The New Zealand Dollar has been hit the hardest overnight and we are not at all surprised to see the relative weakness, with the single currency seemingly overdue for a much needed corrective after relatively outperforming throughout the recent USD surge. Risk appetite led currencies in general have come back under pressure as the Yen finds favor once again and global equities begin to falter.
MORNING SLICES
Fundys – The New Zealand Dollar has been hit the hardest overnight and we are not at all surprised to see the relative weakness, with the single currency seemingly overdue for a much needed correction after relatively outperforming throughout the recent USD surge. Risk appetite led currencies in general have come back under pressure as the Yen finds favor once again and global equities begin to falter. The BOJ left rates unchanged but also came out with an overall gloomy outlook on the Japanese economy. Data released overnight centered around the UK with a mixed bag after the trade deficit came in weaker than consensus, while DCLG house prices showed an improvement. However, a Telegraph article discussing the Pound’s weakness ahead of the inflation report was largely attributed to some of the weakness in Sterling. Elsewhere in the Eurozone, German consumer prices came in better than expected, while wholesale prices were weaker. Looking ahead, Canada housing starts (141.4k expected) are due at 12:30GMT along with US non-farm productivity (5.5% expected) and unit labor costs (-2.5% expected). Economic optimism (50 expected) and wholesale inventories (-0.9% expected) follow at 14:00GMT. US equity futures point to a marginally lower open, while commodities are relatively unchanged.
Techs - EUR/USD still confined to inside day price action with a daily lower top sought out below 1.4220 ahead of the next drop to challenge the 50-Day SMA by 1.4075. USD/JPY in the process of retracing the parabolic moves from Friday which saw the pair race higher by well over 2% to 97.80. Look for deeper setbacks towards 96.00 before considering potential upside resumption. Key levels to watch over the coming session come in by 97.20 and 95.90 respectively. GBP/USD testing the 50-Day SMA which has offered itself as formidable support on dips over the past several weeks. Below the 50-Day SMA will however open a drop towards 1.6300, while rallies should be well capped ahead of 1.6600. USD/CHF not willing to breakdown down just yet after just squeaking out fresh 2009 lows by 1.0560 in the previous week to keep the very well defined range intact. The latest push back above 1.0800 now shifts focus back on critical range resistance by 1.1025.
Flows – Middle Eastern and Japanese demand for Cable on dips. Specs stopped out of short Usd/Cad positions; European banks on the bid. Australian traders selling Aussie. UK clearer selling Nzd/Jpy.
Trade of the Day – Eur/Nzd: We established a long position on Monday and the market is starting to move in our favor on Tuesday with the hourly chart putting in an inverse head & shoulders bottom. This could potentially act as a short-term catalyst for a more significant correction over the coming days, with daily studies only just now turning up from oversold territory. Look for a break above 2.1240 to confirm. POSITION: LONG @2.0980 FOR AN OPEN OBJECTIVE, REVISED STOP @2.0940.
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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