[B]OPENING COMMENT[/B]
The pullback in US and Asian equities has been felt in FX market on Friday, with [B]all major currencies tracking lower against the USD[/B] on safe haven buying. Nevertheless, the greenback remains under intense pressure after the [B]USD Index managed to put in its 10th consecutive negative close[/B] on Thursday to fresh 2009 lows. On the day, [B]Kiwi [/B]has held up the best against the buck, while [B]Sterling[/B] continues to be heavily weighed down. It has not been a good week for the single currency which initially suffered on the back of some downbeat and dovish comments out from the Bank of England, and most recently has come under some more pressure as the [I][B]WSJ[/B][/I] published an article discussing the [B]use of the pound as a funding currency[/B] for carry trades. The [B]Euro[/B] has also held up relatively well, with the latest better than forecast trade balance attributed to the relative strength. Looking ahead, [B]German producer prices[/B] (0.2% expected) are due at 6:00GMT, followed by [B]Eurozone current account[/B] at 8:00GMT. Data in the [B]UK[/B] caps things off at 8:30GMT with the release of[B] public finances[/B] and[B] public sector net borrowing[/B]. At the earlier stage in the day, US [B]equity futures[/B] are pointing to a lower open, while [B]commodities[/B] are mixed.
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ANALYSIS OF SELECTED RATES[/B]
[B]Gbp/Aud:[/B] We continue to look for opportunities to buy this beaten down cross with the market at 20+ year lows and now eyeing the critical lows by 1.8740 from May 1996. At this point we see the 1.8740 level being taken out but do not see any setbacks extending much beyond this point. Not only are daily studies tracking oversold at this point, but weekly studies are also unhealthily overextended and show the need for a major upside reversal and mean reversion. The closest SMA right now comes in the form of the 10-Day which trades much higher by 1.9100. As such, we will look to employ our ATR analysis to try and capture an ideal counter-trend long entry on Friday. The market moves on average some 200 points a day so we will use a wider stop-loss to leave the appropriate amount of room for the trade to be able to materialize. If the market gets going in our desired direction, there is tremendous upside potential. [B]STRATEGY: BUY @1.8700 FOR AN OPEN OBJECTIVE, STOP @1.8450. RECOMMENDATION TO BE REMOVED IF NOT TRIGGERED BY NY CLOSE ON FRIDAY. [/B]
[B]Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
If you wish to receive Joel’s reports in a more timely fashion, e-mail [/B][B][email protected][/B] [B]and you will be added to the [/B][B]“distribution” [/B][B]list.[/B][B][/B]
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