Any USD gains on Tuesday from a number of contributing factors including, fears over nuclear tests in North Korea, reaffirmation of USD reserve commitment from China and the UAE, weaker Case Shiller and concerns over the fate of GM, have been wiped away, with some fresh USD selling from US based accounts and a much better than expected consumer confidence report managing to easily offset the lure of the greenback.
MIDDAY SNAPSHOT & ANALYSIS OF SELECTED RATES
Any USD gains on Tuesday from a number of contributing factors including, fears over nuclear tests in North Korea, reaffirmation of USD reserve commitment from China and the UAE, weaker Case Shiller and concerns over the fate of GM, have been wiped away, with some fresh USD selling from US based accounts and a much better than expected [B]consumer confidence[/B] report managing to easily offset the lure of the greenback. The Richmond and Dallas Fed numbers have also helped to bolster investor sentiment and fuel additional USD selling, with the Euro attempting to break back above 1.4000. Finally, renowned economist Martin Feldstein has been on the wires talking down the USD, citing deteriorating fundamentals, while also saying that he sees no recovery until 2010. Elsewhere, Canada March employment insurance data showed a 10.6% increase to put in the largest monthly rise since the deterioration in the labor market began back in October of 2008. US equities have raced out from negative territory and now trade much higher on the day, with the Nasdaq leading the way up some 2.5%. On the commodity front, both oil and gold track lower. Many investors are now focused on today’s $40B 2Y note auction. This is the first of a total of $101B in notes scheduled for auction this week. Any sign of failure in the auction should weigh heavily on the buck. Cable has broken to fresh 2009 highs above 1.5950 and looks to test critical psychological barriers by 1.6000.
ANALYSIS OF SELECTED RATES
Trade of the Day – Eur/Usd: Finally showing signs of exhaustion on Tuesday with the market rolling over after stalling out above psychological barriers at 1.4000. While it is too early to tell at this point if this is the start to a major USD bull run, there is certainly scope for additional setbacks towards the previous trend highs at 1.3740. The daily RSI has just now crossed down from overbought, while stochastics still reside in overbought but are now showing a negative cross. As such, we have sold into the current rally as per this morning’s recommendation, in anticipation of a deeper drop back towards the 1.3700-1.3740 area over the coming sessions. Position: SHORT @1.3965 FOR A 1.3740 OBJECTIVE, STOP @1.4065. Stops to be trailed to cost on a break back below 1.3915. If 1.3915 not broken, position to be closed out at NY close (5pm NY time) on Tuesday.
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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