morning slices

The USD has been offered all day with the initial selling seen accelerating into European trade and ahead of the US open. The Swiss Franc and Euro have both surged to fresh 2009 highs against the Greenback, while all other major currencies are very well bid, including the Yen, which has cleared some recent trend highs and now eyes a retest of its late 2008 and early 2009 highs against the buck.

MORNING SLICES

FUNDYS

The USD has been offered all day with the initial selling seen accelerating into European trade and ahead of the US open. The Swiss Franc and Euro have both surged to fresh 2009 highs against the Greenback, while all other major currencies are very well bid, including the Yen, which has cleared some recent trend highs and now eyes a retest of its late 2008 and early 2009 highs against the buck. Renewed speculation of potential reserve diversification, and the expectation that the Fed will leave rates on hold for a long time to come, seem to have been fueling the price action, while surging commodity prices, led by record high gold, has not helped the USDs cause.

Relative Performance Versus USD on Wednesday (As of 12:20GMT) –

1)    AUSSIE        +1.03%
2)    CAD              +0.99%
3)    YEN               +0.87%
4)    SWISSIE      +0.74%       
5)    KIWI              +0.70%
6)    EURO            +0.68%   
7)    STERLING    +0.64%

On the data front, UK GDP was the headline release, with the number coming in broadly in-line with consensus estimates, and more or less failing to materially factor into price action. Also out was German Gfk confidence data which unexpectedly weakened for the second month in a row. In Sweden, consumer confidence was much better than expected, while in Norway, the unemployment rate also exceeded expectations after coming in lower than the previous print and well below consensus estimates.

Elsewhere, the news that Russia was prepared to invest some reserves in Canadian Dollars was seen generating some attention, while "Mr. Yen" Sakakibara was out touting is preference for a fast fall in Usd/Jpy to the 85.00 level before the BOJ would consider intervention. The Australian Dollar the outperformer on the day, with the single currency finding its relative strength from the record high gold prices, bullish comments from RBA Battellino, and much stronger construction and skilled job vacancy data.

Looking ahead, the US economic calendar is stacked. US durable goods orders (0.5% expected) are due at 13:30GMT, along with personal income (0.2% expected), personal spending (0.6% expected), and personal consumption (0.1% expected). Also out at 13:30 are initial jobless claims (500k expected) and continuing claims (5550k expected).  University of Michigan confidence (67 expected) then follows at 15:00GMT, along with new home sales (0.8% expected). US equity futures point to a firmer open, while commodities are also well bid. Markets are expected to lighten up later today as US traders head for the exits early ahead of the Thanksgiving holiday.
 

GRAPHIC REWIND
 

TECHS

 
EUR/USD The prospect for a major double top formation on the daily chart is starting to fade, with the market failing to roll over thus far and seemingly more content on a consolidation above the 50-Day SMA. Wednesday’s break back above 1.5000 is somewhat concerning and this has opened the door for a break to fresh 2009 highs beyond 1.5065. However, we continue to see the medium-term outlook as stretched and would therefore recommend looking to fade any rallies to fresh 2009 highs. As such, rallies towards 1.5100 should be sold on Wednesday.

USD/JPY (See below)

GBP/USD (See below)

USD/CHF The latest setbacks have now severely damaged the prospect for a major double bottom formation, with the market dropping back below 1.0100 and accelerating to fresh 2009 lows below critical psychological barriers at parity. For now however, we still retain our constructive outlook and classify the current price action as consolidative with the market in the process of carving a major base. Look for the break to fresh 2009 lows to be well supported by 1.0000 on a close basis, with only a close below to give reason for concern.    
 

FLOWS

UK clearer selling Gbp/Usd and buying Eur/Gbp. US and Swiss investment bank tripping buy stops in Eur/Usd. Model funds on the offer in Usd/Cad. Leveraged funds looking to build on long Aussie and Kiwi positions.
 

TRADE OF THE DAY
 

Usd/Jpy: Remains locked in an intense downtrend, with the latest setbacks below the recent trend lows at 88.00 to now unlock the critical matched trend lows from late 2008 and early 2009 by 87.15. However, with the daily RSI dipping below 30, daily studies warn that the current pullback could be nearing an end, and as such, we will look for an opportunity to buy on dips towards 87.15 over the coming session, in anticipation of a major upside reversal. STRATEGY: BUY USD/JPY @87.20 FOR AN OPEN OBJECTIVE; STOP LOSS @85.90. RECOMMENDATION TO BE REMOVED IF NOT TRIGGERED BY NY CLOSE (5PM ET). 3X LEVERAGE.
 

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 ultimately 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 on a close basis below 1.6800. Our short position from earlier in the week was stopped at break-even and we will look to re-sell further up on Wednesday if given the chance. Our entry point for the trade coincides with the 78.6% fib retracement off of the recent 1.6880-1.6460 move. STRATEGY: SELL @1.6785 FOR AN OPEN OBJECTIVE; STOP 1.6920. RECOMMENDATION TO BE REMOVED IF NOT TRIGGERED BY NY CLOSE (5PM ET) ON WEDNESDAY.
 

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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