The lackluster morning economic releases in the form of a weaker US trade balance and disappointing Canadian data have weighed on investor sentiment into the US, with some broad based selling of currencies seen as a result. The Australian Dollar has been the relative outperformer on the day against the Greenback, while the Yen is the weakest. Looking ahead, the Fed Beige Book and US monthly budget statement (-1$75B) are due at 18:00GMT.
[B]MIDDAY SNAPSHOT & ANALYSIS OF SELECTED RATES[/B]
The lackluster morning economic releases in the form of a weaker [B]US trade balance[/B] and disappointing [B]Canadian data[/B] have weighed on investor sentiment into the US, with some broad based selling of currencies seen as a result, to put the USD back in favor. The [B]Latvian[/B] crisis does however seem to be getting under control after [B]PM Drombrovskis[/B] said that he was confident in maintaining the currency peg until Euro entry potentially as soon as 2013. [B]EU Almunia[/B] was also supportive after saying that a combination of [B]EU[/B] and[B] IMF[/B] financing would help to ensure the stability within the currency. [B]Richmond Fed Lacker [/B]was on the wires saying that the worst of the manufacturing decline was over. Meanwhile,[B] ECB Weber[/B] hinted that the central bank will need to consider extra tools for monetary policy, without getting into specifics. [B]Oil [/B]is still well bid on the day with news that [B]Russian Gazprom[/B] sees a potential shortage of investment leading to a supply shortage, helping to keep the commodity well propped after posting fresh 2009 highs earlier. [B]US equities [/B]trade mixed heading into the London fix. The [B]Australian Dollar [/B]has been the relative outperformer on the day against the Greenback, while the [B]Yen[/B] is the weakest. Looking ahead, the [B]Fed Beige Book[/B] and [B]US monthly budget statement[/B] (-1$75B) are due at 18:00GMT.
[B]ANALYSIS OF SELECTED RATES[/B]
[B]Gbp/Jpy:[/B] We do not see the current rally being sustained in current market conditions, with our broader bullish USD outlook likely to weigh on the cross. The sell-off in the USD into the early week is classed as corrective and we see a resumption of broad based USD buying; including against the Yen over the coming weeks. However, any depreciation in the Yen is likely to be more than offset by a depreciation in the Sterling rate in a USD bullish market environment. Technically, since basing out by historic lows below 120.00 earlier in the year, the market has been undergoing an intense corrective phase. However, any gains should look to stall out at current levels with a measured move objective from an inverse head & shoulders formation now being met in the 160.00 area. Additionally, daily studies are showing overbought, with the RSI above 70 and stochastics also stretched. As such, the risks from here are for a more sizable pullback over the near-term, in favor of a resumption of the longer-term downtrend. [B]Strategy: SELL @161.50 FOR AN OPEN OBJECTIVE, STOP @163.50. Recommendation to be removed if not triggered by NY close (5pm ET) on Wednesday.
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[B]Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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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)
[I][B]“Morning Slices”[/B] – Morning Overview using Fundamental, Technical, Flow, and Quantitative Analysis (Includes “Trade of the Day”).[/I]
Monday-Friday (between 6:30am-7:30am EST)
[I][B]“Indicator of the Day”[/B] – [/I][I]A Feature Report that Highlights our Most Significant Technical Indicator of the Day. [/I]
Monday-Friday (between 8:00am-9:00am EST)
[I][B]“Midday Snapshot” [/B]– A Midday Fundamental Update, along with Technical Analysis of Selected Rates. [/I]
Monday-Friday (between 10:30am-11:30am EST)
[I][B]“Scandi Daily”[/B] –[/I] [I]A Specialized Daily Fundamental and Technical Overview of the Nordic Currencies. [/I] (This report is only distributed through email. Please contact [email protected] if you would like to be added to distribution.)
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[I][B]“Daily Classical”[/B] – A Daily Technical Overview of the Major Currencies. [/I]
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