MIDDAY SNAPSHOT & ANALYSIS OF SELECTED RATES
A very pro-risk session of trade thus far with equities rallying impressively, aided by the better than expected earnings out from Ford, Microsoft and American Express along with the above consensus durable goods orders. This has also generated some additional selling in the greenback as traders look to exit the lower yielding/safe-haven currency play. Meanwhile, on the commodity front, oil has also been a big winner after rallying back above the critical $50 level. Although new home sales were weaker, this has failed to materially factor into price action. UK Chancellor Darling has been on the wires expressing confidence that the upcoming gilt auctions will be successful, while ECB Nowotny says that signs are emerging that the economy has finally bottomed. Other officials on the wires include ECB Weber who said that the German economy would bottom in the summer of 2009, and Canada FinMin Flaherty who said that repaying debt taken on during the recession was a top priority. There has been some negative news surrounding US government official involvement in the Merrill/Bank of America merger and questionable actions taken by the Fed and Treasury in its advisement on the matter before it had become public. Looking ahead, market participants will be sure to focus on the scheduled outline release of the US stress tests for the 19 largest US banks, while the G7 and G20 meetings kick off with Treasury Secretary Geithner to hold a news conference at 20:30GMT.
ANALYSIS OF SELECTED RATES
Usd/Cad: Despite the sharp pullbacks seen on Thursday, the overall structure still remains quite constructive with the market posting a series of medium-term higher lows over the past several months. A fresh higher low is now sought out by 1.1980 (16Apr low) ahead of the next major upside extension back above 1.3065 over the coming weeks. As such, we recommend looking to buy into the current pullback with additional weakness seen limited to the 1.2100 area which also coincides with the projected “Average True Range” (ATR) low for Friday, along with the 78.6% fib retracement off of the 1.1980-1.2510 recent move. Strategy: BUY @1.2100 FOR A 1.2500 OBJECTIVE, STOP @1.1950. Stops to be trailed to cost on a break back above 1.2150. If trade triggers and 1.2150 not broken, position to be closed out at NY close on Friday. Recommendation to be removed if not triggered by NY close on Friday.
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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