JP Morgan has come out with earnings and they have well exceeded expectations which could help to prop investor sentiment ahead of the US open, which in turn could put the buck back under pressure. Otherwise, A very quiet session of overnight trade both from an economic release and price action standpoint.
MORNING SLICES
Fundys – JP Morgan has come out with earnings and they have well exceeded expectations which could help to prop investor sentiment ahead of the US open, which in turn could put the buck back under pressure. A very quiet session of overnight trade both from an economic release and a price action standpoint. The only release came in the form of a Swiss ZEW survey which showed a much weaker reading than the previous month’s 9.7 print after coming in at 0.0 in July. The Riksbank came out with its Minutes for the recent very unexpected decision to cut rates and this was seen generating some attention after Governor Ingves conceded that the Swedish central bank would need to be prepared to consider other monetary policy instruments. The New Zealand Dollar has been one of the big losers on the day, with the single currency getting hit on two fronts with some broad based profit taking in currencies and a Fitch cut of the long-term credit rating outlook to negative, fueling the relative weakness. Meanwhile in the UK, [B]Bank of England Barker[/B] has been on the wires saying that the impact of quantitative easing will not be felt until 2010 and could have a longer-term inflationary impact. Barker also added that she would not have expected to see any improvement in bank lending as of yet. Elsewhere, in Japan, contrary to earlier commentary from the opposition party of a potential shift in reserves away from the USD, a spokesperson for the DPJ has come out expressing a high degree of confidence in the USD. Looking ahead, initial jobless claims (555k expected) and continuing claims (6850k expected) are due at 12:30GMT. TIC data ($16.5B expected) follows at 13:00GMT, with Philly Fed (-5 expected) at 14:00GMT and NAHB housing market index (16 expected) at 17:00GMT. Equity futures have shifted into marginally positive territory following the JPM result, while commodities are still offered.
Quant –
For information on the above tables, please visit our Guide to Morning Slices Quant section
Techs - EUR/USD gains have stalled out above 1.4100 and by a very solid technical confluence of resistance in the form of a falling trend-line, 78.6% fib retrace and upper Bollinger. Look for a lower top to carve out below 1.4200 ahead of a drop back below 1.3830 over the coming days. Key levels to watch above and below come in by 1.4135 and 1.4015. USD/JPY starting to roll back over following the latest corrective recovery to 94.45. Look for a break back below 93.25 to suggest a lower top by 94.25 and expose retest of the recent 91.75 lows. Back above 94.25 will however delay bearish outlook and open a test of 95.00. GBP/USD confined to inside day price action for now with the key levels to watch above and below by 1.6470 and 1.6300. Back under 1.6300 brings 1.6000 back into focus, while above 1.6470 opens push back into the 1.6600’s. USD/CHF continues to attempt to carve out a meaningful base. A higher low is now sought out above 1.0700 ahead of the next upside extension back above 1.1025. Key levels to watch over the coming session come in by 1.0900 and 1.0710.
Flows – Real money and CTA demand for Usd/Cad. Real money buying Eur/Usd; talk of demand into the London Fix; ,model funds on the offer. Asian central bank selling Aussie.
Trade of the Day – Gbp/Usd: We continue to hold an overall bearish bias in the major and view the current price action as toppish with the market attempting to carve out a medium-term high by 1.6745 ahead of a major downside extension back towards 1.5000 over the coming weeks. While the formation is somewhat questionable, we would argue that the market could be forming the right shoulder of a loose head & shoulders topping pattern to be confirmed on a break back below 1.5985. As such, any additional rallies are expected to be well capped on approach to 1.6600 with the 78.6% fib retracement off of the 1.6745-1.5985 (1.6580) offering itself as an ideal sell entry for a very playable short trade on Thursday. Strategy: SELL @1.6575 FOR AN OPEN OBJECTIVE, STOP @1.6775. 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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Quant section prepared by David Rodriguez, Quantitative Strategist for DailyFX.com
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