Fundys - Sterling has been the standout in the overnight session with the single currency getting hit hard and descending below the previous weekly lows at 1.3960 into the 1.3800's thus far. A combination of Llyods and Barclays troubles, downbeat BoE Bean comments and a gloomy BCC outlook for the UK economy have all been attributed to the relative weakness, with the lack of any significant event risk on the broader calendar helping to accelerate the declines. Many officials have been on the wires overnight with SNB Kohli saying that the Swiss economy is not immune from the global deterioration, while Japan PM Aso has said that the government will not intervene in the stock market. In the Eurozone, ECB Stark and Bini-Smaghi continued with their hawkish tone after questioning the effectiveness of lower interest rates as a tool to solve the financial crisis. In contrast, ECB Liikkanen and Gonzalez-Paramo still see room for lower rates. On the data front, the Sentix came in weaker than expected while also showing the first drop in the future expectations componen t since December of 2008. Finally, Warren Buffett has been talking with CNBC this morning, saying that the economy has “fallen off a cliff.” Buffett does offer some longer-term optimism saying that the economy will be running fine in 5 years time. Global equities are markedly lower on the day while the US stock market points to a much lower open. Looking ahead to the North American calendar, the only scheduled event risk comes in the form of Canada housing starts (148.5k expected) due at 12:15GMT.
Techs - EUR/USD has pulled back into Monday leaving the price confined to some more sideways trade above the previous week's fresh 2009 lows at 1.2455. We hold no intraday directional bias and look for a break above 1.2755 or back below 1.2455 to provide a clearer picture. USD/JPY continues to be very well supported in the 97.00 area with the pair once again bouncing out from 96.55 to trade back towards 99.00. The market has been locked in a choppy sideways consolidation since late February and key levels to watch now come in by 99.70 and 96.55. GBP/USD is trading with a heavy tone into the new week with the market now taking out the previous weekly lows at 1.3960. Next support comes in by 1.3830, the 78.6% fib retrace off of the 1.3500-1.4990 move. Back above 1.4185 required to delay. USD/CHF has shown little follow through from Friday's sharp sell-off with the market trading by daily opening levels at 1.1585. Overall, the pair remains locked within a multi-day consolidation, with a break above 1.1890 or back below 1.1465 required for clear directional bias.
Flows - Oil has been suspiciously trading higher even with the lower global equities. There is talk of ongoing speculation that OPEC will look to cut production once again. This comes after comments from the organization's secretary general who said that the low price of oil is now unacceptable. Swiss bank and German bank on the offer in Cable .
Trade of the Day - Eur/Gbp: Friday's bullish price action has carried over into Monday with the cross ascending to multi-day highs well into the 0.9000's thus far. However, the cross has been in the process of carving out a major top on the daily chart with a life-time high at 0.9805 from late December, followed by a confirmed lower top by 0.9520 from late January. A fresh lower top is now being sought out with falling trend-line support off of the previous levels coming in just under 0.9100. As such, we will look for an opportunity on Monday to sell by the falling trend-line resistance in anticipation of bearish trend resumption. The 50% fib retrace off of the 0.9520-0.8635 move and 38.2% retrace off of the major 0.9805-0.8635 move directly coincide at 0.9075, while the previous high from February 2 at 0.9085 all help to contribute to the strong confluence of resistance just under 0.9100. Strategy: SELL @0.9090 FOR A 0.8810 OBJECTIVE, STOP @0.9160. Stops to be trailed to cost on a break back below 0.9050. If trade triggers and 0.9050 not broken, position to be closed out at NY close (5pm EST) on Monday. Recommendation to be removed if not triggered by NY close on Monday.
Fundamental Catalyst - The lack of event risk on Monday's calendar is shifting all of the market focus to the UK today, with the ongoing concerns within the domestic financial sector seemingly elevating this morning, in light of the news that Lloyds Bank will now join the government “Asset Protection Scheme” (APS), while Barclays is also negotiating some form of rescue for a reported GBP60B in toxic assets. Meanwhile, Bank of England Bean has warned that the UK is in the early stage of a “particularly nasty recession.” Finally the “British Chambers of Commerce” (BCC) has come out with an even gloomier and more downbeat outlook on the UK economy, which has been seen weighing on Sterling. Nevertheless, from a data standpoint, the releases over the past several weeks out of the UK have begun to come in better than analyst consensus, to potentially warn of a bottom within the beaten down economy. In contrast, Eurozone data has begun to disappoint more consistently, and we see the greater risk from here for a more rapid Euro depreciation. Effective monetary policy will be the key to recovery in our opinion, and it is quite clear that the BoE has been more aggressive in their reaction to the financial crisis than their European counterpart. It stands to reason that whichever countries are able to get ahead of the curve the quickest will manage to come out of this global recession fastest.