MIDDAY SNAPSHOT & ANALYSIS OF SELECTED RATES
Over half of the S&P 500 firms have reported Q2 earnings results and with some 80% of those companies beating EPS estimates, it is no wonder why equities have been so well bid of late. Nevertheless, these results should be taken with a grain of salt with many of the firms beating estimates after doing some cost cutting on their bottom lines. Data this morning of the US was mixed with initial jobless claims disappointing, while continuing claims was better than forecast. In Canada, industrial product and raw material prices were much stronger and helped to bolster the Loonie on the day. Although the Euro was slightly better bid against the USD, the single currency was relatively weak with IMF comments that the Euro was overvalued not helping. Both the Australian Dollar and Sterling were the prime beneficiaries of weaker developments out from respective neighboring economies, with the IMF comments and concerns over the German banking sector weighing on Eur/Gbp, while the downbeat outlook from the RBNZ was seen generating a very strong bid tone in Aud/Nzd. All major US equity indices track some +1.5% higher on the day, while commodities are also well bid on similar correlations.
ANALYSIS OF SELECTED RATES
Usd/Cad: We will once again attempt to establish a long position in the pair, with any intraday pullbacks below 1.0800 not likely to be sustained. However, trading this pair requires a strong stomach with the market often chopping around in whipsaw fashion at extremes, to make the art of picking a top or bottom very challenging. The daily ATR projects a potential low by 1.0770 today which comes in just over Tuesday’s 2009 lows. We look for stops to be taken out below Wednesday’s lows to the 1.0770 area before the market once again reverses course and recovers back towards 1.0935. STRATEGY: BUY @1.0775 FOR AN OPEN OBJECTIVE, STOP @1.0575. RECOMMENDATION TO BE REMOVED IF NOT TRIGGERED BY NY CLOSE (5pm ET) ON THURSDAY.
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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