The Euro is relatively unchanged from opening levels but the price action is somewhat misleading with the single currency showing some relative strength across the board. The USD has found bids against all other major currencies on Thursday with the biggest gains seen against Sterling and Yen.
Fundys – The Euro is relatively unchanged from opening levels but the price action is somewhat misleading with the single currency showing some strength across the board. The USD has found bids against all other major currencies on Thursday with the biggest gains seen against Sterling, as the Pound remains weighed down by the latest BOE testimony which was very downbeat and also supportive of a weaker currency. The Yen has also been very well offered overnight but price action there is not attributable to any particular event and more flow related. Another day and another speculated round of intervention from a central bank which declines to comment, after the Swissie was sold heavily ahead of the US open, to force a 100 point surge in Eur/Chf in a matter of minutes. There is no real resistance on the cross now until 1.5450 with this level now becoming a likely near-term target. ECB Noyer was on the wires and said that FX reserves have not been enough to protect countries from crisis. On the data front, [B]Eurozone industrial new orders [/B]came in much weaker than expected after showing a drop when the markets were looking for a flat reading. The yearly reading fell 35.5% from the previous year, the biggest decline since 1995. Looking ahead, US GDP (-5.7% expected) will be the key release, due at 12:30GMT, while initial jobless claims (600k expected) and continuing claims (6714k expected) are due at the same time. The RPX composite 28 day index (-19.69% expected) comes out just after at 13:00GMT. US equity futures point to a lower open, while commodities are slightly bid.
Techs - EUR/USD has been trading with a heavier tone but will need to break below 1.3825 today to open the next drop back towards critical short-term support by 1.3750. Only back above 1.4140 negates bearish outlook and gives reason for pause. USD/JPY very well bid following Wednesday’s bullish reversal day with gains now extending back towards the 20/50/100-Day SMAs in the upper 96.00’s. Ultimately, the market will need to take out 97.20 to officially take the pressure off of the downside. Setbacks should be supported intraday ahead of 95.60. GBP/USD extending declines from Wednesday’s bearish close and the market now eyes a break of key short-term support at 1.6185. Below 1.6185 opens a deeper drop exposing the critical 1.5800 lows from early June. Only back above 1.6605 negates, while any intraday rallies should be well capped ahead of 1.6470. USD/CHF has broken above the critical 1.1000 barriers on Wednesday to confirm medium-term basing and likely now open a fresh upside extension towards 1.1500 over the coming days. Look for any setbacks to now be well supported ahead of 1.0800. Next resistance comes in by the 50-Day SMA at 1.1060.
Flows – Model funds on the bid in Usd/Chf. German bank rumored to be behind some of the Eur/Chf buying. US prime name and model funds on the offer in Cable. French bank buying Eur/Gbp. CTAs and leveraged accounts selling Eur/Usd.
Trade of the Day – Eur/Chf: We have no regrets in attempting to short the cross on Wednesday (after it had already rallied some 250 points); even after getting stopped out of our position in such an aggressive manner, and we will once again look to take advantage of the overdone rally on Thursday. However, we will continue to be conservative with our entry point and not look to chase any trades. Key resistance on the cross now comes in by the 2009 highs by 1.5450 and it is expected that this level will be tested in the very near-term. As such, any rallies towards this level should set up a compelling intraday short trade and potential longer-term reversal. Many traders could be caught short the cross following the extreme moves from Wednesday on the back of the SNB intervention, and we feel that the central bank could be looking to teach a lesson after warning against buying Francs. This is a lesson that will be painfully learned on a retest and break of the yearly highs. But we plan on being there when the bell rings and school lets out. We realize our entry is far off, but If it doesn’t play out, than we will happily stick to the sidelines. Strategy: SELL @1.5445 FOR AN OPEN OBJECTIVE, STOP @1.5545. Recommendation to be removed if not triggered by NY close (5pm ET) on Thursday.
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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