MIDDAY SNAPSHOT & ANALYSIS OF SELECTED RATES
The morning data releases have come and gone and the reaction has been less than compelling with all major currencies holding to US session opening levels. Initially the much weaker GDP release at -6.1% versus consensus estimates of -4.7%, forced some profit taking on Euro longs from short-term spec accounts, but the market soon recovered with traders finding some comfort in the better personal consumption numbers and seemingly focused on pressing higher irrespective of any single data release. The stronger performance in US equities was also seen factoring into price action with currencies still very well bid on the back of the increased risk appetite. All major US equity indices are up over 2.0%, while on the commodity front both oil and gold are higher. ECB Weber was back on the wires warning that any uptick in sentiment indicators should be treated with caution, while Chancellor Darling said that the UK would meet its borrowing requirements. Greece has announced that it will be looking to tap the markets through USD and Yen bonds later in the year. We would expect the markets to settle in ahead of the afternoon event risk in the form of the FOMC rate decision. While an unchanged verdict is widely anticipated at 0.25%, market participants will be very focused on the accompanying statement and any indication of additional quantitative easing measures.
[B]ANALYSIS OF SELECTED RATES
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Eur/Usd: Yesterday, we attempted a short in the pair into the afternoon but were forced to exit on the close for a 5 pip loss after the market failed to pull back as we had hoped. This resulted in a daily close that was far less bearish than we had anticipated and left us on the sidelines into Wednesday. Today, the market continues to rally, and at a closer glance, it looks as though we could still have some more room to run before the rally finally stalls out. There is a confluence of technical resistance further up, with falling channel resistance, the 50% fib retrace off of the major 1.3740-1.2885 move, and the 61.8% fib retrace off of the 1.3585-1.2885 move, all coinciding just over 1.3300. Additionally, our daily “Average True Range” (ATR) analysis also projects a potential high on Wednesday just over 1.3300. As such, any rallies above 1.3300 will be used as opportunities to once again attempt short positions in anticipation of a resumption of the broader downtrend. Strategy: SELL @1.3325 FOR A 1.3000 OBJECTIVE, STOP @1.3460. Stops to be trailed to cost on a break back below 1.3275. If trade triggers and 1.3275 not broken, position to be closed out at NY close (5pm NY time) on Wednesday. Recommendation to be removed if not triggered by NY close on Wednesday.
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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