Currencies Find Renewed Bids on Gold Surge

MORNING SLICES

FUNDYS
 

The US Dollar has come back under some pressure early in the week, with the failure of Eur/Usd to close below the 50-Day SMA on Friday helping to fuel some renewed broad based currency buying. Fundamentally, it has been the rally to fresh record highs by $1170 in gold prices and some comments from Fed Bullard that have weighed on the buck. Fed Bullard has recently said that he would like to see the Fed extend the life of its MBS buying program beyond March’s end point.

Relative Performance Versus USD on Monday (As of 11:10GMT) –

1)    KIWI             +1.33%
2)    CAD              +1.26%
3)    AUSSIE        +0.98%
4)    SWISSIE      +0.85%       
5)    EURO            +0.75%
6)    STERLING    +0.69%   
7)    YEN               +0.06%

Elsewhere, M&A related activity revolving around bids for Cadbury have been moving markets in the UK on news that Ferrero and Hershey do not have sufficient funds for the acquisition. On the data front, German and Eurozone PMIs have been released and have come in broadly in-line with expectation,  Australian new motor vehicle sales rose for the third month in a row, while New Zealand consumer confidence pulled back from its previous 22-month high. 

Looking ahead, Canada retail sales (0.4% expected) are due at 13:30GMT, along with the Chicago Fed national activity index. US existing home sales (5.7M expected) then follow at 15:00GMT. US equity futures point to a higher open, while commodities are well bid, led by yet another surge in gold.

GRAPHIC REWIND
 

TECHS
 

 
EUR/USD The market stubbornly remains well bid on dips to the 50-Day SMA which has supported much of the up-trend in 2009. While we continue to favor the prospects for the formation of a major double top on the daily chart, with a neckline by 1.4625, the market will need to close below the 50-Day SMA to accelerate declines and force a material shift in the construct. Ultimately, only back above 1.5065 negates and gives reason for rethink.

USD/JPY Remains locked in an intense downtrend, with the latest setbacks below 89.00 to likely open a direct retest of the recent trend lows by 88.00 over the coming sessions. Below 88.00 will then unlock the critical matched trend lows from late 2008 and early 2009 by 87.15. A lower top is now sought out by 90.60 with only a break back above this level to delay bearish structure.

GBP/USD (See “Trade of the Day”).

USD/CHF We continue to retain a constructive outlook for the pair despite the underlying bearish trend with medium-term studies overextended and warning of a more meaningful corrective rally. While the latest pullback has matched the recent 2009 lows by 1.0030, this does not rule out the potential for a double bottom formation to be confirmed on an eventual break back above 1.0335. Ultimately, only back under 1.0030 would undermine our constructive outlook and put pressure back on downside.       
 

FLOWS
 

Custodial account selling Gbp/Usd. Swiss bank on the offer in Eur/Gbp. US prime name on the offer in Eur/Usd; Asian central bank bids. Aussie well bid on the back of some commodity related interest. Local accounts looking to buy Usd/Cad on dips.

 

TRADE OF THE DAY

Gbp/Usd: The market has been well confined to a prominent range that has defined price action for the past several months. As such, any rallies towards 1.7000 should be used as a formidable opportunity to build on short positions, with only a break and close back above 1.7045 to negate outlook. Next support comes in by 1.6460, with a break to accelerate declines towards more significant support at 1.6250. For now, look for any rallies to be well capped ahead of 1.6700. STRATEGY: SELL @1.6645 FOR AN OPEN OBJECTIVE; STOP 1.6810. RECOMMENDATION TO BE REMOVED IF NOT TRIGGERED BY NY CLOSE (5PM ET) ON MONDAY. LEVERAGED 3X.
 

PORTFOLIO OVERVIEW

 

P&L Update and Overview: Many of you have been asking for a way to better track trading results and open positions. In response to these requests and in an effort to be fully transparent, a simulated portfolio was created in June to track and mirror all recommendations and trades. Below is a return on equity curve since inception on June 1, 2009, along with an open and closed position tracker. I am hopeful that this will make things easier for you all.

Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
If you wish to receive Joel's reports in a more timely fashion, e-mail jskruger@fxcm.com and you will be added to the "distribution" list.

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