A combination of some oversold USD technicals along with lower oil, lower equity futures, supportive USD China and UAE reserve currency talk and more concerns from North Korea have all helped to spark some renewed interest in the greenback today, with the buck rallying against all of the major currencies.
Fundys – A combination of some oversold USD technicals along with lower oil, lower equity futures, supportive USD China and UAE reserve currency talk and more concerns from North Korea have all helped to spark some renewed interest in the greenback today, with the buck rallying against all of the major currencies. On the data front, Eurozone industrial orders fell sharply but managed to come in better than expected on the whole, while German GFK consumer confidence and final Q1 GDP came out in line with consensus estimates. However, the capital investment and export components were concerning with the biggest decline on record. In Switzerland, the economic releases were offsetting with employment figures coming in better while the UBS consumption indicator showed a drop. ECB Nowotny was on the wires saying that he didn’t see an risks for inflation or deflation and that the central bank could withdraw liquidity quickly if the economy were to stabilize. Meanwhile in the UK, BOE Sentance warned that the economy needed to stop contracting before talking of green shoots. Much of the focus now shifts to the US note auctions this week with a total of $101B set for sale over the coming days, $40B of 2Y which are slated for today. Looking ahead, Case-Shiller house prices (-18.40% expected) are due at 13:00GMT, followed by consumer confidence (42.0 expected) and Richmond Fed manufacturing (-7 expected) at 14:00GMT. Dallas Fed manufacturing (-24.0 expected) comes out just after at 14:30GMT.
Techs - EUR/USD (See below). USD/JPY starting to show signs of a potential base by 93.85 with the market failing to break lower on and managing to take out Friday’s highs at 94.90 on Monday. Key levels to watch over the coming session come in by 95.40 and 94.40. GBP/USD bearish outside day in the works with the market potentially looking to roll over after rallying quite sharply over the past several days. Key levels to watch over the coming session come in by 1.5900 and 1.5780. USD/CHF looks to finally be putting in a bullish reversal day after ending a sequence of consecutive daily lower highs and lower lows. Look for fresh upside over the coming days back towards 1.1000-1.1050 at a minimum, with scope for additional gains on a break towards 1.1270. Key levels to watch over the coming session come in by 1.0940 and 1.0820.
Flows – CTA stops reported above 95.25 in Usd/Jpy; bids from AAA account. Stops in Cable below 1.5750; UK clearer selling. Russian accounts selling Gbp/Jpy. French bank selling Eur/Gbp. German bank and system funds offering Euro while Asian central banks on the bid.
Trade of the Day – Eur/Usd: Finally showing signs of exhaustion on Tuesday with the market rolling over after stalling out above psychological barriers at 1.4000. While it is too early to tell at this point if this is the start to a major USD bull run, there is certainly scope for additional setbacks towards the previous trend highs at 1.3740. The daily RSI has just now crossed down from overbought, while stochastics still reside in overbought but are now showing a negative cross. As such, will look for opportunities to sell into intraday rallies, in anticipation of a deeper drop back towards the 1.3700-1.3740 area. Strategy: SELL @1.3965 FOR A 1.3740 OBJECTIVE, STOP @1.4065. Stops to be trailed to cost on a break back below 1.3915. If trade triggers and 1.3915 not broken, position to be closed out at NY close (5pm NY time) on Tuesday. Recommendation to be removed if not triggered by NY close on Tuesday.
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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