CROSS COUNTRY: MIDDAY SNAPSHOT & ANALYSIS OF SELECTED CROSS RATES
Investors are once again back on the defensive on Thursday after any hopes for an immediate China stimulus plan have failed to materialize, while more pressure on financials (Citi at $1) and talk of downgrades at JP Morgan, Bank of America and Wells Fargo have exacerbated the outlook for the global macro economy. This has resulted in a lower Euro rate and some heavy profit taking in Usd/Jpy and the Yen crosses. This morning’s central bank decisions are also out of the way with the as expected respective 50bp cuts from the BoE and ECB not helping to infuse any confidence after the BoE announced quantitative easing measures while Trichet sounded particularly downbeat leaving the door open for additional rate cuts. Treasury Secretary Geithner is in front of the House Budget Committee today repeating much of the language from the previous day. Geithner says that the Treasury is not currently seeking additional TARP funds to help the beleaguered banks. Fed Kohn has also been on the tape testifying in front of the Senate Banking Committee saying that the government had no choice but to bail out AIG on “too big to fail “grounds. On the data front, initial jobless claims and factory orders were better than expected while non-farm productivity was weaker and [B]mortgage delinquencies[/B] hit record highs. In Canada, data was better than expected across the board with both building permits and Ivey well above consensus. Ivey still however remained below the critical 50 level at 45.8. Canada Deputy Governor Duguay comments were unsettling after the central banker warned that Canada would be hit by a string of bad news in the coming months, while also appealing for the urgent need for stimulus into the economy. The S&P has been the hardest hit on the day on the equity side, down over 3.0%, while oil has retraced, down some 2.0%.
ANALYSIS OF SELECTED CROSS RATES
Eur/Jpy – The cross looks to have found some resistance by 126.00 after failing by the level on two attempts over the past several days. Despite the recent short-term recovery rally, the overriding trend on the cross remains bearish and as such, the latest topside failure ahead of 126.00 could now open the door for a potential double top on the daily chart. The neckline comes in around 122.00, while the peak comes in by 126.00. A break back below 122.00 would then project a drop back towards 118.00 over the coming days.
Written by Joel Kruger, Technical Currency Analyst for DailyFX.com
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