Sterling was the weakest currency overnight, despite a more upbeat BOE Minutes, with a Telegraph article talking about RBS and Barclays need for additional capital, along with a CBI industrial trends reading at its lowest levels since January 1992, weighing on the single currency. However we are starting to see some buying into the US open.
Fundys – The greenback had been well bid overnight, with some broad based currency selling and renewed risk aversion helping to fuel gains in the lower yielding, safe-haven currencies. Sterling was the weakest currency overnight, despite a more upbeat [B]BOE Minutes[/B], with a Telegraph article talking about RBS and Barclays need for additional capital, along with a CBI industrial trends reading at its lowest levels since January 1992, weighing on the single currency. In the Eurozone, industrial orders came in much weaker than expected but did not generate additional selling pressure on the Euro, with the currency staying close to a reported large 1.4200 option expiry. US equity futures point to a lower open, while commodities are also offered. Looking ahead, Canada retail sales (0.5% expected) are due at 12:30GMT, followed by the US house price index (-0.2% expected) at 14:00GMT. On the official circuit, Fed Chair Bernanke is slated to testify in front of the Senate Banking Committee at 14:00GMT.
Techs - EUR/USD confined to inside day thus far but doesn’t feel like this will last with a break above 1.4280 or back below 1.4165 required for clearer directional bias. Across the board price action seems to be warning of some broad USD strength but it is too early to tell at this point. USD/JPY remains locked in a downtrend off of the yearly highs by 101.45 and a lower top is now sought out below 97.00, potentially at 94.80 ahead of the next drop towards 91.75. GBP/USD looks like the market could be attempting to carve a right shoulder of a head & shoulders top and a lower top is now sought out by 1.6560 ahead of the next drop back towards 1.6000. Initial support comes in by 1.6265. USD/CHF trading with a heavy tone but still locked in choppy sideways trade within a very well defined range. Key levels to watch over the coming session come in by 1.0820 and 1.0625.
Flows – Semi-official bids in Usd/Jpy. Russian accounts bidding Eur/Usd; real money selling. Japanese investor and real money bids in Aussie.
Trade of the Day – Gbp/Usd: While our gut is telling us that a major USD rally could be on the verge of playing out, we prefer to stay on the sidelines for now and will instead look to sell into an intraday rally back over 1.6500. The 1.6500 area has offered itself as formidable internal range resistance and this in conjunction with a 78.6% fib retracement off of the latest moves, along with a projected ATR high just above the figure, sets up a playable short trade over the coming hours. Overall, we favor the formation of a right shoulder of a major head & shoulders top, with renewed weakness projected back below 1.6000 over the coming days. Ultimately, only back above 1.6745 negates. Strategy: SELL @1.6510 FOR AN OPEN OBJECTIVE, STOP @1.6675. RECOMMENDATION TO BE REMOVED IF NOT TRIGGERED BY NY CLOSE (5pm ET) ON WEDNESDAY.
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 been 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.
Additionally, please feel free to check out a [B]full profit and loss statement since inception on June 1, 2009[/B].
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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