Currencies have stabilized as we head into the London fix despite the relative strength in US equities which continue to rally on the day. The rally in the Euro had initially extended to daily highs by 1.3070 in the early session, but these gains proved to be fleeting with the major pulling back under 1.3000 and trading well below New York opening levels. On the whole, the morning event risk was discouraging with much weaker empire manufacturing data, disappointing industrial production and TICS data that showed net outflows after the market had been looking for more purchases of US assets. This has no doubt forced profit taking in some of the currencies against the buck with many accounts already content on exiting positions with the intraday rallies well overdone. On the commodity front, both oil and gold track lower, with oil well off on the back of the news that OPEC would not cut production over the weekend. Looking ahead, NAHB housing data is set to be released at 17:00GMT, while ECB President Trichet is scheduled to speak just ahead of the housing data at 16:30GMT.
ANALYSIS OF SELECTED CROSS RATES
Eur/Chf – We continue to look for opportunities to fade the current rally on the cross with the latest moves going parabolic and resulting in overbought stochastics, and an RSI that is above the critical 70 level for the first time since May 2008. We had issued a sell recommendation earlier in the day at 1.5450 but this was just missed, with the market trading to 1.5448 before pulling back to current levels by 1.5400. Should our 1.5450 level not be hit today, we will once again look for opportunities to be short the cross into Tuesday by either selling at 1.5500 by the 200-Day SMA, or on a break back below Monday’s low at 1.5285. Stay tuned…
Written by Joel Kruger, Technical Currency Analyst for DailyFX.com
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