MORNING SLICES
Fundys – A wild session of trade overnight with the slew of economic releases out of the UK appropriately resulting in an equal amount of volatility in Sterling. The initial data releases at 8:30GMT were tempered, with Q2 GDP coming in as expected, and mortgage approvals slightly exceeding analyst forecasts. However, the later release of CBI retail sales which shocked to the upside after coming in at +3 versus an expectation for a -14 print, sent the single currency off to the races, with notable losses highlighted in Eur/Gbp as a result. Eurozone economic sentiment data was also firmer, but failed to materially factor in price action, with the Euro weighed down by some USD supportive comments, and a reduction is risk appetite as reflected by lower US equity futures. Elsewhere, data in other regions was not promising with the Swiss UBS consumption indicator showing weakness, while retail sales out from Sweden were also surprisingly much weaker than consensus. Finally, the Russian rate cut today has also left a sour taste in many investor mouths, forcing a liquidation of some of their higher yielding and risky investments. In fact, news out that the Russian central bank would be looking to add Aussie and Cad to their reserves triggered a violent intraday swing in the Aussie and Cad crosses. Looking ahead, US Case Shiller (-14.25% expected) is due at 13:00GMT, followed by consumer confidence (57.0 expected) at 14:00GMT. On the official circuit, Fed Plosser is slated to speak at 23:00GMT.
Techs - EUR/USD Remains under pressure into Tuesday with the market considering a close below next key moving average support in the form of the 20-Day SMA at 1.4575. Below 1.4575 will open a deeper setback towards inter-day support at 1.4465. For now, a lower top is sought out below 1.4720, with any rallies intraday seen well capped ahead of this level. Overall, there is plenty of room for additional weakness from here, and only a break back above 1.4720 would delay short-term bearish outlook. USD/JPY Saw some intensely volatile price action on Monday with the market dropping sharply to 88.25, before a jackknife reversal into the close back to opening levels at 89.65. This has set up a very bullish hammer-like formation with the price action now likely signaling a short term bottom ahead of some fresh upside over the coming days. Look for today’s break back above 89.85 to provide additional confirmation with an upside extension likely extending to a minimum objective by 92.00. Back under 88.25 negates however and exposes the critical matched trend lows from late 2008/early 2009 by 87.15. GBP/USD The technical break of the major head & shoulders neckline by 1.6000 in the previous week has been showing some solid follow through thus far with the market trading as low as 1.5770. Ultimately, the pattern formation projects deeper setbacks over the coming days to a measured move objective at 1.5000, but we would caution bears with daily studies now oversold and more likely inclined to bounce a bit ahead of the next downside extension. As such, selling into rallies back into the 1.6100-16200 area is the favored strategy. USD/CHF Looks like it could be in the process of carving out a base after dropping to a fresh 2009 low by 1.0185 in the previous week. The market has since broken back above 1.0300 and now has its sights set on next resistance by the 20-Day SMA at 1.0390. A close above 1.0390 will be encouraging for bulls and open an acceleration of gains back towards 1.0500 over the coming sessions. We are long from 1.0215 and have trailed our stops to cost to eliminate any risk on the trade.
Flows – UK clearer, US prime name and Russian account buying GBP aggressively. Semi-official buying Eur/Jpy. Swiss private bank buying Eur/Usd; buy-side names on the offer. Large option related interest around the 90.00 level in Usd/Jpy.
Trade of the Day – No Trade: Currently long Usd/Chf @1.0215 and short Nzd/Usd. No new opportunities are presenting on Tuesday. We were also stopped from our Eur/Nzd long @2.0270.
P&L Update and Overview: Many of you have been asking for a way to better track trading results and open positions. In response to these requests and in an effort to be fully transparent, a simulated portfolio was created in June to track and mirror all recommendations and trades. Below is a return on equity curve since inception on June 1, 2009, along with an open and closed position tracker. I am hopeful that this will make things easier for you all.
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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