The key economic releases in the overnight session came out of the UK with the jobless claims and claimant count numbers coming in better than expected, while the unemployment rate was worse at 7.6% after analysts had been looking for a 7.4% print. Also out overnight was Eurozone CPI which was in-line with consensus estimates and Swiss retail sales which came in much weaker.
Fundys – The key economic releases in the overnight session came out of the UK with the [B]jobless claims[/B] and claimant count numbers coming in better than expected, while the unemployment rate was worse at 7.6% after analysts had been looking for a 7.4% print. Also out overnight was [B]Eurozone CPI[/B] which was in-line with consensus estimates and Swiss retail sales which came in much weaker. Despite the weaker Swiss data, the Franc has suspiciously been the outperformer on the day, while the Yen lags. It is not too often when you see these traditional safe-haven currencies on opposing ends of the spectrum, perhaps suggesting that overall price action remains choppy and unpredictable. Any downbeat comments from EU Barosso and ECB Constancio have also failed to materially weigh on the Euro, with the market clearing stops above 1.4075. Barosso said that the Euro would be exposed to weakness if an economic recovery plan were to fail, while Constancio warned that economic uncertainty remained high despite signs of stabilization. Meanwhile, the USD remained well offered across the board, with USD supportive comments from the UAE central bank failing to influence price action. The Euro managed to take out stops above 1.4075 to help accelerate the broad based currency buying, with higher equity futures and commodity prices also helping to fuel gains. Looking ahead, US CPI (-1.5% expected) and empire manufacturing (-5 expected) are due at 12:30GMT, along with Canada manufacturing shipments (-2.5% expected), while US industrial production (-0.6% expected) and capacity utilization (67.9% expected) follow shortly after at 13:15GMT. Later in the day, the Fed Minutes are scheduled for release at 18:00GMT.
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Techs - EUR/USD pressing higher on Wednesday thus far to break above the recent 1.4075 highs. However any gains beyond should be limited to the 1.4120 area which is a projected ATR high and 78.6% fib retrace off of the 1.4200-1.3830 recent move. Back under 1.3965 should accelerate declines. USD/JPY in the process of recovering out from the multi-day lows set on Monday by 91.75. Dips have been very well supported below 92.00 and there is scope for some short-term upside back towards 95.00 before bear trend resumption. Key levels to watch over the coming session come in by 93.40 and 92.70. GBP/USD well bid in the early week, with the market breaking back above the 20-Day SMA and threatening a retest of psychological resistance by 1.6500. However, we would recommend looking to sell rallies into the 1.6500’s in anticipation of a bearish resumption. Only back above 1.6745 negates. Key short-term support now comes in by 1.6300. USD/CHF continues to attempt to carve out a meaningful base. A higher low is now sought out by 1.0750 ahead of the next upside extension back above 1.1025. Key levels to watch over the coming session come in by 1.0960 and 1.0750.
Flows – Middle Eastern accounts bidding Cable; Asian central bank offers. Model funds and US prime name buying Eur/Usd.
Trade of the Day – Gbp/Jpy: With a current daily low of 152.40, the daily ATR (Average True Range) projects a potential daily high today back towards the 20-Day SMA at 155.40. We are not inclined to enter any positions at current levels but will be more than happy to establish a short position should the market rally to test the 20-Day SMA on Wednesday. Major bull channel support off of the 2009 multi-year lows was broken in the previous week and any rallies are now seen limited to the former channel support now turned resistance which also coincides with the 20-Day SMA, ahead of an eventual resumption of declines back below the 100-Day SMA which has managed to successfully prop setbacks for now. Weekly studies are also quite bearish and we look for a lower top to carve out below 157.15, ideally by the 20-Day SMA and former channel support ahead of the next major drop. Strategy: SELL @155.30 FOR AN OPEN OBJECTIVE, STOP @157.30. 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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