Market participants were not afraid to take on risk in Asian and European trade with currencies, commodities and global equities surging on the resurgence in risk appetite. The Yen and the USD were the big losers as a result, with a massive flow of funds exodus from the safe-haven currencies in favor of the more attractive yield plays.
MORNING SLICES
Fundys – Market participants were not afraid to take on risk in Asian and European trade with currencies, commodities and global equities surging on the resurgence in risk appetite. The Yen and the USD were the big losers as a result, with a massive flow of funds exodus from the safe-haven currencies in favor of the more attractive yield plays. As such, it was also no surprise to see Kiwi and Aussie outperforming on the session. The news from NABE that the US recession was abating, along with comments that GDP was set to improve, helped to fuel a portion of the currency gains. In Germany, the Bundesbank announced that the economy only contracted slightly in Q2, while also noting that the recession had clearly softened in the second quarter. German producer prices were weaker than expected, but failed to weigh on the Euro, while in the UK, house prices showed an improvement from the previous reading. Also in the UK, the BOE trend in lending report showed that while the flow of net lending to businesses fell for a second consecutive month in May, major lenders were starting to approve more mortgages. Looking ahead, Canada international securities transactions (C$7.0B expected) and wholesale sales (-2.1% expected) are due at 12:30GMT, followed by US leading indicators (0.5% expected) at 14:00GMT. On the official circuit, Fed Lockhart is slated to speak on the economic outlook in Nashville at 17:30GMT. US equity futures point to a higher open, led by the S&P up 0.80%, while commodities are also well bid.
Techs - EUR/USD upside on Monday is significant with the market taking out critical short-term resistance by 1.4200 to expose the 2009 highs at 1.4340. Key levels to watch over the coming session come in by 1.4265 and 1.4165. USD/JPY pushes higher into Monday to test the 20-Day SMA by 94.75 ahead of the latest minor retreat. Key levels to watch come in by 95.00 and 94.20. GBP/USD has cleared the previous weekly high to run back above 1.6500 on Monday and threaten a potential retest of the 2009 highs by 1.6745. However, there is some solid internal range resistance in the 1.6600’s and any retest on 1.6745 should prove hard to come by. Key levels to watch come in by 1.6600 and 1.6315. USD/CHF lower into Monday and starting to consider retest of 1.0590 2009 lows. However, 1.0630 must be cleared to expose 2009 lows, while back above 1.0820 delays.
Flows – US prime names bidding Aussie. Spec and CTA demand for Eur/Usd. CTA sell-stops in Usd/Cad below 1.1000. Asian accounts bidding Cable.
Trade of the Day – Usd/Cad: We were stopped out of our long from 1.1205 @1.1055 this morning but have still not lost hope in the USD and will once again look for a shot to establish another long lower down. The 78.6% fib retracement off of the major 1.0785-1.1725 move comes in by 1.0985 and with daily studies now approaching oversold levels, we are compelled to look to buy on a dip below 1.1000 today in anticipation of the formation of a medium-term higher low above 1.0785. [B]Strategy: BUY @1.0990 FOR AN OPEN OBJECTIVE, STOP @1.0760. RECOMMENDATION TO BE REMOVED IF NOT TRIGGERED BY NY CLOSE (5PM ET) ON MONDAY.
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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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