Whipsaw price action overnight. Russian government denies rumors that it was considering the restructuring of domestic bank corporate debt. UK trade balance better than expected. USD/CHF sees sharp reversal after posting fresh multi-day highs. Semi-officials bidding EUR/USD. Looking to buy EUR/GBP on positive close.
Fundys - A dangerous session of overnight trade with some intense whipsaw price action, particularly in USD/CHF and EUR/USD with the respective markets surging to spike highs and lows before trading back towards daily opening levels ahead of the US open. The volatility could not be attributed to any specific event risk with the markets paying little attention to the weaker than expected French and Italian industrial production data , while Euro/Swissy traded sharply lower despite the much softer than expected Swiss CPI reading. Instead, it seemed as though risk aversion and global uncertainty were the more dominant forces as global equity prices faltered and the flight to safety trade was back in vogue. Also seen influencing price action was the initial rumor and later denial by the Russian government that it was considering the r estructuring of domestic bank corporate debt . Cable was also well offered even with the better than expected trade balance , as more doom and gloom comments out from ex-MPC members on their outlook for the UK economy generated some attention. EU FinMins have been meeting in Brussels to discuss the high importance of increased cooperation to solve the global economic turmoil. Looking ahead to the North American session the focus turns to the passage of the Obama plan along with the Geithner Testimony in which the Treasury Secretary will unveil his financial rescue plan. Fed Chair Bernanke will also be speaking at the House panel regarding various Fed programs. US wholesale inventories are due at 15:00GMT while consumer confidence is slated for later in the day at 22:00GMT.
Techs - EUR/USD dips overnight well supported ahead of 1.2800. Bullish momentum has however stalled out and the pair has resorted to sideways chop. Key levels to watch above and below over the coming session come in by 1.3095 and 1.2810. USD/JPY is rolling back over and could now be poised for deeper setbacks after taking out Monday's low by 90.90. Key levels to watch come in by 92.45 and 90.75. GBP/USD gains have stalled out just ahead of critical psychological resistance by 1.5000 on Monday to open the current round of setbacks. The upper Bollinger and 78.6% fib of the 1.5375-1.3500 move also weigh on gains. Nevertheless, the market is still confined to trade within yesterday's range and a break above 1.4990 or below 1.4700 will be required for clear directional bias. USD/CHF price action suggests that we could be headed lower before resumption of the broader up-trend. The market has once again stalled out above 1.1700 at 1.1785 before reversing sharply back under daily opening levels. Key levels to watch here over the coming session come in by 1.1785 and 1.1500.
Flows - Semi-official names on the bid in EUR/USD . German accounts bidding USD/CAD . German and Swiss banks selling EUR/ CHF ; Japanese names buying on dips. UK clearer on the offer in Cable . US investment house selling Aussie all day.
Trade of the Day - EUR/GBP: The cross has been in a steep decline since positing life-time highs at 0.9805 in late December to reach 0.8638 today ahead of the latest minor bounce. However, daily studies are now starting to look a little stretched, and with the cross bouncing by former resistance at 0.8665 (13Nov high), the risks are for a short-term reversal back towards the 0.9000 area over the coming days before another lower top can take form and open a resumption of the broader downtrend. Look for a break back above 0.8780 (Monday's high) to confirm short-term reversal prospects. Back under 0.8638 negates. Strategy: BUY ON THE NEW YORK CLOSE (5PM EASTERN) IF THE CROSS IS TRADING 0.8730 OR ABOVE; TARGET 0.8930, STOP 0.8655.