[B]MORNING SLICES *(Abridged)
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[B]Fundys – [/B]A very quiet session of overnight, with lack of any material economic releases leaving the market to trade on broader fundamentals and flows. The [B]USD[/B] has been the winner on the day across the board thus far, with the single currency gaining the most against the [B]Yen[/B]. Usd/Jpy has broken through stop sat 91.65 to trigger a double bottom formation that projects gains towards 93.20 over the coming hours. [B]Sterling[/B] also remains under pressure with the primary driver still coming from the hangover from the previous week in which many concerns arose from the central bank and other organizations with regard to the outlook for the economy and monetary policy. Many analysts now source the drivers for the recent Dollar rally as coming from [B]oversold technicals[/B], news that the [B]IMF will be selling large amounts of gold[/B], a pullback in [B]global equities[/B], and finally the [B]upcoming FOMC[/B]. Commodities have come under pressure in the early week, with[B] gold [/B]dropping back below the $1000 mark and [B]oil[/B] succumbing to additional profit taking on talk of a lessening in demand from China. Looking ahead, the calendar is very light. [B]Canada international securities transactions[/B] at 12:30GMT, followed by [B]US leading indicators[/B] at 14:00GMT. On the official circuit, [B]Fed Cumming[/B] is slated to speak in New York at 21:30 on the economic recovery.
[B]Techs -[/B] [B]EUR/USD [/B]The strong rally appears to have finally stalled out by 1.4770 and Friday’s bearish reversal day has been showing some good downside follow through thus far on Monday. Daily studies show plenty of room for additional corrective weakness and we look for a break below the 10-Day SMA at 1.4430 to accelerate declines back to retest the 20-Day SMA in the 1.4460 area. Any intraday rallies should be well capped ahead of 1.4700. [B]USD/JPY[/B] Gains have accelerated in the early week following the break above double bottom neckline resistance at 91.65. The break above the neckline now officially confirms short-term bottoming and projects fresh upside over the coming days back towards a measured move objective at 93.20. [B]GBP/USD[/B] We continue to maintain a sell on rallies approach to this market with the view that the pair has made a meaningful high above 1.7000 this year. The market looks to be in the process of carving the right shoulder of a head & shoulders top that ultimately would project setbacks to 1.5000 over the coming weeks. We are now nearing and expected to test key neckline support which comes in just under psychological barriers at 1.6000. Any intraday rallies should be well capped in the 1.6300’s. [B]USD/CHF[/B] At a minimum, a short-term base appears to be in place by the recent 2009 lows at 1.0275 and we look for a break above 1.0350 to confirm basing prospects and open fresh upside over the coming hours and days back towards the 1.0500, previous support now turned resistance area. Our core view at current levels is also quite bullish with any medium-term setbacks now seen limited to the 78.6% fib retrace off of the major 2008 low-highs at 1.0200. As such we recommend looking to build longs at current levels.
[B]Flows –[/B] Option expiry in [B]Usd/Cad[/B] set to roll off at 1.0750 today. Commercial offers on rallies in [B]Usd/Jpy[/B].
[B]Trade of the Day – Gbp/Aud:[/B] (Same as Friday) We continue to look for opportunities to buy this beaten down cross with the market at multi-year year lows after just breaking below the critical lows by 1.8740 from May 1996. Not only are daily studies tracking oversold at this point, but weekly studies are also unhealthily overextended and show the need for a major upside reversal and mean reversion. The closest SMA right now comes in the form of the 10-Day which trades much higher by 1.9100. The market moves on average some 200 points a day so we will use a wider stop-loss to leave the appropriate amount of room for the trade to be able to materialize. If the market gets going in our desired direction, there is tremendous upside potential. POSITION: LONG @1.8835 FOR AN OPEN OBJECTIVE; STOP 1.8585.
[B]* Full Slices to resume on Tuesday[/B]
[B]Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
If you wish to receive Joel’s reports in a more timely fashion, e-mail [/B][B][email protected][/B] [B]and you will be added to the [/B][B]“distribution” [/B][B]list.[/B][B][/B]
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