Another overnight session of safe-haven bidding with the Yen and USD benefitting from more global uncertainty. Looking ahead, Case-Shiller house prices are due at 13:00GMT, followed by consumer confidence and Richmond Fed manufacturing at 14:00GMT. The markets will also start to key in on Wednesday’s Fed with the key focus on additional QE measured along with any signs from Bernanke of stabilization within the economy.
MORNING SLICES
Fundys – Another overnight session of safe-haven bidding with the Yen and USD benefitting from more global uncertainty and lower equity prices. Data overnight has been light with most of the attention centering out of developments in the UK. The shockingly stronger than expected CBI distributive trades survey has been taken with more than a grain of salt after the organization admitted the timing of Easter may have distorted the results. The +3 print was well above a -40 consensus estimate and the previous month’s -44 reading. Also in the UK the first post budget gilts sale outcome was better than feared while UK Treasury Ramsden noted that the recent Sterling weakness had helped to mitigate risks in the UK. In the Eurozone, ECB Wellink followed up on Monday’s market moving Nowotny QE comments after saying that further rate cuts needed to be discussed and that he was non-committal on how low rates should go. The latest earnings out from Daimler have not helped investor confidence after the automaker reported a Q1 loss of nearly double estimates at EUR1.426B. Also generating some attention was the latest research out from Fitch which noted that the pressure on capital positions at major Japanese banks was increasing in quantity and quality. The rise in risk aversion over the past 24 hours has not been favorable to the antipodeans with both the Kiwi and Aussie underperforming on the day, with the higher interest rates leaving these currencies exposed. News that China’s steel makers and global miners have agreed to cut iron ore prices sharply has added to the strain, while downbeat comments out from Australia Treasurer Swan haven’t helped either. Looking ahead to the North American session, Case-Shiller house prices (142.8 expected) are due at 13:00GMT, followed by consumer confidence (29.9 expected) and Richmond Fed manufacturing (-17 expected) at 14:00GMT. ABC consumer confidence (-47 expected) is due out later at 21:00GMT. The markets will also start to key in on Wednesday’s Fed with the focus on additional QE measured along with any signs from Bernanke of stabilization within the economy. US equity futures are down some 1.5% while both crude and gold trade lower by some 2.85% and 0.85% respectively.
Quant –
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Techs - EUR/USD has been quiet overnight and now eyes next key support by 1.2980 with a break to expose deeper setbacks towards the key lows by 1.2885. Expect any rallies intraday to be limited to the 1.3165 area with only a break back above 1.3300 ultimately delaying bearish structure. USD/JPY continues to slide since breaking back below the 50-Day SMA on Friday with setbacks extending well into the 95.00’s now. Next key support comes in by 95.65 and we would look for this level to support additional declines. Back above 96.80 would now be required to take pressure off of downside. GBP/USD remains locked in some choppy sideways trade. Ultimately a break above 1.4775 or back below 1.4395 is required for clear directional bias. In the interim, key levels to watch over the coming session come in by 1.4650 and 1.4440. USD/CHF has bounced quite impressively out from the rising trend support off of the March lows and remains very well supported on dips to the 200-Day SMA. Additional upside is now projected back towards and through 1.1740 over the coming sessions. Key levels to watch today comes in by 1.1675 and 1.1500.
Flows – Russian and Asian central bank demand for Euro. Large 1.4535 option expiry reported in Cable; Asian central banks and UK clearer on the bid, also talk of London fix related corporate demand. Intraday spec selling Usd/Cad rallies; M&A related bids (Canada Viterra looking to buy Aussie ABB Grain for Aud1.6B). Japanese retail accounts selling Usd/Jpy. Corporates have been on the offer in Aussie all day.
Trade of the Day – Eur/Cad: While there is still room for some additional weakness, potentially back to the 1.5500 area, we do not expect to see setbacks extend much further with the broader structure still showing mildly constructive. As such, we recommend looking to establish long positions on dips towards 1.5500 over the coming sessions in anticipation of a more significant rally back into the 1.6500 area. Daily studies are approaching oversold which helps to reaffirm near-term basing prospects. Strategy: BUY @1.5750 FOR A 1.6180 OBJECTIVE, STOP @1.5540. Stops to be trailed to cost on a break back above 1.5800. If trade triggers and 1.5800 not broken, position to be closed out at NY close (5p NY time) on Tuesday. Recommendation to be removed if not triggered by NY close on Tuesday.
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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Joel Kruger publishes 6 daily pieces:
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