Greenback Looking for US Session of Bids to Confirm Base (Morning Slices)

It remains to be seen how things play out today, but there is no doubt that there has been a familiar pattern of USD rally in the overnight session followed by a resumption of intense USD selling into the US. The US Dollar and the stabilization within the US economy remain the key focus on the broader global macro scene, and we have seen many officials come out in support of the USD as the primary reserve currency amidst recent talk of diversification.

[B]MORNING SLICES[/B]

[B]Fundys –[/B] It remains to be seen how things play out today, but there is no doubt that there has been a familiar pattern of [B]USD[/B] rally in the overnight session followed by a resumption of intense [B]USD [/B]selling into the US. The US Dollar and the stabilization within the US economy remains the key focus on the broader global macro scene, and we have seen many officials come out in support of the USD as the primary reserve currency amidst recent talk of diversification. The latest USD support comes unofficially overnight from[B] India[/B], [B]Japan[/B] and [B]South Korea[/B]. [B]China[/B] continues to throw cold water on global recovery prospects, with the government saying that the impact from China on the global financial markets crisis is not over and that the economic recovery in China is not well grounded. Elsewhere, [B]ECB Mercier[/B] has been on the wires with a more accommodative tone, saying that it was technically possible for the central bank to have a [B]negative deposit rate[/B], although the ECB did not want to give such a signal at present. Meanwhile[B] ECB Nowotny [/B]has been very downbeat after saying that he expected [B]“massively negative” [/B]GDP rates in 2009 and “around zero” growth in 2010. The central banker also warned that tomorrows central bank forecast revisions would be bad. Data out of the[B] Eurozone[/B] seemed to confirm these comments with [B]Eurozone GDP[/B] coming slightly weaker on the whole, while [B]PPI [/B]was worse than expected after putting in the b[B]iggest drop since 1981[/B]. In contrast, [B]UK services PMI [/B]was much better than expected after coming in above 50 and expanding for the first time since April. Also in the UK, the latest [B]10YR Gilt[/B] auction was well received. In the [B]US[/B], [B]mortgage applications[/B] have come out and show a drop from the previous week after coming in at -16.2%, while [B]Challenger job cuts[/B] showed a 7.4% rise in May from the previous year. Looking ahead, the market will be looking for hints at Friday’s much anticipated NFP number with the release of [B]ADP employment[/B] (-533k expected) at 12:15GMT. Later [B]ISM non-manufacturing [/B](45.0 expected) and f[B]actory orders [/B](0.7% expected) are due at 14:00GMT. Market participants will also be keenly focused on [B]Fed Chair Bernanke[/B] who is slated to testify at 14:00GMT before the [B]House Budget Committee[/B]. The [B]Yen[/B] has been the strongest currency on the day, while the [B]New Zealand Dollar[/B] is the weakest. US [B]equity futures[/B] point to a lower open, and [B]commodities[/B] are also back under pressure.

[B] Quant – [/B]


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[B] Techs - [/B][B]EUR/USD[/B] starting to show signs of a top after just squeaking out fresh 2009 highs by 1.4340 earlier today, before pulling back into the upper 1.4100’s. Nevertheless, a break below 1.4100 will be required to confirm short-term topping and open deeper setbacks over the coming days. Back above 1.4340 delays and keeps bull structure intact.[B] USD/JPY [/B]remains locked in some choppy sideways trade with key levels to watch above and below by 97.25 and 93.85. No clear directional bias at current levels. [B]GBP/USD[/B] still highly overbought on the daily but still ignoring these studies. The rally to fresh 2009 highs by 1.6665 on Wednesday has been met with some initial resistance but any pullbacks continue to be well supported. A daily close at or below 1.6580 will be required for a clear sing of a potential top, while back under 1.6325 should officially shift the short-term structure. Key levels to watch over the coming session come in by 1.6675 and 1.6500. [B]USD/CHF[/B] could be looking for a much needed and healthy corrective rally, after finally trading down to fresh 2009 lows (first time since January) and breaking below 30 on the daily RSI. However, the bear trend has been quite intense and we will need to see a break back above 1.0745 for confirmation of short-term basing.

[B] Flows –[/B] Real money and German bank offers in [B]Eur/Usd[/B]. Model funds looking to buy[B] Gbp/Jpy[/B]; momentum accounts on the offer.
[B]
Trade of the Day – Cad/Jpy: [/B]All of the Yen crosses look like they might want to consider rolling over following some impressive moves over the past several weeks. However, we like selling this cross the most given the relative Canadian Dollar weakness of the past few days. The recent rally has broken above rising trend-line resistance and appears to be uncomfortable outside of this line and we look for Tuesday’s doji close along with today’s failure to materially extend gains beyond 89.10 to signal the start of a more significant corrective retracement back towards previous resistance turned support in the 86.00 area. A break below 87.70 will help to confirm bias and accelerate declines. [B]Position: SHORT @88.35 FOR AN 86.00 OBJECTIVE, STOP @90.35.[/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]Quant section prepared by David Rodriguez, Quantitative Strategist for DailyFX.com
To contact, e-mail [/B][B][email protected][/B] [B][/B]

Joel Kruger publishes 6 daily pieces:

[I][B]“Tech Talk”[/B] – A Daily Video Highlighting Technical Developments in the Overnight Session of Trade. [/I]
Monday-Friday (between 5:30am-6:30am EST)

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[I][B]“Indicator of the Day”[/B] – [/I][I]A Feature Report that Highlights our Most Significant Technical Indicator of the Day. [/I]
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[I][B]“Cross Country” [/B]– A Midday Fundamental Update, along with Technical Analysis of Selected Cross Rates. [/I]
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