Australian Dollar Surges to Fresh 2009 High

Published September 30th, 2009 - 03:15 GMT

The commodity currencies were certainly not to be ignored, with all three taking the top performing major currency spots on the day.  Aussie has been the strongest on the back of the better than expected data overnight, with the single currency standing out as the only major currency to rally to fresh 2009 highs on Wednesday.



MORNING SLICES

Fundys – The key economic release in the overnight session came from the Eurozone with Germany unemployment data pleasantly surprising and coming in much better than expected.  The Euro had been trading down by 1.4600 ahead of the release and took some time to get going immediately following, but eventually started to climb back towards 1.4700 heading into the US open. Sterling was also well bid on the session with upbeat comments from UK PM Brown, and BoE Miles, along with some better data in the form of the Gfk consumer confidence and index of services, helping to revive the beaten down pound. Elsewhere, Eur/Chf was very well offered, with the Franc finding bids on the much firmer than forecast KOF. The commodity currencies were certainly not to be ignored, with all three taking the top performing major currency spots on the day. Aussie has been the strongest on the back of the better than expected data overnight, with the single currency standing out as the only major currency to rally to fresh 2009 highs on Wednesday. The rally in the commodity currencies has also been aided by indication of a higher US equity open along with stronger commodities. In Japan, comments from FinMin Fuji that there are no plans to raise the Yen at G7 were sourced as a reason for some additional Yen strength. Looking ahead, ADP employment is due at 12:15GMT, immediately followed by US (-1.2% expected) and Canada (0.5% expected) GDP. Chicago PMI (52 expected) comes out later at 13:45GMT.  On the official circuit, Fed Lockhart is slated to speak at 14:30GMT, while Fed Kohn is up at 16:30GMT.

Quant –



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Techs - EUR/USD (See below). USD/JPY We are skeptical with the early setbacks on Wednesday and do not see declines extending much below 89.30. Daily studies still show the need for a more significant healthy corrective bounce, and the strong bullish doji close on Monday reaffirms. As such, we recommend taking advantage of any pullbacks and looking for opportunities to buy on dips towards 89.30 in anticipation of an eventual break back above 90.35 and into the 91.00-92.00 area. GBP/USD While the recent H&S top that triggered in the previous week projects deeper setbacks over the medium-term to a measured move objective at 1.5000, we would caution bears with daily studies in the process of bouncing from oversold and more likely inclined to bounce some more ahead of the next downside extension. As such, selling into rallies back towards 1.6150 is the favored strategy on Wednesday. USD/CHF Looks like it could be in the process of carving out a base after dropping to a fresh 2009 low by 1.0185 in the previous week. The market has since broken back above 1.0300 and now has its sights set on establishing a close above the 20-Day SMA at 1.0375. A close above 1.0375 will be encouraging for bulls and open an acceleration of gains back towards 1.0500 over the coming sessions.

Flows – Talk of heavy Eur/Gbp sales into the London fix. US investment name buying Eur/Usd on dips. Option expiries at 90.00 in Usd/Jpy continue to get attention.

Trade of the Day – Eur/Usd: Setbacks appear to have stalled for now by the 20-Day SMA, with the market rebounding marginally on Wednesday thus far. However, we continue to contend that a short-term top is in place at a minimum, in favor of some deeper setbacks over the coming days to the 1.4400-1.4465 area.   Ultimately, any rallies on Wednesday should be well capped by 1.4700 (projected ATR high and 10-Day SMA), with only a break back above 1.4730 giving reason for concern. STRATEGY: SELL @1.4700 FOR AN OPEN OBJECTIVE; STOP 1.4855. RECOMMENDATION TO BE REMOVED IF NOT TRIGGERED BY NY CLOSE (5PM ET) ON WEDNESDAY.




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Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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Quant section prepared by David Rodriguez, Quantitative Strategist for DailyFX.com
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