Currency traders are certainly taking advantage of the fuller post US holiday trading session to bash the USD. The dollar has dropped to fresh 2009 lows against many of the major currencies, with the USD Index also posting a new yearly low as a result. It seems as though a renewed confidence in the global financial markets and a broad based negative attitude towards the greenback have helped to fuel the relentless declines.
MORNING SLICES
Fundys – Currency traders are certainly taking advantage of the fuller post US holiday trading session to bash the USD. The dollar has dropped to fresh 2009 lows against many of the major currencies, with the USD Index also posting a new yearly low as a result. It seems as though a renewed confidence in the global financial markets and a broad based negative attitude towards the greenback have helped to fuel the relentless declines. While the much better than expected industrial production numbers out from the UK have helped to force additional gains in Sterling, the same can not be said about data in the Eurozone, after German industrial output was considerably weaker. The rally in gold prices above $1000 have also been a big story today, with the gains in the commodity above the critical psychological barrier helping to fuel USD weakness as well. While Aussie, and Kiwi have posted fresh 2009 highs against the buck, Sterling is the strongest major currency on the day, up over 1.30%. In fact, the New Zealand Dollar is the weakest currency on the day against the USD, with discouraging overnight data and bearish Kiwi comments from FinMin English weighing somewhat. Price action in the Yen today has been quite fascinating, with the single currency gaining over 1% against the USD, even in the face of rallying global equity prices. It is truly strange to see currencies so well bid and the Yen crosses tracking flat to lower. Finally, Usd/Chf has broken to fresh 2009 lows with the market managing to take out stops below the 1.0500 figure. Looking ahead, Canada building permits (0.4% expected) are due at 12:30GMT, followed by US consumer credit (-$4.0B expected) at 19:00GMT. The USD is already very oversold intraday heading into the US session and we would not at all be surprised to see some form of profit taking.
Techs - EUR/USD has broken to fresh 2009 highs beyond 1.4450 with the market contemplating a move above 1.4500 next. However, hourly studies are highly overbought and we would not expect to see gains extend much further on Tuesday. Key levels to watch over the coming session come in by 1.4500 and 1.4400. USD/JPY has pulled back quite severely on Tuesday and a lower top is now sought out by 93.30 ahead of the next drop below 91.75. Key levels to watch over the coming session come in by 92.80 and 91.75. GBP/USD Rallies should be limited to the 1.6500-1.6600 with the market in the process of attempting to carve out a major head & shoulders top on the daily chart that would ultimately project a measured move drop back towards 1.5000 over the medium-term. Look for a break below 1.6115 to help confirm bearish bias, while only back above 1.6700 gives reason for concern. USD/CHF Although the market has once again dropped to fresh 2009 lows below 1.0500, we are not entirely convinced of the move and will only look to get bearish on a sustained break below 1.0500. For now, we still see a multi-week range with the price currently residing at the lower end.
Flows – Asian central bank buying of Usd/Chf. Retail, model accounts selling Cable. Large US investment house bidding Eur/Usd.
Trade of the Day – Usd/Cad: We entered a long position on Friday and price action has not been favorable with the market dropping back towards the recent trend lows by 1.0630. While it is not our custom to remove stops, our core view on the currency remains intensely bullish and any dips should be limited from here. As such, we have removed our 1.0695 stop-loss and will instead look to increase our exposure on a dip to 1.0640 today. We will re-issue a fresh stop-loss for the position into the New York close and for now will keep it open (no stop-loss temporarily). POSITION: LONG @1.0895 FOR AN OPEN OBJECTIVE, STOP OPEN FOR NOW. [B]STRATEGY: INCREASE EXPOSURE AND BUY AT 1.0640 TODAY. REMOVE 1.0640 BUY RECOMMENDATION IF NOT TRIGGERED BY CLOSE (5PM NY TIME).
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P&L Update and Overview: Many of you have been asking for a way to better track trading results and open positions. In response to these requests and in an effort to be fully transparent, a simulated portfolio was been created in June to track and mirror all recommendations and trades. Below is a return on equity curve since inception on June 1, 2009, along with an open and closed position tracker. I am hopeful that this will make things easier for you all.
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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