Happy New Year

MORNING SLICES

ABRIDGED

We would just like to take the opportunity to wish everyone a happy and healthy New Year!!!

Relative Performance Versus USD on Thursday (As of 10:15GMT) –

1)    SWISSIE     +0.59%
2)    KIWI             +0.55%
3)    CAD              +0.50%
4)    AUSSIE        +0.47%       
5)    EURO            +0.43%
6)    STERLING    +0.26%   
7)    YEN               +0.09%

Here are some of the latest developments for Thursday:

1)    Markets see whipsaw price action in final hours of 2010
2)    UK Nationwide house price index comes in stronger than expected
3)    BOE credit conditions survey shows encouraging signs with lenders increasing secured credit to households in Q4
4)    ECB Smaghi cautious on outlook; unemployment to increase further; will never see financial markets like before crisis
5)    Gold prices rally on the back of some end of year profit taking
6)    Australian private sector credit rises by seasonally adjusted 0.1%m/m in November
7)    Australian housing credit rises 0.7%m/m versus 0.8% previous
8)    RBA announces that personal credit rises 0.3%m/m; business credit falls 1.0%m/m
9)    Sterling rebounds on M&A related activity surrounding Hershey’s bid for Cadbury

Looking ahead, initial jobless claims (460k expected) and continuing claims (5100k expected) are due at 13:30GMT, followed by NAPM-Milwaukee at 15:00GMT and capped off by the Bloomberg financial conditions index at 21:15.  US equity futures are pointing to a slightly firmer open, while commodities are solidly bid. 
 

TECHS

EUR/USD: While longer-term and medium-term technicals now warn of a major shift in the structure, which favors additional USD gains, shorter-term technicals are stretched, with the daily RSI in the process of recovering from below 30. Remarkably, the daily RSI in the major had not been below 30 since October of 2008. While this development reaffirms the trend shift into the USDs favor, the shorter-term horizon now warns that we could see more of a bounce over the coming days to allow for some inter-day oversold technical readings to unwind. The risks from here are for a bounce back towards the 1.4600 area before considering a fresh downside extension and assault on the 200-Day SMA.

USD/JPY: Despite the latest bounce, the pair still remains confined to a very strong downtrend and any rallies are seen limited, in favor of a bearish resumption. Look for any additional rallies to stall out ahead of 93.00, with only a break and close back above 93.00 to delay outlook and give reason for re-think. Key support now comes in by 91.10, and we look for a break below this level to trigger resumption of downtrend. It is however worth noting that the market has broken back above the daily Ichimoku to potentially warn of a shift in the structure. But moves above the Ichimoku in recent attempts have proved fleeting.   

GBP/USD: The market has now easily cleared support by the 200-Day SMA and psychological barriers by 1.6000 to open the next downside extension towards key medium-term support at 1.5700. Daily studies are however in the process of unwinding from oversold levels, and we would recommend looking to sell into rallies rather than selling on breaks. Look for any rallies to now be well capped ahead of 1.6300, where a lower top is sought out ahead of the retest on 1.5700.

USD/CHF: The break back above 1.0340 has been a critical development which now greatly increases the likelihood of a material shift in the structure in favor of additional USD gains over the coming weeks and months. The market has also now broken back above the 100-Day SMA for the first time since May 2009, while the daily RSI has recently reached its highest levels in over a year, which further strengthens our core bullish outlook. From here, look for any setbacks to now be very well supported ahead of 1.0200, with the market now seen eyeing a test of next resistance by 1.0700 over the coming days.
 

GRAPHIC REWIND

Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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