The markets have done a 180 from the overnight session with any positive sentiment out the window in favor of elevated risk aversion and a flight back into safety in the form of the USD. US equities are back under pressure with all major indices down over 1.50% on the day, led by the Nasdaq which is down over 2.00%. It seems as though any positive reaction to the G20 has now been fully priced in and the markets are once again focused on the ongoing deterioration within the global macro economy. Today’s data out of Canada has not helped, with building permits coming nearly 4 times worse than consensus, while Ivey PMI was also extremely discouraging and below expectation. New central bank swap lines have been announced between the Fed, ECB (Eur80B), SNB (Chf40B), BOE (Gbp30B) and BOJ (Jpy10T) in an effort to provide liquidity to US financial institutions. The lines are valid until October 30, 2009. Elsewhere, George Soros was on the wires saying that the strong growth over the past 20 years was unlikely to be repeated and that the IMF’s SDR could replace the USD in the long run. Soros did say that there was the potential for recovery in 2010. Stops have been cleared in the Euro below 1.3365 and technicians now cite a bearish outside day in the works.
ANALYSIS OF SELECTED RATES
Nzd/Cad: After showing some good downside follow through on Friday, our trade was eventually stopped at breakeven on Monday with the market surging back to fresh highs through 0.7300. However, daily studies remain highly overextended and with the market once again on the verge of meeting its daily average true range, we will look to establish fresh shorts in anticipation of a material corrective pullback. Strategy: SELL @0.7330 FOR A 0.7030 OBJECTIVE, STOP @0.7430. Stops to be trailed to cost on a break back below 0.7250. Recommendation to be removed if not triggered by NY close (5pm ET) on Monday.
Written by Joel Kruger, Technical Currency Analyst for DailyFX.com
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