MIDDAY SNAPSHOT & ANALYSIS OF SELECTED RATES
A mixed session of data out of the US this morning with [B]mortgage applications[/B]and [B]durable goods[/B] coming in stronger, while [B]new home sales[/B] disappointed. The economic releases however hardly factored into price action, with the markets left trading on broader fundamentals and risk sentiment. The Euro has been weighed down in New York as the news of the larger than expected bid for the refi tender continues to drive profit taking. Meanwhile in the UK some downbeat talk out from a number of central bankers including comments supporting a weaker GBP from BOE King, have forced some profit taking in Cable as well which has broken back below 1.6500. One of the biggest stories on the day came just ahead of the US open with the Swiss Franc selling off heavily and driving Eur/Chf to consume the previous multi-week range in a matter of minutes on speculated SNB intervention. The Australian Dollar is the strongest major currency on the day against the USD, while Swissie is the big laggard. US equities are all much higher on the day, led by the NASDAQ, which is up well over 2%. Commodities have also recovered and are bid into the London fix. Looking ahead, trade is expected to continue to remain choppy with all eyes now keenly focused on the FOMC this afternoon at 18:15GMT. While an unchanged 0.25% verdict is widely expected, the tone of the accompanying central bank statement will be paramount and likely set the stage for the direction in the markets for the remainder of the week.
ANALYSIS OF SELECTED RATES
Aud/Chf: An extremely compelling chart with the cross surging higher on Wednesday to more than double its ATR (Average True Range) before finally stalling out by 0.8740. However, we view the latest topside failure as significant, with gains stalling ahead of the 0.8770 June 19 lower top and by the 78.6% fib retrace off of the 0.8815-0.8425 recent move. Moreover, we had seen a major break of multi-day rising trend-line support off of the mid-March lows, with the market rallying on Wednesday to kiss the former trend-line support now turned resistance. As such, we like the idea of establishing shorts at current levels in anticipation of a short-term pullback at a minimum, with hourly studies so overdone, and potentially a more medium-term decline on a break back below 0.8425. We already have Swiss exposure from this morning so will hold off on any formal position.
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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