More consolidation into Tuesday, with the markets seemingly waiting for a catalyst to trigger the next key directional move in the market. Sterling has been a relative outperformer overnight, with the single currency tracking higher against the buck on stronger overnight data, signs of stability within the UK government and positive M&A flows.
[B]Fundys –[/B] More consolidation into Tuesday, with the markets seemingly waiting for a catalyst to trigger the next key directional move in the market. [B]Sterling[/B] has been a relative outperformer overnight, with the single currency tracking higher against the buck on stronger overnight data, signs of stability within the UK government and positive M&A flows. Data released overnight showed [B]RICS[/B] house prices and [B]DCLG[/B] house prices coming in better than expected, with both data series falling at a slower pace. [B]Bank of England Tucker[/B] was also on the wires with a familiar line that was heard from various officials throughout the overnight session. The central banker said that while there were signs of a bottom, the outlook still remained highly uncertain. [B]ECB’s Papademos [/B]and [B]Liikanen[/B] and [B]BoJ Shirakawa[/B] were the other officials to use similar language. Meanwhile, in [B]China[/B], more talk on diversification emerged, with an official saying that any talk of dumping the USD was [B]“unrealistic”[/B], while adding that no one wants to dump the USD. In [B]Japan[/B], the [B]Yen[/B] took a hit following some initial gains early on after [B]North Korea[/B] warned that it would use nuclear arms if provoked. Elsewhere, [B]Moody’s[/B] followed up with S&P’s downbeat assessment on [B]Ireland[/B], saying that the country was subject to a downgrade if it emerged from the current economic crisis with a weak growth outlook and high debt. The[B] Swiss KOF [/B]institute cut its 2009 and 2010 growth forecasts for Switzerland to -3.3% in 2009 from -2.4% and -0.6% in 2010 from -0.3%. Other data released overnight came out of the Eurozone, with[B] German industrial production[/B] standing out, after coming in much weaker than forecast. German[B] trade data[/B] was also released but failed to factor into price action after the data was rather mixed. The [B]Canadian Dollar[/B] has been the outperformer on the session against the USD, while the [B]Euro[/B] is the relative underperformer. Looking ahead, the calendar is once again rather light in North America, with [B]US wholesale inventories [/B](-1.1% expected) and [B]IBD/TIPP economic optimism[/B] due at 14:00GMT. US [B]equity futures[/B] point to a lower open. On the commodity front, [B]oil [/B]trades some 1% higher to $68.75, while[B] gold[/B] trades flat at $950.
[B] Techs -[/B] [B]EUR/USD [/B]intraday rallies have stalled shy of Monday’s highs by 1.4005 and a lower top is now sought out by 1.3965 ahead of the next drop below 1.3805. Below 1.3805 accelerates and opens deeper setbacks towards 1.3725. [B]USD/JPY[/B] setbacks intraday have been very well supported on dips below 98.00 and the market looks to be in a period of bullish consolidation ahead of fresh upside beyond 98.90. A break above 98.90 should open a move to challenge longer-term trend-line resistance just over 100.00. [B]GBP/USD[/B] has broken back above Monday’s highs to end a series of consecutive daily lower highs. However, the overall structure favors additional setbacks with any rallies seen limited to the 1.6450 area. Look for a fresh lower top to carve out below 1.6450 ahead of the next downside extension to be confirmed on a break below 1.5800. Below 1.5800 opens 1.5375-1.5515.[B] USD/CHF[/B] showing some inside day price action with the market confined to Monday’s ranges for now. Key levels to watch over the coming session come in by 1.0990 and 1.0835 respectively. Our bias is for an eventual break above 1.0990 to expose 1.1270 further up.
[B] Flows –[/B] Asian central bank and US investment house buying [B]Cable[/B]. [B]Eur/Usd[/B] sold heavily by US prime name and real money accounts. German demand for [B]Usd/Jpy[/B]. Asian central bank demand in [B]Cad/Jpy[/B].
[B] Trade of the Day – Eur/Cad:[/B] The cross is back under pressure and looks like it is ready to retest the previous 2009 lows from early June by 1.5345. However, intraday studies are now looking quite stretched and any dips below 1.5400 and towards the 2009 lows should be very well supported, at least on Tuesday. Based on the current daily high, we project a potential daily low by 1.5365 and as such, will look for an opportunity to establish a counter-trend long on a dip to this level, in anticipation of a potential double bottom. The neckline for the premature double bottom would come in by 1.5775, with a break to trigger the pattern formation and open a more significant upside acceleration towards 1.6000. [B]Position: LONG @1.5370 FOR AN OPEN OBJECTIVE, STOP @1.5220. [/B]
[B]Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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