USD Starting to Find Bids into London Fix Despite Better Data (Midday Snapshot)

Data out of the US this morning was initially quite well received after coming in better than expected across the board, led by US ISM. Personal income, personal spending, personal consumption, and construction spending also managed to exceed expectations.There has been talk however of some broad based USD buy interest into the London fix.

MIDDAY SNAPSHOT & ANALYSIS OF SELECTED RATES

Data out of the US this morning was initially quite well received after coming in better than expected across the board, led by [B]US ISM[/B]. Personal income, personal spending, personal consumption, and construction spending also managed to exceed expectations. This helped to keep investor sentiment well propped with currencies, US equities, and commodities all remaining well supported on dips despite their overbought technical readings. The Pound has been the strongest performer on the day, up some 1.35%, while the higher yielding antipodeans come in just behind. The Yen has been the weakest currency, after getting slammed in the US session as additional carry related Yen cross buying fueled gains. There has been talk however of some broad based USD buy interest into the London fix. President Obama is getting set to speak at 16:00GMT, along with the GM management in light of the official filing by the automaker of bankruptcy this morning. The US government will be taking a 60% stake in the company. Also of interest, an economic advisor for Qatar has been getting some attention after advising the Emir to diversify out of USDs. Meanwhile in Canada, GDP was better than expected, but still managed to put in the largest decline since 1991. Other data out of the country was weaker with the key standout in raw materials prices which came in at a dramatic -0.5% after analysts had been looking for a +6.5% print. US equities are up by well over 2%, while oil trades by $68, at fresh 2009 highs and gold approaches a retest of the critical $1000 level.

ANALYSIS OF SELECTED RATES

Trade of the Day – Usd/Cad: Once the currency pair had broken down through the multi-week choppy consolidation back in early May, there was very little in the way to support any pullbacks with the next key support not seen until the 1.0800 area which is currently being tested. Throughout the current pullback, we have consistently been looking to buy USDs with very little success, but also very little pain as we have been quick to exit any positions that do not show any form of bottoming. However, at current levels, the market should indeed be very well supported and we would now confidently expect to see a major upside reversal over the coming days at a minimum. From August through September of 2008 the market had been consolidating gains, with the 1.0800 area at that time acting as a formidable resistance point. We therefore see this former resistance now acting as an excellent support zone ahead of a reversal back towards the 1.1100-1.1300 area over the coming days. We have left our objective open and will be looking for an RSI move back towards 30 (currently 23) over the coming days. Position: LONG @1.0807 FOR AN OPEN OBJECTIVE, STOP @1.0590.



Trade of the Day – Gbp/Usd:
Much like Usd/Cad, we have been looking for opportunities to be short of this pair as well, and have established a fresh short on Monday after gains showed signs of stalling above 1.6400. Shorter-term, hourly studies are overbought and the daily ATR (Average True Range) has already been well exceeded on the day, to make the counter-trend short position very attractive on an intraday basis. Longer-term, the market has now retraced to the 38.2% fib retrace off of the major multi-year high-lows and we would expect to see some form of capitulation at current levels in light of the major retracement level. Finally, the daily RSI has broken above the 80 level which is now severely overbought and warning of a much needed and healthy corrective pullback. We have left our objective open and will be looking for an RSI move back towards 70 (currently 81) over the coming days. Position: SHORT @1.6407 FOR AN OPEN OBJECTIVE, STOP @1.6687.

Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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