MIDDAY SNAPSHOT SNAPSHOT & ANALYSIS OF SELECTED RATES
With the overnight session so quiet on the lightened holiday trade, market participants were content on settling in ahead of the US economic data which have now been released. Overall, the releases were encouraging with both [B]ISM manufacturing[/B] and Reuters/UofM[B]confidence[/B] exceeding expectations to further support some sentiment that we could finally be reaching a bottom within the economy. [B]Factory orders[/B] were weaker than expected but failed to materially factor into price action. Looking at the major currencies, Sterling has been the outperformer on the day while the Yen has been the underperformer. Meanwhile, Fed Bullard has been on the wires in support of the case for the Fed’s strong regulatory role in the current economic environment. The market overall continues to chop around and we would recommend paying close attention to price action in Eur/Usd, with a break above 1.3390 or back under 1.3195 required for a clearer insight into market direction. Above 1.3390 will likely suggest that the markets are prepared to continue taking on risk, while below 1.3195 indicates that we are still not yet out of the woods. US equities are under pressure early on which doesn’t bode well for Euro bulls. Commodity related price action has been rather interesting with crude up +2.00%, by $52 despite the strain on equities.
ANALYSIS OF SELECTED RATES
Usd/Jpy: The bounce out from the Ichimoku cloud top has been quite impressive with the pair rallying back into the 99.00’s thus far. However, any rallies above the critical psychological barriers at 100.00 are seen limited with the 78.6% fib retracement off of the 101.45-95.60 move ideally capping ahead of a resumption of setbacks. Fundamentally, the rally in the global equity markets over the past several weeks looks to be approaching overdone and we anticipate yet another wave of risk aversion and market uncertainty to take hold in the early days of May. We may not have seen equity showers in April but we believe a “hard rain is gonna fall” in May. Strategy: SELL @100.20 FOR A 97.15 OBJECTIVE, STOP @101.65. Stops to be trailed to cost on a break back below 99.80. If trade triggers and 99.80 not broken, position to be closed out at NY close (4pm NY time) on Friday. Recommendation to be removed if not triggered by NY close on Friday.
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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