MIDDAY SNAPSHOT & ANALYSIS OF SELECTED RATES
A very quiet final session of trade thus far as we head into the weekend. The only economic release this morning came from Canada, with the much weaker retail sales factoring into price action and weighing on the Canadian Dollar, which tracks lower against the USD, despite a weaker buck against many of the other major currencies. The weaker retail sales release (-0.8% versus +0.1% expected) and a pullback in oil prices have driven the Canadian Dollar into the worst performing currency slot on the day. Nevertheless, broader price action is still quite uneventful, with even Usd/Cad still confined to Thursday’s trading range. Fed Hoenig was on CNBC this morning and hinted at the potential need for rate hikes down the road, after saying that there was a risk in “keeping policy to loose for too long.” Meanwhile, PM Brown announced that the EU leaders had agreed to new measures to regulate the region’s financial services industry. The Australian Dollar is the strogest performer on the day, up 1.4% against the USD, while the Yen lags. All major US equity indices track well higher on the day, led by the NASDAQ, which is up an impressive 1.60%, more than double the gains seen in the S&P and DJIA. On the commodity front, both oil and gold trade only marginally higher, with oil pulling back from earlier highs.
ANALYSIS OF SELECTED RATES
Aud/Usd: Although the market has been struggling to break down since double topping by 0.8240 on June 11, we still retain a bearish bias and look for opportunities to sell into rallies towards the 0.8240-0.8265 area. A fresh lower top is now ideally sought out below 0.8240, ahead of the next drop through 0.7825-50. Nevertheless, we do not want to be too aggressive with our entry and will look to be more conservative by incorporating some ATR (Average True Range), and Fibonacci analysis to isolate an ideal sell entry point for Friday. The ATR for the pair currently stands at 170 pips, and as such, based on the current daily low by 0.7980, would project a potential high today by 0.8150. Additionally, the 78.6% fib retrace off of the latest 0.8240-0.7850 also comes in directly by 0.8155 to provide an ideal technical confluence for our trade. Any gains beyond 0.8150 are therefore expected to be very well capped. Strategy: SELL @0.8145 FOR AN OPEN OBJECTIVE, STOP @0.8285. Recommendation to be removed if not triggered by NY close (4pm ET) on Friday.
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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