Sterling has been the standout currency overnight after initially surging to fresh 2009 highs early on by 1.6745, following the much better than expected Nationwide HPI. However, it was all downhill from there after the final Q1 GDP reading was much worse, and the current account and total business investments also grossly disappointed to the downside.
MORNING SLICES
Fundys – Sterling has been the standout currency overnight after initially surging to fresh 2009 highs early on by 1.6745, following the much better than expected Nationwide HPI. However, it was all downhill from there after the [B]final Q1 GDP[/B] reading was much worse, and the current account and total business investments also grossly disappointed to the downside. This opened a sharp pullback to daily opening levels below 1.6600 heading into the US session. The weaker data also forced a jackknife reversal in Eur/Gbp off of its lows by 0.8435, back above Monday’s 0.8525 highs. In the Eurozone, data was on the stronger side, after CPI estimates and German unemployment came in slightly better. However, the Eurozone inflation estmiates did show the first annual decline since inception. Nevertheless, the Euro was well bid to trade above 1.4100 and towards noted resistance by 1.4175. In Switzerland, the UBS consumption indicator came in at its lowest level since 2004, which helped to put some bids back into the much watched Eur/Chf cross rate. Looking ahead, Canada GDP (-0.1% expected), industrial product prices (-0.6% expected), and raw materials prices (2.0% expected) are due at 12:30GMT. Chicago PMI (39.0 expected) is due at 13:45GMT, followed by Case Shiller (-18.6% expected) and consumer confidence (55.3 expected) at 14:00GMT. On the official circuit, Fed Bullard speaks at 16:00GMT on Fed exit strategies, while Fed Hoenig is slated for 20:10GMT in New York. The Australian Dollar is the strongest currency on the day against the buck, while Kiwi is the weakest. US equity futures point to a higher open, while commodities are bid with oil making a fresh yearly high overnight, before pulling back to daily opening levels.
Quant –
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Techs - EUR/USD inches higher to take out the previous weekly high, but any gains ultimately seen limited to the 1.4200 area, where a lower top is sought out below the 1.4340, 2009 high ahead of the next major drop through 1.3750. Key levels to watch over the coming session come in by 1.4175 and 1.3980. USD/JPY well supported for now by the 95.00 area but overall structure favors additional weakness to retest the key trend lows by 93.55-85. Only back above 96.60 will delay and give reason for shift. GBP/USD has broken to fresh yearly highs by 1.6745 ahead of the latest sharp intraday pullback to daily opening levels. As per our analysis on Monday, any gains beyond 1.6665 have proved to be unsustainable and our bias continues to favor a major drop over the coming weeks back below 1.5800. However, this level is a ways off at present, with the key level to watch below coming in by 1.6185. Below 1.6185 should accelerate declines. Only back above 1.6800 negates. USD/CHF setbacks have been well supported ahead of 1.0760 and we look for a fresh higher low to carve out in anticipation of the next major upside extension back above 1.1025 and towards the 1.1500 area. Only a close back below 1.0760 negates.
Flows – EU sovereign bidding Eur/Gbp. UK clearer offering Cable; Middle Eastern accounts bids. Asian reserve manager offers in Eur/Usd. Corporates and custodial accounts buying Kiwi. Usd/Cad option expiries at 1.1500 and 1.1610. Models and real money bids in Aussie. Hedge funds and US investment bank selling Usd/Jpy.
Trade of the Day – Aud/Cad: We have been trying to sell the cross with no luck as of yet but will again look to sell on Tuesday with the market continuing to surge to fresh 2009 highs by 0.9400 thus far. Daily studies reside well in overbought territory and a much needed and healthy corrective pullback is anticipated over the coming hours, back towards the 10-Day SMA at a minimum, which currently comes in some 200 points below at 0.9200. Look for any rallies above 0.9400 today to be very well offered, with a break back below 0.9315 to accelerate declines and confirm short-term topping structure. Strategy: SELL @0.9420 FOR AN OPEN OBJECTIVE, STOP @0.9570. Recommendation to be removed if not triggered by NY close (5pm ET) on Tuesday.
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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