MORNING SLICES
Fundys – The only key data release in the overnight session of trade has failed to factor into price action, with the better than expected [B]German IFO[/B] coming in above forecast at 85.9 versus expectations for an 85.0 print. Instead, is has been a session of broad based flight to safety buying, with the Yen and USD benefiting the most, while the higher yielding Aussie and Kiwi lag behind. Lower oil prices and US equity futures have helped to weigh on sentiment, while Dr. Doom, Nuriel Roubini is back on the wires saying the the crisis is not over, while also warning of the potential for a double dip recession. Meanwhile, in cross related price action, Eur/Gbp has been a standout, with the market once again dropping to fresh 2009 lows by 0.8400 on Monday. May have attributed the relative weakness to dovish comments from ECB Nowotny who says that the central bank is likely to keep interest rates on hold for some time, and a hawkish UK Sunday Times article that suggests the next move for the Bank of England could be to the upside. The New Zealand Dollar is the weakest currency on the day with comments from the NZ PM that the rapid gain in the currency is counter to what is needed, contributing to the relative underperformance. All major US equity indices point to a lower open, while commodities have also been trading lower on the shift in investor sentiment. Looking ahead, the North American calendar is extremely light with only Canada international securities transactions (CAD$5.5B expected) due at 12:30GMT.
Techs - EUR/USD pulling back quite nicely on Monday after the market successfully adhered to falling trend-line resistance off of the 1.4340 2009 highs on Friday. A lower top is now sought by 1.4015 to be confirmed on a break back below 1.3750 over the coming sessions. Key levels to watch over the coming session come in by 1.3965 and 1.3805. USD/JPY continues to trade with a heavy tone into the early week and deeper setbacks are now favored back to retest key trend support in the 93.55-85 area. Key levels to watch above and below over the coming session come in by 96.35 and 95.55. GBP/USD holding up quite well with the pair benefiting from heavy cross related Sterling demand on the day. The market remains confined to Friday’s range with key level to watch coming in by 1.6560 and 1.6305. USD/CHF continues to consolidate but looks to be in the process of carving out a fresh higher low by 1.0760 ahead of the next upside extension beyond 1.0990. An inverse head & shoulders formation still exists, although the market needs to break higher over the next few session for this to still be valid. Key levels to watch come in by 1.0990 and 1.0760.
Flows – M&A related demand for Gbp/Aud. French bank bidding Cable. Usd/Cad option expiries at 1.1300 and 1.1350. System funds on the offer in Eur/Usd.
Trade of the Day – Eur/Gbp: While our longer-term outlook has been quite bearish on the cross since the start of 2009, our shorter-term view is contrasting, with daily studies showing oversold and in need of a healthy corrective bounce. The market has once again descended to fresh 2009 lows on Monday, but we look for any additional setbacks to now be well supported below 0.8400 as the market trades into a previous congestion zone from November 2008. The daily RSI trades just above the critical 30 level which has rarely been breached over the past several years to further strengthen our bullish case. The ATR (Average True Range) projected low comes in by 0.8370 on Monday and we will look to buy just ahead of this level if given the opportunity. Strategy: BUY @0.8375 FOR AN OPEN OBJECTIVE, STOP @0.8275. Recommendation to be removed if not triggered by NY close (5pm ET) on Monday.
Written by Joel Kruger, Technical Currency Strategist 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)
“Midday Snapshot” – A Midday Fundamental Update, along with Technical Analysis of Selected 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)