With the exception of the Yen, all of the major currencies have come under some decent pressure against the greenback today, with each individual currency being weighed down by specific fundamental developments in the respective regions.
[B] MORNING SLICES
Fundys –[/B] With the exception of the Yen, all of the major currencies have come under some decent pressure against the greenback today, with each individual currency being weighed down by specific fundamental developments in the respective regions. In the Eurozone, the Euro has come under pressure following the Trichet comments that the ECB central banker supported the US stance on a strong USD policy. These unexpected remarks along with talk of a potential Ireland downgrade from Moody’s resulted in some early selling that ultimately drove the price down into the 1.3000’s, before some support finally emerged by 1.3055. The better than expected Eurozone trade balance data was seen helping to offset some of the earlier weakness. Meanwhile in the UK, sterling was getting hit hard following some bearish comments from various officials including Blanchflower who said that he remained highly concerned over the unemployment rate going forward, while Minister Davies said that the weaker currency was seen helping to drive the recession hit economy to recovery. In Switzerland,retail sales was a nightmare coming in much weaker than expected to weigh on the franc, while more talk of additional intervention if needed from SNB Roth, was also seen driving relative weakness in the Swissy. Finally, in Japan, the latest government report shows that the economy is still in a “severe state” but does leave some room for optimism with the government also saying that the outlook is somewhat brighter with the pace of deterioration moderating. US equity futures point to a lower open while commodities trade marginally lower. Looking ahead to the North American session, Canada CPI (1.9% core expected) is due at 11:00GMT, followed by Reuters/University of Michigan confidence (58.5 expected) at 14:00GMT. On the official circuit, Fed Hoenig speaks at a Fed conference in Washington at 12:30GMT, while Fed Chair Bernanke speaks shortly after at 16:30GMT. The markets will also take time to digest the latest earnings from Citigroup and GE.
Techs - EUR/USD break below the recent consolidation lows at 1.3090 now opens the door for a direct retest by 1.3000 over the coming session. There is some minor support ahead of the psychological 1.3000 level in the form of the lower Bollinger and 50-Day SMA at 1.3030 and 1.3040 respectively. USD/JPY dips have been well supported by 98.15 for now, but it remains unclear which direction the pair is headed in from here. Key levels to watch over the coming session come in by 100.00 and 98.50. GBP/USD had finally managed to break key topside resistance by 1.5000 on Wednesday, but was unable to generate any positive momentum above the psychological level after gains were limited to 1.5070 on Thursday. Friday’s break back below Thursday’s 1.4840 lows now puts the pressure back on the downside and potentially opens deeper setbacks into the 1.4500’s over the coming sessions. Rallies intraday are now seen well offered ahead of 1.4950. USD/CHF trade is expected to remain quite choppy. However, today’s break back above 1.1625 confirms a fresh higher low by 1.1305 and opens the next upside extension exposing initial resistance by 1.1835. Any dips are expected to continue to be well supported by the 200-Day SMA.
Flows – German bank and CTA selling of Cable. French bank standout seller in Eur/Jpy. Japanese retail accounts selling Aud/Jpy. Central banks, sovereigns and hedge funds all offering Eur/Usd. Stops cited below 98.00 in Usd/Jpy. Corporate Canada and leveraged accounts buying Usd/Cad.
Trade of the Day – Eur/Aud: After booking some 60 pips profit on Wednesday’s trade, we are once again looking for opportunities to buy the oversold cross rate, despite the overwhelming bearish price action. As contrarians, we are always looking for set-ups where the market shows that it is overstretched and thereby vulnerable and exposed for some form of a material corrective retracement. With daily studies still showing well oversold, we continue to see the risks from here to the upside, with limited room for additional weakness. Key psychological barriers now approach at 1.8000 and we will look for a break below stops under the 1.8080, April 13 trend lows to open a move down to our 1.8000 buy entry today. Strategy: RE-BUY @1.8000 FOR A 1.8760 OBJECTIVE, STOP @1.7780. Stops to be trailed to cost on a break back above 1.8100. If trade triggers and 1.8100 not broken, position to be closed out at NY close (4pm ET) on Friday. Recommendation to be removed if not triggered by NY close on Friday.
Written by Joel Kruger, Technical Currency Analyst for DailyFX.com
If you wish to receive Joel’s reports in a more timely fashion, e-mail [email protected] and you will be added to the “distribution” list.
Joel Kruger publishes 6 daily pieces:
“Tech Talk” – A Daily Video Highlighting Technical Developments in the Overnight Session of Trade.
Monday-Friday (between 5:30am-6:30am EST)
“Morning Slices” – Morning Overview using Fundamental, Technical, Flow, and Quantitative Analysis (Includes “Trade of the Day”).
Monday-Friday (between 6:30am-7:30am EST)
“Indicator of the Day” – A Feature Report that Highlights our Most Significant Technical Indicator of the Day.
Monday-Friday (between 8:00am-9:00am EST)
“Cross Country” – A Midday Fundamental Update, along with Technical Analysis of Selected Cross Rates.
Monday-Friday (between 10:30am-11:30am EST)
“Scandi Daily” – A Specialized Daily Fundamental and Technical Overview of the Nordic Currencies. (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)
“Daily Classical” – A Daily Technical Overview of the Major Currencies.
Monday-Friday (published between 2:00pm-3:00pm EST)