USD Stop-Loss Hunting to Persist in Thin Market (Morning Slices)


Fundys – Although the overnight trading session has been relatively light in terms of both data and volume, currencies have picked up right where they left on Friday, with the USD getting hit hard across the board. The Labor Day holiday should not help matters, with many stop orders likely to be targeted in the thin trade. On the data front, Eurozone Sentix was slightly weaker than expected, while German factory orders were slightly better. Sterling was well offered early on against the Euro but managed to find some bids mid-Europe on positive M&A related talk associated with Cadbury’s/Kraft. However, the news that Cadbury’s felt Kraft’s proposal was weak, once again helped to fuel some Sterling selling. On the whole, a general sense of concern over the state of the UK economy has once again begun to surface. The Canadian Dollar is the strongest currency across the board on the day, with the Loonie picking up momentum following Friday’s better than expected employment data. Meanwhile the Yen and USD are the laggards.

Techs - EUR/USD Remains well supported above 50-Day SMA for now and any pullbacks have been met with solid buying back into the familiar multi-day range between 1.4200 and 1.4400. While our bearish outlook for the pair is being tested at present, we continue to hold onto the idea that the market will eventually roll over and establish below the 50-Day SMA to force a shift in the structure. As such, any rallies above 1.4400 should be met with solid offers ahead of a resumption of declines. Only a sustained break above 1.4445 would give reason for pause. USD/JPY With the overall trend still grossly bearish, we view the current corrective rally out from 91.95 as corrective and look for a lower top to carve out in the 94.00-95.00 area ahead of the next drop. The recent trend lows by 91.75 from mid-July have not been taken out just yet, and we look for a break below this level over the coming days to accelerate declines back towards the critical multi-year trend lows at 87.15. GBP/USD Rallies should be limited to the 1.6500-1.6600 with the market in the process of attempting to carve out a major head & shoulders top on the daily chart that would ultimately project a measured move drop back towards 1.5000 over the medium-term. Look for a break below 1.6115 to help confirm bearish bias, while only back above 1.6700 gives reason for concern. USD/CHF Continues to chop around within a very well defined multi-week range with the price currently residing at the lower end of the range. We like the idea of looking to keep playing the multi-week range with any breaks to fresh 2009 lows seen as limited. Ultimately, only a close back below psychological barriers at 1.0500 would give reason for re-think. Back above 1.0715 should help to reaffirm constructive outlook and accelerate gains to next resistance by 1.0835.

Flows – M&A related selling in Eur/Gbp. System funds buying Usd/Jpy; exporter offers. Option expiries in Aussie at 0.8500; macro, model, real money bids.

Trade of the Day – Gbp/Aud: The market continues to drop to post fresh +10 year lows on a daily basis. However, daily, weekly and monthly technicals are showing oversold and with the cross set to test some falling trend-line support off of the January 2009 lows just over 1.9000, wee see good reason for attempting a very playable counter-trend long position. We have incorporated out ATR analysis to ensure that entry will only be triggered on an overextended intraday move on Monday. [B]STRATEGY: BUY @1.9075 FOR AN OPEN OBJECTIVE, STOP 1.8825. RECOMMENDATION TO BE REMOVED IF NOT TRIGGERED BY CLOSE (5PM NY TIME) ON MONDAY.


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
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