The doom and gloom continues as we head into the London fixing with the US equity markets under pressure on the back of growing concerns over the state of the financial markets and broader global macro economy.
CROSS COUNTRY: MIDDAY SNAPSHOT & ANALYSIS OF SELECTED CROSS RATES
The doom and gloom continues as we head into the London fixing with the US equity markets under pressure on the back of growing concerns over the state of the financial markets and broader global macro economy. Although President Obama has now signed off on the stimulus bill, many doubts still linger as reflected in the broader market price action. On the data front, US Empire manufacturing was a gross disappointment coming in well below expectations at -34.65. This was seen accelerating USD gains even against the Yen. Comments out from Japanese economic minister Yosano could also be driving USD/JPY higher after the minister said that the downturn in the local economy is exceeding expectations. With EUR/USD now taking out stops below 1.2700, traders are eying a full retracement back to the late October trend lows by 1.2330. EUR/GBP has come back under intense selling pressure to take out stops below 0.8830 and expose 0.8635 further down. UK Chancellor Darling was on the wires earlier saying that RBS will not receive discretionary bonuses this year above what it is legally committed to distributing. Interesting price action in various indices with the CRB index tracking to fresh 6.5 year lows while the VIX has now broken back above 50.0. Looking ahead, Fed Bullard is slated to talk on the economy this afternoon in New York.
Gbp/Chf - Price action has been constructive since basing by 1.5125 in late December, with a fresh higher low already firmly in place at 1.5650 (21Jan low). Tuesday's upside break now suggests that we could be in the process of carving the next higher low by 1.6460 (12Feb low) to be eventually be confirmed on a break above the recent trend high at 1.7490 (10Feb high). Key topside resistance now comes in by 1.6950 (13Feb high) and we look for a break above the latter to accelerate gains back towards 1.7490 and beyond.
Eur/Gbp - The market looks to be in the process of rounding out a lower top by 0.9075 (12Feb high) which will ultimately be confirmed on a break back below the recent trend lows at 0.8635 (10Feb low). Daily studies confirm bearish outlook and show room for deeper setbacks below 0.8635 over the coming days. Initially, a break below 0.8830 (Friday's low) will accelerate declines and open a direct retest of 0.8635.
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