MORNING SLICES
Fundys – The greenback has been sold heavily across the board into Friday (Sterling exception) with even the Yen appreciating against the USD after stops were cleared below 97.65 earlier in the day. The big news overnight has come out of the UK with the release of the much weaker than expected Q1 GDP data easily managing to offset any positives from the better than expected retail sales. The GDP result was highly concerning after putting in the sharpest quarterly drop in 30 years. Also seen weighing on the pound has been a recent Telegraph article questioning the UK’s AAA credit rating in light of the government’s oversized borrowing intentions. As a result, Sterling has been the weakest performing currency on the day. Meanwhile in the Eurozone, data has been more encouraging with the German IFO coming in on the stronger side of expectations. The wide disparity in the results from the economic releases out of the respective regions was seen having a significant impact on the cross rate with Eur/Gbp surging on the day towards key topside barriers by 0.9100. Newly appointed SNB member Danthine was on the wires saying that the bottom of the economic cycle would most probably come at the end of 2009 or early 2010, but did not see the recovery as being a strong one. On the commodity front, gold has been well bid, aided by talk that China has increased its positioning to hedge against USD holdings. 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. The official results of the stress tests are scheduled for release on May 4. US durable goods orders (-1.5% expected) are due at 12:30GMT followed by new home sales (0.0% expected) at 14:00GMT. The G7 and G20 meetings kick off today with Treasury Secretary Geithner scheduled to hold a news conference at 20:30GMT.
Quant –
For information on the above tables, please visit our Guide to Morning Slices Quant section.
Techs - EUR/USD continues with the rebound out from the recent 1.2885 lows set earlier in the week with the market trading into the 1.3200’s thus far. Any additional gains are seen limited to 1.3300 with a lower top sought out below 1.3395 ahead of the next downside extension back below 1.2885. Key levels to watch over the coming session come in by 1.3300 and 1.3115. USD/JPY has finally broken down below the recent consolidation lows and through the 50-Day SMA into the 96.00’s thus far. This delays hope for additional gains back above 100.00 for the time being and potentially opens a more significant drop over the coming sessions to the 95.00-95.65 area. Only back above 98.15 to take pressure off of the downside. GBP/USD remains locked in some choppy sideways trade with the latest rallies to the range highs above 1.4700 once again failing to open the current retreat back towards 1.4500. Ultimately a break above 1.4745 or back below 1.4395 is required for clear directional bias. USD/CHF declines are finding some support in the 1.1400 area by a rising trend-line off of the March lows. We have established a fresh long by 1.1400 on Friday as per our recommendation in Thursday’s “Daily Classical” and look for a resumption of gains from here. Ultimately, only a close back below the 200-Day SMA would give reason for concern. Back above 1.1530 should accelerate gains.
Flows – Eastern European, Asian central bank and UK clearer on the offer in Eur/Usd; US prime name and CTAs bidding. Leveraged and real money buyers of Eur/Gbp.
Trade of the Day – 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
If you wish to receive Joel’s reports in a more timely fashion, e-mail [email protected] and you will be added to the “distribution” list.
Quant section prepared by David Rodriguez, Quantitative Strategist for DailyFX.com
To contact, e-mail [email protected]
Joel Kruger publishes 6 daily pieces:
“Tech Talk” – A Daily Video Highlighting Technical Developments in the Overnight Session of Trade.
Monday-Friday (between 5:30am-6:30am EST)
“Morning Slices” – Morning Overview using Fundamental, Technical, Flow, and Quantitative Analysis (Includes “Trade of the Day”).
Monday-Friday (between 6:30am-7:30am EST)
“Indicator of the Day” – A Feature Report that Highlights our Most Significant Technical Indicator of the Day.
Monday-Friday (between 8:00am-9:00am EST)
“Cross Country” – A Midday Fundamental Update, along with Technical Analysis of Selected Cross Rates.
Monday-Friday (between 10:30am-11:30am EST)
“Scandi Daily” – A Specialized Daily Fundamental and Technical Overview of the Nordic Currencies. (This report is only distributed through email. Please contact [email protected] if you would like to be added to distribution.)
Monday-Friday (between 11:30am-12:30pm EST)
“Daily Classical” – A Daily Technical Overview of the Major Currencies.
Monday-Friday (published between 2:00pm-3:00pm EST)