GBPCHF
A Break From the Norm
While it has been obvious from economic releases from both the Swiss and British the past few months that the upper hand is resolutely with the Franc, there are always periods that counter intuition. Speculation remains steadfast that the SNB will continue its pace of hiking the overnight repo rate another quarter point at its next quarterly meeting, even receiving murmurs of a more aggressive 50 point pace. Only pushing the ball further in the Francs court yesterday, the SVME manufacturing survey revealed the first advance in three months in June fixing into place one of the few missing puzzle pieces for the Swiss economy. However, todays UK fundamentals were able to take advantage of the quiet cross currency activity. The Office of National Statistics in London revealed today that firm profitability was the highest ever in 2005 as layoffs and pay cuts preserved revenue from expensive oil. This suggests firms will increase spending throughout 2006 to bolster efficiency and capacity restraints, while in turn offering a hearty boost to GDP. The real question with this news is, How long will this data play out? With the SNB on a clear path of tightening and the BoE not looking at shifting the benchmark rate anytime soon, this pair should revert back to the bears.
Technically Speaking
The 100 point runup seen in the usually volatile GBPCHF pair seems, like it has for the week, to be another retracement in the more prevelant downtrend. However, from a larger time frame, the move higher appears more legit. Yesterdays low point was the lowest level in three months, while the daily bar forming has fully engulfed everything but the previous days wick. While a retracement back to the low is the least technically defended scenario, a break to the upside could be lucrative.
EURCAD
Oil and Fundamentals
Oil prices were squarely on the minds of currency traders, as the happenings in the previous liquid took precedence over the economic data from the pairs respective economies. Canadian fundamentals were off to a slow start on Tuesday as liquidity from the Canadian markets just began to come back on line from the long holiday weekend. Furthermore, the absence of any economic release from the country until Thursdays Ivey Purchasing Managers index has put a crimp on many market participants from putting on long-term positions. The one market moving piece of scheduled data that hit this pair was the Euro-zones producer price index. While the annualized measurement grew to its fastest level in 5 years, the monthly statistic actually slowed to 0.3% from 0.8%. This was the first indicator that was not unequivocally bullish for the euro in nearly two weeks.
Technically Speaking
The pivot higher in the EURCAD yesterday just at the 1.4300 figure has proven resistance carved out not a month before only 20 pips higher is well defended. Todays retracement was quick but ill-equipped to handle some otherwise weak support. Both the former swing high from the 26th/27th of June and the rising 30 simple moving average have stopped the move in its tracks. Though a move higher is the path of least resistance, the 1.4300/20 zone will prove a difficult area to surpass. Conversely, while there are immediate technicals containing a further downside move, they will not likely hold under any serious momentum.
USDCAD
Politics and Commodities
Its not uncommon that crude oil prices and geopolitical tensions drive USDCAD spot, and today was no exception. Not only was a lack of economic releases from either side of the pair not impeding the effects of the crude correlation, but US capital markets were also closed for the Independence Day celebration; further amplifying oil in the cross. Crude oil had settled just pennies from $74 per barrel yesterday and lower prices are not visible in the near term according to global uncertainties. The continuing negotiations between the United Nations and Iran hit another setback today after the top negotiator from the latter rejected demands from the Security Council to halt uranium enrichments. The US has placed a metaphorical line in the sand with a July 12th deadline for the nation to comply with its demands. As the deadline approaches and Iran remains steadfast in its right to use uranium for its own purposes, expect the USCAD to enjoy the ensuing volatility.
Technically Speaking
The break through the steady uptrend in USDCADs lows has put the pairs bulls into a panic. Pushing past 1.1080 support, the 61.8% fib of the now ubiquitous range has now become the next line of defense. If this level should to fall, momentum is likely to build into a move to the bottom of the range around 1.0950. On the other hand, if the fib should prove sturdy, the bulls may still not be out of the woods. A test of previous support is a norm after breaks as big traders hop on for a better price.
