The markets continue to respond well to the latest Treasury plan to rid banks of toxic assets with US equities surging on the day as reflected by all of the major indices. Also seen bolstering investor sentiment has been the much better than expected US existing home sales data. However, the FX market has not responded in the same way with the USD rallying against all of the majors in New York. The disparity in the price action seems to reflect differing interpretations of the recent events. Clearly the FX market are far more skeptical with traders opting to flow back into the safer USD. The stronger housing data might also be somewhat misleading with many of the sales being attributed to large block sales of bank-owned homes. ECB Orphanides has been on the wires this morning echoing previous comments from Trichet and Weber of the potential for lower rates. This has also been seen weighing on the Euro. In the UK, soon to retire BoE Blanchflower warns of a further unemployment deterioration. Blanchflower also argues for the need for additional stimulus. Elsewhere, data out of Canada was weaker than expected with leading indicators coming in at -1.1%, the biggest fall in 27 years. Still, this has not negatively impacted the Cad, with all of the commodity currencies outperforming on the session as the commodity trade comes back into favor.
ANALYSIS OF SELECTED RATES
Aud/Nzd – The cross continues its decline off of the 1.2935 2009 highs from March 2, now trading back into the 1.2200’s. However, the broader structure still remains constructive and the preferred strategy is to look for opportunities to buy into dips in anticipation of a resumption of the major up-trend. Daily studies are nearly oversold with the RSI at 32 and we will look for a dip below 30 to consider buying. The move to 30 in the RSI should coincide with a confluence of formidable support by 1.2200 in the form of the 61.8% fib retrace off of the 2009 low-highs along with the 100/200-Day SMAs. Any setbacks below 1.2200 are seen limited. Strategy: BUY @1.2190 FOR A 1.2580 OBJECTIVE, STOP @1.1890.
Written by Joel Kruger, Technical Currency Analyst for DailyFX.com
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