Fundys - A very light session of overnight trade following Friday's extremely volatile price action which saw all of the commodity bloc currencies trade to fresh 2009 highs against the greenback. The story since has been once of consolidation, with the markets seemingly content on waiting for New York to open to make any real directional decisions. The biggest news came from well known global macro portfolio manager George Soros who was interviewed by a German newspaper. While Soros did provide some sense of optimism after saying that he did see an upturn ahead, he also conceded that the upturn will not offset the downturn and we are more likely to see a period of stagnation. Soros went on to say that he thought Asia would be the first to emerge from the global recession and that China would overtake the US as the engine of growth. Finally on currencies, Soros said that he already saw the USD as a weak currency and did not expect it to lose much more in value against the Euro. A recent WSJ article has been generating some attention after suggesting that the banks received concessions on the stress tests. Meanwhile HSBC has released its interim management statement which looks stronger than many were expecting, with the bank also receiving an upgrade to Buy from Goldman Sachs. ECB Ordonez was on the wires overnight saying that he saw a certain amount of good economic news and improvement in the financial markets. He also went on to say that inflation risks in Europe were relatively contained. Looking ahead, Canada new house prices is the only scheduled economic release at 12:30GMT, with the market looking for a 0.5% decline. Later in the day at 23:30GMT, Fed Chair Bernanke is slated to speak on the bank stress tests. US equity futures set for a lower open while oil is also weighed down on profit taking and comments from a member of Kuwait's supreme petroleum council who says that OPEC is not expected to cut production at its next meeting. Gold trades relatively flat.

Techs - EUR/USD rallies have stalled out ahead of 1.3700 on Monday and the market looks to be consolidating the latest round of sharp gains seen on Friday. Key levels to watch above and below come in at 1.3670 and 1.3465. USD/JPY once again rolling over and looks to be carving out a right shoulder of a head & shoulders-like topping pattern. The break below 97.95 on Monday now exposes deeper setbacks to next support by 97.15, below which accelerates further to 95.60. Only back above 98.80 delays. GBP/USD unable to extend much beyond Friday's highs thus far with the market stalling out by 1.5245 ahead of the latest round of setbacks. Ultimately however, a break back below 1.4940 would be required to take the pressure off of the topside. USD/CHF well supported on dips ahead of critical psychological barriers at 1.1000. However, the inter-day structure is still grossly bearish and only a break back above 1.1335 would be required to delay. Key levels to watch over the coming session come in by 1.1020 and 1.1165.

Flows - Swiss name and German bank selling Sterling. German bank selling Aud/Usd. Asian sovereign buyer in Usd/Jpy. US investment house selling Eur/Usd.

Trade of the Day - Eur/Gbp:
The market has been locked in some sideways chop since dropping from the latest trend highs by 0.9495 on March 18. The parameters for the consolidation have been defined between 0.8765 and 0.9085 and as such we would recommend looking for an opportunity to sell rallies into the range highs, which also coincides with the 50/100-Day SMAs. Overall, our longer-term bias is for deeper setbacks over the coming months with the cross finally starting to rollover from overbought studies. Strategy: SELL @0.9080 FOR A 0.8785 OBJECTIVE, STOP @0.9180. Stops to be trailed to cost on a break back below 0.9030. If trade triggers and 0.9030 not broken, position to be closed out at NY close (5pm NY time) on Monday. Recommendation to be removed if not triggered by NY close on Monday.

Written by Joel Kruger, Technical Currency Strategist for
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