While the Euro and Yen trade relatively unchanged on the day thus far, price action in the other major currencies has been far more interesting, with the commodity bloc currencies and Sterling leading the way, while Swissie has been sold heavily on speculation of SNB intervention.
Fundys - While the Euro and Yen trade relatively unchanged on the day thus far, price action in the other major currencies has been far more interesting, with the commodity bloc currencies and Sterling leading the way. On the data front, market participants failed to pay too much attention to the better Eurozone current account and slightly weaker UK CBI retail sales, with much of the attention centered around the release of the OECD global economic forecasts. Overall, the OECD saw a 30 nation contraction of 4.1% in 2009, followed by a rebound of 0.7% growthin 2010. Some of the highlights were calls for the ECB to cut rates sooner than later, and the Fed to stay on hold until 2011. The organization also called for the Bank of England and Bank of Canada to leave rates on hold until 2010. Surprisingly, downwardly revised forecasts to UK growth, along with a unsettling piece in the Times on UK debt, failed to materially weigh on the outperforming Sterling, which managed to break back above 1.6600. Elsewhere, the commercial banking association BDB, came out with a sobering outlook, not expecting any repair from the financial crisis until 2015. The Euro did manage to receive some bids however on stop hunting despite a larger than expected bid from the ECB refi tender. The Eur/Chf cross once again generated much attention into the US open, with the market skyrocketing by over 250 points in a matter of minutes after the cross had been flirting with the critical 1.5000 barriers in which the SNB has been reportedly defending. While intervention is the likely driver here, the BIS declined to comment on any official buying on behalf of the SNB. US mortgage applications have also been released and show a strong improvement from the previous week's -15.8% print, with a +6.6% reading. Looking ahead, key event risk comes in the form of the FOMC later in the day at 18:15GMT. While no change from 0.25% is expected, all eyes will be keenly focused on the accompanying central bank statement. On the data front, durable goods (-0.9% expected) are due at 12:30GMT, followed by new home sales (2.3% expected) at 14:00GMT. On the official circuit, BOE King is set to testify at 13:30GMT, while ECB Bini-Smaghi speaks at 15:30GMT. US equities point to ahigher open while commodities are mixed with oil lower and gold mildly higher.
For information on the above tables, please visit our Guide to Morning Slices Quant section
Techs - EUR/USD gains have stalled out by 1.4140 thus far on and ahead of the 1.4175 lower top from June 11. While the market holds below 1.4175, we retain a bearish bias and look for a fresh lower top by 1.4140 ahead of the next drop back below 1.3750 over the coming days. Above 1.4175 negates outlook and forces a rethink. Key levels to watch over the coming session come in by 1.4175 and 1.4000. USD/JPY price action confined to inside day thus far, with the market trading by opening levels just over 95.00. The overall structure continues to favor additional weakness over the short-term back towards the 93.55-85 area. Key levels to watch above and below come in by 95.95 and 94.90. GBP/USD bid on Wednesday, taking out the previous weekly highs by 1.6560 to 1.6605 thus far. Any additional gains need to be capped below 1.6620 to keep hopes alive for USD bulls. Above 1.6620 should accelerate and open direct retest of the 2009 highs by 1.6665 from June 3. Back below 1.6415 will be required to take the pressure off of the topside. USD/CHF trades with a heavy tone and after breaking below the previous higher low by 1.0650 on Tuesday, looks set for a retest and break of the recent 2009 lows by 1.0590. However, any additional setbacks are seen limited to the 1.0550 area on Wednesday.
Flows - Asian central bank offers in Cable; UK clearer on the bid. Japanese selling in Usd/Jpy. Funds selling Gbp/Jpy. Option related offers in Aussie. IMM, model funds, Asian reserve managers, Russian specs and Middel Eastern names all on the bid in Eur/Usd.
Trade of the Day - Gbp/Jpy: Although the cross has been recovering since posting historical lows by 118.85 in early 2009, the overall trend is still grossly bearish and we continue to look for opportunities to sell into rallies. The weekly chart shows a very bearish close in the previous week, after being unable to extend gains to fresh 2009 highs and subsequently breaking the previous weekly low, to end a sequence of 4 consecutive positive closes of higher highs and higher lows. The result has been the formation of a major head & shoulders topping formation on the daily chart, which now shows the market attempting to carve out the right shoulder before what is anticipated to be a more significant decline over the coming weeks. Although the neckline by 155.00 was marginally breached on Tuesday, inability to close below negated the likelihood for an immediate drop, only warning of the anticipated decline. However, any rallies from here are now seen well capped ahead of 160.00 and we will look for an opportunity to sell into the current rebound, ahead of renewed weakness and a break back below the neckline. A break below 154.10 should accelerate towards the measured move objective of the head & shoulders top, which comes in by 147.50. Strategy: SELL @159.05 FOR AN OPEN OBJECTIVE, STOP @161.55. Recommendation to be removed if not triggered by NY close (5pm ET) on Wednesday.
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 email@example.com and you will be added to the distribution list.
Quant section prepared by David Rodriguez, Quantitative Strategist for DailyFX.com
To contact, e-mail firstname.lastname@example.org
Joel Kruger publishes 6 daily pieces:
Tech Talk - A Daily Video Highlighting Technical Developments in the Overnight Session of Trade.
Monday-Friday (between 5:30am-6:30am EST)
Morning Slices - Morning Overview using Fundamental, Technical, Flow, and Quantitative Analysis (Includes Trade of the Day).
Monday-Friday (between 6:30am-7:30am EST)
Indicator of the Day - A Feature Report that Highlights our Most Significant Technical Indicator of the Day.
Monday-Friday (between 8:00am-9:00am EST)
Midday Snapshot - A Midday Fundamental Update, along with Technical Analysis of Selected Rates.
Monday-Friday (between 10:30am-11:30am EST)
Scandi Daily - A Specialized Daily Fundamental and Technical Overview of the Nordic Currencies. (This report is only distributed through email. Please contact Nordic@fxcm.com if you would like to be added to distribution.)
Monday-Friday (between 11:30am-12:30pm EST)
Daily Classical - A Daily Technical Overview of the Major Currencies.
Monday-Friday (published between 2:00pm-3:00pm EST)