MORNING SLICES
Fundys – Price action has been more than impressive overnight with the markets seemingly unbothered by a flurry of risk sensitive developments that up until recently would have triggered a fresh wave of flight to safety buying. The WHO has upgraded the flu swine virus to phase 5, a notch just under global pandemic, while the WSJ reports that Chrysler talks have collapsed and the company is on the verge of filing for Chapter 11. Meanwhile, ECB Stark has come out with some dovish talk, after saying that there is still modest room to move on rates. On the data front, Eurozone CPI was a shade softer than expected while the unemployment rate was much higher than expected. Price action in Kiwi has been somewhat suspicious today, with the currency failing to maintain yesterday’s outperforming status after the RBNZ slashed rates as expected by 50bps to 2.50%, and more importantly were very downbeat in their assessment on the outlook for the economy. Finally, in Japan, the BoJ has reiterated that the economy has worsened sharply and that financial conditions are severe, after leaving rates at 0.1%. Despite all of the above, market sentiment remains high with the USD and Yen remaining well bid and global equities surging once again. Market participants also continue to focus on a cautiously optimistic Fed and some encouraging components out of Thursday’s GDP data. Some bright spots overnight include better than expected unemployment numbers out from Germany and a not as bad Nationwide house price release out of the UK. Looking ahead to the North American session, Canada GDP (-0.1% expected), raw material (2.0% expected) and product prices (0.5% expected) are due at 12:30GMT, along with US personal consumption (0.2% expected), personal income (-0.2% expected), personal spending (-0.1% expected), initial jobless claims (640k expected) and continuing claims (6200k expected). Chicago PMI (35.0 expected) is due shortly thereafter at 13:45 GMT. US equity futures point to an open some 2% higher while on the commodity front, oil is higher by some 1.50% while gold has pulled back, down 0.75%.
Quant –
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Techs - EUR/USD continues to surge, taking out some falling channel resistance in the lower 1.3300 to reach 1.3390 thus far ahead of the latest minor pullbacks. The break above the channel top opens the door for additional upside, with daily studies showing some more room to run. Ultimately however, we maintain a longer-term bearish bias and will be looking for opportunities to fade the current rally. Key levels to watch over the coming session come in by 1.3390 and 1.3245. USD/JPY very well supported on dips to Ichimoku cloud with the market finally reversing course on Wednesday to break back above Tuesday’s 96.80 highs, ending a sequence of 7 consecutive daily lower highs. Scope from here for additional strength in the days ahead with key levels to watch above and below by 98.15 and 97.15. GBP/USD remains locked in choppy sideways trade with Wednesday’s break back above 1.4775 opening the door for a push back towards the 1.5000 area. Ultimately, only a clear break back above 1.5070 will shift structure while below 1.4400 is required to resume downtrend. Key levels to watch over the coming session come in by 1.4950 and 1.4745. USD/CHF failed to close below the 200-Day SMA on Wednesday, which is fairly significant considering the 200-Day SMA has supported pullbacks dating back to March. We will continue to watch the price action relative to the 200-Day SMA to see if we can once again put in a close back above. The 200-Day SMA currently resides by 1.1365. A close below is bearish.
Flows – UK clearer on the offer in Cable. Reserve manager offers in Euro; spec and German bank on the bid. Large option expiry in Usd/Jpy at 98.00 for Thursday.
Trade of the Day – Usd/Cad: Has pulled back quite sharply over the past several days with the market breaking to fresh multi-day lows below 1.1980 to just shy of the 200-Day SMA by 1.1850 thus far. While the current pullback changes the picture somewhat, the broader structure still remains constructive with the market locked in a longer-term bullish consolidation dating back to October of 2008. As such, any dips towards the bottom of the range should be used as opportunities to establish long positions in anticipation of a move back into the mid-range at a minimum. Strategy: BUY @1.1855 FOR A 1.2270 OBJECTIVE, STOP @1.1680.
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
To contact, e-mail drodriguez@fxcm.com
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)
“Cross Country” – A Midday Fundamental Update, along with Technical Analysis of Selected Cross Rates.
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“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.
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