The better than expected US ISM data has failed to bolster any confidence in the markets this morning with market far from convinced that the improvement in the data series offers any indication of a bottoming within the economy. Meanwhile construction spending was a nightmare coming in much worse than expected while in Canada, GDP came in -1.0% to put in the biggest monthly drop since October 1982. However, Q4 data wasn’t as bad after contracting by 3.4% against analyst expectations for a-3.5% drop. The government lifeline to AIG and troubles at HSBC have weighed on investor sentiment, while downbeat comments from the Oracle of Omaha have not helped. The DJIA has now broken below 7000 which has infused a fresh sense of panic into the equity markets on Monday. This now opens a fresh drop exposing the April 1997 lows by 6356.
Eur/Gbp – The market has carved out a major top by 0.9805 back in December 2008 and has now put in a confirmed lower top by 0.9520 in late January. We are now in the process of attempting to carve out the next lower top ahead of a fresh downside extension back below 0.8635 (10Feb lows). As such, today’s surge towards 0.9000 should be used as a formidable entry point for a playable counter-trend move back into the overriding downtrend. The daily average true range has now been met which ultimately should translate into a daily high somewhere in the 0.9000 area and not much higher. Position: Short @0.9000 FOR A 0.8725 OBJECTIVE, STOP @0.9085. Stops to be trailed to cost on a break below 0.8920.
Written by Joel Kruger, Technical Currency Analyst for DailyFX.com
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Joel Kruger publishes 6 daily pieces:
“Tech Talk” – A Daily Video Highlighting Technical Developments in the Overnight Session of Trade.
Monday-Friday (between 5:30am-6:30am EST)
“Morning Slices” – Morning Overview using Fundamental, Technical, Flow, and Quantitative Analysis (Includes “Trade of the Day”).
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“Indicator of the Day” – A Feature Report that Highlights our Most Significant Technical Indicator of the Day.
Monday-Friday (between 8:00am-9:00am EST)
“Cross Country” – A Midday Fundamental Update, along with Technical Analysis of Selected Cross Rates.
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“Scandi Daily” – A Specialized Daily Fundamental and Technical Overview of the Nordic Currencies. (This report is only distributed through email. Please contact Nordic@fxcm.com if you would like to be added to distribution.)
Monday-Friday (between 11:30am-12:30pm EST)
“Daily Classical” – A Daily Technical Overview of the Major Currencies.
Monday-Friday (published between 2:00pm-3:00pm EST)
