The big news this morning has been the official introduction by the SNB of active intervention in the Franc. The Swissy has sold off dramatically across the board on the news with the SNB reportedly intervening following the interest rate decision in which the central bank cut rates by 25bps to 0.25% as expected. This has impacted the broader market with the greenback benefiting across the board as a result. The yen has been the second biggest loser on the day with the SNB intervention talk fueling concerns over a potential BoJ intervention at current levels. ECB President Trichet has been on the wires with some upbeat remarks citing a majority of economists who see the global economy recovering 2010. On interest rates, he does not rule out the possibility for additional accommodation. Treasury Secretary Geithner is testifying on the 2010 budget and says that the US economy is suffering from a “severe lack of demand” from households and businesses. On the data front, things were mixed with retail sales coming in much better, while initial jobless claims and continuing claims were weaker. Continuing claims ascended to yet another record high. Many traders were quick to discount the better than expected retails sales due to the volatility of the number. Equities have been doing their own thing today and continue to rally with the S&P leading and up some 1.15% on the day. Commodities have also been well bid as oil trades 3.5% higher and gold shows +2.00%.
ANALYSIS OF SELECTED CROSS RATES
Gbp/Aud – The latest round of setbacks could be finally stalling out after finding a low by 2.1120 on Wednesday and rebounding into the afternoon to put in a doji close. This has been followed up with some bullish price action on Thursday with the cross taking out Wednesday’s high to end a sequence of 3 consecutive daily lower tops. The latest drop has also failed to establish a close below the 61.8% fib retrace off of the 2009 low-highs. As such, the market could now be looking to carve out a more medium-term higher low above 2.0750 (26Jan lows) at 2.1120 ahead of a fresh upside extension back above 2.2880 over the coming weeks. Look for confirmation on a break back above Thursday’s high at 2.1515 into Friday. Longs are only recommended on a break back above 2.1515. Inability to clear 2.1515 negates and exposes deeper setbacks. Strategy: BUY @2.1520 FOR A 2.2575 OBJECTIVE, STOP @2.1090.
Written by Joel Kruger, Technical Currency Analyst for DailyFX.com
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Monday-Friday (between 5:30am-6:30am EST)
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“Indicator of the Day” – A Feature Report that Highlights our Most Significant Technical Indicator of the Day.
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“Cross Country” – A Midday Fundamental Update, along with Technical Analysis of Selected Cross Rates.
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“Daily Classical” – A Daily Technical Overview of the Major Currencies.
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