The buck remains relatively well bid ahead of the US session, with the greenback only suffering from some marginal setbacks against the Euro, Yen and Swissie. Most of this price action however has been classified more as consolidative rather than a source of renewed interest in selling the USD.
MORNING SLICES
Fundys – The buck remains relatively well bid ahead of the US session, with the greenback only suffering from some marginal setbacks against the Euro, Yen and Swissie. Most of this price action however has been classified more as consolidative rather than a renewed interest in selling the USD. Data in Europe was more or less a non-factor, with UK releases coming in mixed, as Nationwide house prices were better but construction PMI was weaker. Meanwhile, in the Eurozone, PPI readings managed to come in bang on consensus estimates. There were some officials on the wires overnight all coming out in support of the USD, including France economic minister Lagarde. The commodity bloc has come under some intense pressure over the past two days, with the pullback in risk appetite and weakness in gold and oil, seen as the primary driver for the relative weakness there. It is worth noting that attempts at a 12th consecutive weekly positive close in Nzd/Usd could be in jeopardy, warning of a potential top. US equity futures point to a lower open, while commodities are also well offered led by oil declines. Looking ahead, all of the attention centers on this morning’s highly anticipated NFP release (-180k expected) and unemployment rate (9.8% expected) due at 12:30GMT. Factory orders (0.0% expected) follow in anti-climactic fashion at 14:00GMT.
Techs - EUR/USD (See below). USD/JPY While the overall structure remains intensely bearish, the recent weakness leaves daily studies in need of a healthy corrective bounce. Look for the 88.25 weekly low to hold for now ahead of some corrective upside over the coming days back towards the 93.00-94.00 area. However, any rallies are classed as corrective with a retest of the critical matched trend lows from 2008/2009 at 87.15 expected. GBP/USD The much talked about neckline of the major h&s topping pattern has now finally been triggered with the result to likely now open a measured move decline towards the 1.5000 area over the coming weeks. Look for a lower top now by 1.6130, to be confirmed on a break below 1.5770 over the coming days. Below 1.5770 opens a fresh downside extension to initial support by 1.5430 in the form of the 200-Day SMA. USD/CHF Has ended a sequence of consecutive weekly lower tops, with some good upside follow through seen following the previous week’s bullish doji-like reversal. We contend that a major base is now in place by 1.0185 and look for an acceleration of gains over the coming days back above 1.0500 and towards the 1.0700 area.
Flows – Japanese life insurance company offering Euro. Model funds and Japanese investors selling Aussie. Corporate, leveraged and real money buying in Usd/Cad. Option expiries in Usd/Jpy at 89.00-90.00.
Trade of the Day – Eur/Usd: The break to a fresh weekly lower low helps to confirm our outlook for a top by 1.4845, with deeper setbacks now projected back into the 1.4100-1.4200 area over the coming days/weeks. Look for a lower top now by 1.4720, with a test of initial support by the 50-Day SMA in the 1.4400 which has been supporting over the past several months. A close below the 50-Day should accelerate declines. As such, any intraday rallies on Friday should be well capped above 1.4600, with the recently broken 20-Day SMA by 1.4625 to act as formidable previous support now turned resistance. STRATEGY: SELL @1.4625 FOR AN OPEN OBJECTIVE; STOP 1.4775. RECOMMENDATION TO BE REMOVED IF NOT TRIGGERED BY NY CLOSE ON FRIDAY. [I][B](We have also issued a Gbp/Aud buy recommendation at 1.8145 (stop 1.7945) for Friday but it does not look like the trade will trigger. This recommendation also expires on the NY close.
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P&L Update and Overview: No Change from Thursday to Equity curve.
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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