A relatively quiet overnight session of trade, with all of the majors more or less happily confined to the previous day’s ranges. German IFO was as expected, while UK CBI was much weaker. Looking ahead, key event risk in the US session comes in the form of durable goods due at 12:30GMT. New home sales are also due out a little later at 14:00GMT.
MORNING SLICES
Fundys - A relatively quiet overnight session of trade, with all of the majors more or less happily confined to the previous day’s ranges. European equities are flat to moderately lower, while US equities point to a slightly firmer open. On the commodity front, oil has pulled back a bit and trades down over 2% on the day thus far while gold stands still. There were few data releases with the main focus on German IFO and UK CBI. German IFO was as expected but was accompanied with some mixed comments from IFO economist Abberger who said that while the pace of the deterioration within the German economy had slowed, the bottom was yet to be reached. UK CBI came in at -44 which was much weaker than the previous month’s print of -25. The combined Eurozone and UK data was seen generating fresh bids in Eur/Gbp following yesterday’s sharp sell-off. ECB Gonzalez-Paramo joins a long line of recent dovish central banker comments this week after saying that there was still margin to “alter rates.” Meanwhile, Eurogroup Juncker has been on the wires expressing his stiff opposition to the US approach to the financial crisis be saying that a “global reordering of the financial architecture” is needed and that more regulation needs to be imposed. He also said that current European fiscal stimulus measures were appropriate and that packages will not be increased if the US requests this. In Australia, RBA Stevens noted that further rate cuts would still help if they were needed, while also reaffirming the soundness of the country’s financial system, which has held up quite well in the face of the current turmoil. In Japan, the big news was the record 49% drop in exports along with BOJ Shirakawa’s refusal to rule out zero rates or quantitative easing. However, this failed to have any real negative impact on the Yen. Looking ahead, key [B]event risk[/B] in the US session comes in the form of durable goods (-2.5% expected) at 12:30GMT. New home sales (301k expected) are due out a little later at 14:00GMT. On the official circuit, Fed Pianalto is scheduled to speak in Ohio on economic recovery at 16:20GMT, while Fed Yellen is slated for 17:00GMT in New York on the US economy and policy.
[B]Quant -
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For information on the above tables, please visit our Guide to Morning Slices Quant section.
Techs - EUR/USD (see below). USD/JPY trades in an inside day, confined to the previous daily range. Look for a break above 98.60 or below 96.90 for clear directional bias. GBP/USD also confined to Tuesday’s range thus far after closing just over the 100-Day SMA. Key levels to watch above and below come in by 1.4780 and 1.4545. USD/CHF latest sharp pullbacks below 1.1315 have found some decent support in the form of the 50% fib retracement off of the 1.0370-1.1970 move (1.1170) and the 200-Day SMA. Look for a break back above 1.1345 today to confirm basing and open a move back towards 1.1500. Only back under 1.1160 negates.
Flows - Massive end of month offers reported in Usd/Cad. London fix related demand for Euro; Asian central bank and Russian bids as well. US accounts offering Aussie on rallies. German and US bank bidding Eur/Gbp post CBI data.
Trade of the Day - Eur/Usd: The market looks like it could be in the process of attempting to carve out a medium-term lower high by 1.3740 (19Mar high) with daily studies rolling over from overbought. We classify the latest upside moves as corrective with the overriding trend still intensely favoring the USD. Nevertheless, trade remains quite choppy at current levels and we are more comfortable selling into rallies rather than on downside breaks. If we miss the opportunity, then we will stand aside and wait for the next one. Ideally, we are now looking for a fresh daily lower top below Tuesday’s low. [B]Strategy: SELL @1.3635 FOR A 1.3310 OBJECTIVE, STOP @1.3755. [I]Stops to be trailed to cost (break-even) on a break back below 1.3585. If trade triggers and 1.3585 not broken, position to be closed out at NY close (5pm EDT) on Wednesday. Recommendation to be removed if not triggered by NY close on Wednesday.
[/I][/B]Fundamental Catalyst - We have seen dovish comments out from a number of ECB officials this week with Trichet, Weber, and Orphanides all indicating that there is room for more accommodation from the central bank, while Almunia has said on Tuesday that the ECB could even consider adopting quantitative easing if necessary. It is our belief based on the current state of the global economy that it will indeed be necessary for the ECB to adopt some form of quantitative easing which should ultimately weigh on the Euro. Additionally, any sign of resumption in equity selling, should also weigh on the major which has been positively correlated with US equity prices.
Written by Joel Kruger, Technical Currency Analyst for DailyFX.com
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[/B]Quant section prepared by David Rodriguez, Quantitative Analyst for DailyFX.com
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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”).
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“Indicator of the Day” – A Feature Report that Highlights our Most Significant Technical Indicator of the Day.
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“Cross Country” – A Midday Fundamental Update, along with Technical Analysis of Selected Cross Rates.
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“Daily Classical” – A Daily Technical Overview of the Major Currencies.
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