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The much weaker than expected Michigan confidence data has set the tone for the day with the markets opting to exit their higher yielding investments in favor of the safer lure of the USD and Yen.

MIDDAY SNAPSHOT & ANALYSIS OF SELECTED RATES

The much weaker than expected Michigan confidence data has set the tone for the day with the markets opting to exit their higher yielding investments in favor of the safer lure of the USD and Yen. The Yen has been the strongest currency by far on the day as the weight of the elevated risk aversion translates into massive cross yen related sales. Despite some mild setbacks against the USD, the Canadian Dollar has also held up quite well after manufacturing data and new motor vehicle sales were much stronger. Meanwhile, some stop related buying of Kiwi on the crosses helped to keep the New Zealand Dollar on top as the only other currency besides the Yen to show gains against the buck on the day. Earlier, both Kiwi and Aussie posted fresh 2009 highs against the greenback. Other US data including US CPI, industrial production and capacity utilization failed to factor into price action after more or less as expected results. All major US equity indices are down by more than 1.50%, while commodities are also well offered led by crude selling. There are stops in crude building up below $68.50.

ANALYSIS OF SELECTED RATES

Aud/Nzd: The market has collapsed on Friday to 1.2250 thus far, after trading as high as 1.2455 early on. The 200 point plus move is well beyond the 125 point average true range for the market and has resulted in a test of some multi-day channel support off of the April highs. As such, we have opted to take advantage of the intraday pullback with hourly studies well oversold and daily studies also now looking stretched. We look for an initial rebound back towards former support by 1.2355, with a break back above 1.2465 to accelerate gains. While we had been looking to sell Aud/Usd this morning, the subsequent price action leaves more bearish on Kiwi and has therefore inspired the current trade. We are also quite comfortable with the position for now given the lack of direct USD exposure. POSITION: LONG @1.2275 FOR AN OPEN OBJECTIVE, STOP @1.2075.

Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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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.
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