibility for the formation of the right shoulder of a very loose and messy head & shoulders top. However, a sharp pullback will need to take place over the coming days for this topping scenario to play out. Key levels to watch over the coming session come in by 1.6585 and 1.6385. USD/CHF attempting to carve out a meaningful base and Thursday’s break back above 1.0720 helps to take some pressure off of the downside. Back under 1.0590 delays.
Flows – Stops reported above 0.8220 in Aussie. CTA, real money and clearer demand for Eur/Gbp. Spec accounts looking to buy Usd/Jpy. US custodial bids in Eur/Usd.
Trade of the Day – We are already riding two positions from Thursday and will not look to increase our exposure in the final session of trade for the week. We are currently short GBP/JPY @156.70 and Long USD/CAD @1.0875.
P&L Update and Overview: Many of you have been asking for a way to better track trading results and open positions. In response to these requests and in an effort to be fully transparent, a simulated portfolio was been created in June to track and mirror all recommendations and trades. Below is a return on equity curve since inception on June 1, 2009, along with an open and closed position tracker. I am hopeful that this will make things easier for you all.
Additionally, please feel free to check out a [B]full profit and loss statement since inception on June 1, 2009[/B].
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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