Any positive momentum in the Euro from overnight trade has fizzled out into the US session, with the confirmed 50bp rate cut from the Bank of Canada, and much weaker than expected US pending home sales data once again reminding investors of the rapid deterioration in the global economy.
Any positive momentum in the Euro from overnight trade has fizzled out into the US session, with the confirmed 50bp rate cut from the Bank of Canada, and much weaker than expected US pending home sales data once again reminding investors of the rapid deterioration in the global economy. Fed Chair Bernanke has been on the wires, talking tough on the need for the US to move “aggressively” to deal with the financial crisis. Bernanke goes on to say that the markets face “extraordinary challenges” that need to be addressed quickly. The Fed has officially announced the launch of its TALF program for March 25, 2009. The Fed also said that it had revised the terms and conditions of the facility. Usd/Jpy continues to show well bid on Tuesday with a US prime name and UK clearer seen as the major buyers. Looking ahead to the afternoon, things could start to get interesting with the Euro eying a break of the 1.2515 (18Feb 2009 low) level. A break below 1.2515 will trigger sell-stops and should then expose a direct retest on the critical trend lows by 1.2330 from late October 2008 over the coming days.
Aud/Nzd - The cross has been tracking higher over the past several days breaking to fresh 2009 highs and now threatens to clear the 2008 multi year highs by 1.2970(24Jul high) over the coming session. However, with the daily studies looking quite stretched as evidenced by the overbought stochastics and RSI, scope exists for a short-term pullback over the coming days. While we expect 1.2970 to indeed be cleared, the critical 1.3000 psychological barriers are just above. Market participants will often look to book profits on positions by big figures and the logic is even more applicable to tests of major psychological barriers. As such, we recommend looking to sell on rallies to 1.3000 in anticipation of a much needed healthy short-term corrective pullback towards the 10-Day SMA by 1.2700 at a minimum. Fundamentally, we question the RBA’s decision today, and hardly feel that this should be taken as any sign of a bottom in the Australian economy or the global economy for that matter. The decision by the Bank of Canada to cut rates by 50bps as expected this morning supports our view and we suspect that the Aussie is now slightly overdone. Strategy: SELL @1.3000 FOR A 1.2700 OBJECTIVE, STOP @1.3150. Stops to be trailed to cost on a break below 1.2900.
Written by Joel Kruger, Technical Currency Analyst for DailyFX.com
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