The USD fell across the board as traders shifted their belief that the Fed will cut interest rates as much as 50 bp next month. The Consumer Confidence report fell more than expected triggering a rally in the Euro. The Conference Board's confidence index fell to 64.5, a five-year low. The low estimate was 73.5. Financial traders in Chicago are already pricing in the next cut at the April 30 meeting.
As mentioned in yesterday's commentary, the Euro is still in an uptrend and needs to test the all-time high and fail before we can begin to look at the short side. This test could come in the form of a 50% to 62% retracement of the break to 1.562 â€“ 1.569.
Durable Goods for February will be reported today at 8:30 A.M. EST. New Home Sales are due out at 10:00 A.M. EST. These two reports should make traders forget about the Consumer Confidence number if they come out better than expected.
Continue to monitor the news for any indications of a slow down in Eurozone exports. The next ECB meeting is April 10. Poor exports numbers may cause the ECB to consider a rate cut or at least soften its stance against inflation. Talk of a possible G-7 coordinated intervention has trickled into the market. Watch this situation closely as the next meeting is April 12 and April 13.
GBPUSD rallied on Tuesday in reaction to the weaker U.S. fundamentals. The upside objective of this rally is 2.006 to 2.014. The trend is down as traders are concerned about UK banks and uncertain about the direction the BoE is going to take on interest rates at its next meeting. The new support is at 1.534.
In range bound trading action, the USD lost ground to the Yen on weaker U.S. fundamentals and a directionless U.S. equity trade. The USDJPY never finished its upside move to 102.15. Near term support is at 98.37 to 97.75. Todayâ€™s reports will be critical to U.S. equity markets. A strong rally will lead to a new round of selling in the Yen.
USDCHF has been trading range bound for the past week. The upside objectives are 1.036 followed by 1.055. On the downside, look for buyers to surface at .9948 to .9775. The Consumer Confidence news did not have much of an influence on the CHF on Tuesday as the stock market hardly reacted. The next two days are more critical to the current cycle. A bullish stock market could lead to renewed buying in the USD versus the CHF.
The USDCAD has been trading in a tight range for several weeks due to the mixed fundamentals. Sellers of the CAD are concerned that the weakening U.S. economy will spill over into the Canadian economy. Buyers of the Loonie believe that firmer prices in gold, wheat and crude oil should benefit the Canadian economy. The direction is going to come down to the export numbers. A weak export number could drive the Canadian Dollar lower. The upside target is 1.038. On the downside, support comes in at 1.00 and .9938.
AUD and NZD rallied as investors sought higher-yielding assets. Following a two week selloff, both currencies are poised to challenge the multi-year highs set in February at .9408 and .8215 respectively. As long as the interest rate differential remains wide and credit markets remain stable, expect strong up moves in both pairs. A turnaround in U.S. equity markets today could stop the rally. AUDUSD should find resistance at a retracement zone at .9211 to .9272. The short-term objective of the current rally in the NZDUSD is .8040 to .8081.
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