After being the clear underperformer in the overnight session following the S&P outlook downgrade to the UK, Sterling has been outperforming in the US as traders use the dips as formidable buy opportunities after discounting the rating agency downgrade and instead focusing in on the stronger retail sales and prospects for global macro recovery.
MIDDAY SNAPSHOT & ANALYSIS OF SELECTED RATES
The batch of mixed data this morning has largely been ignored after initial jobless claims and Philly Fed were slightly weaker, while leading indicators showed a marginal improvement. After being the clear underperformer in the overnight session following the S&P outlook downgrade to the UK, Sterling has been outperforming in the US as traders use the dips as formidable buy opportunities after discounting the rating agency downgrade and instead focusing in on the stronger retail sales and prospects for global macro recovery. Canadian FinMin Flaherty was on the wires following the better than expected Canadian international securities and wholesale sales data, saying that although times were still challenging, he felt that the Canadian economy was well positioned. Meanwhile Treasury Secretary Geithner is testifying in front of the House Financial Subcommittee. All major US equity indices are well offered on the day, sown some 2%, while on the commodity front, oil has backed off over 3% to $60 and gold trades flat. Looking ahead, Fed Plosser speaks to investors in New York at 23:00GMT, while Fed Rosengren speaks in Massachusetts at 23:30GMT.
ANALYSIS OF SELECTED RATES
Aus/Usd: Currently trades above all relevant moving averages with the closest SMA coming in at 0.7640 by the 10-Day. This is suggestive of an overextended market and potential for a meaningful pullback over the coming days. Price action thus far on Thursday confirms with the market failing to put in a 4th consecutive up-day, while also failing to establish a fresh daily higher high, before reversing course and breaking back below Wednesday’s lows to end a string of consecutive daily higher lows. We would recommend standing aside for now to see if the market can manage to put in a negative close. Should we close 0.7750, we will look to initiate a short trade into Friday on a break back below Thursday’s low.
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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