Euro Sell Recommendation Issued @1.4060

MORNING SLICES

FUNDYS
 

Any initial fears some 24 hours ago on the back of the unexpected RBA rate pause and expressed concerns from the Australian central bank over the developments in the global economy, have now been well offset and put to rest, after an upbeat round of earnings and alleviated Greece issues. The triple digit gains in the DJIA and rebound in commodities have helped to bolster appetite for higher yielding currencies as well, with even the beaten down Aussie recovering well off of its post RBA lows.

Relative Performance Versus USD on Wednesday (As of 11:00GMT) –

1)    AUSSIE          +0.33%
2)    SWISSIE       +0.28%
3)    EURO             +0.27%
4)    STERLING    +0.21%       
5)    KIWI               +0.15%
6)    YEN                -0.06%   
7)    CAD                -0.07%

Asia: The Australian trade deficit was released overnight and came out slightly weaker than expected, while UK Nationwide consumer confidence showed an improvement. However, traders should not get too excited just yet with some developments still weighing on sentiment. While we have seen some form of a Greek relief rally, there are those that are still highly concerned after an article in the UK Telegraph about a commission of experts that told parliament that it had uncovered Euro 40B of hidden debts. Meanwhile, in China, the Fitch downgrade of 2 midsized banks has also generated some negative attention.

Europe: Trade in the European session was fairly steady with some mild USD selling seen pushing Eur/Usd back above 1.4000, while some stops were also tripped in Aud/Usd above 0.8900 to put the market just shy of the pre-RBA levels. Data failed to materially influence price action with German and Eurozone PMI coming in slightly better than expected, while UK PMI was weaker. Eurozone retail sales were also released and came in weaker than expected.

Looking ahead, mortgage applications are due at 12:00GMT, followed by challenger job cuts at 12:30GMT. ADP (-40k expected ) then comes out at 13:15GMT, followed by the more highly anticipated ISM non-manufacturing (51 expected) at 15:00GMT.  US equity futures point to a slightly higher open, while commodities are also bid.
 

GRAPHIC REWIND

 
TECHS
 

EUR/USD (See below)

USD/JPY The measured move objective off of the double top triggered on the break below neckline support at 91.25 has now been reached and although the overall trend appears to be grossly bearish at present, shorter-term technicals are starting to look a little stretched and could potentially be warning of a more significant upside reversal over the coming sessions. Key short-term resistance comes in by 90.90 and look for a break above this level to confirm basing and open a push back towards 92.00. Back under 89.00 negates and opens fresh drop.

GBP/USD The latest bout of consolidation has been broken, with the market easily taking out 1.6085, to accelerate declines and expose a direct retest of key medium-term support by 1.5700 over the coming days. While we would not recommend buying at current levels, daily studies are looking stretched and the risks from here are for a potential bounce back towards 1.6100 before bearish resumption towards 1.5700.

USD/CHF The latest break back above 1.0500 suggests that the market has now carved out a major base that exposes some fresh medium-term upside towards 1.1000 over the coming weeks. However, given the intensity of the run-up over the past few days from 1.0200 to 1.0600, a short-term corrective pullback can not be ruled out. Nevertheless, we would look to use any dips into the 1.0350-1.0400 region as a formidable opportunity to build on existing longs in anticipation of a higher low.
 

FLOWS
 

UK clearer sales in Eur/Gbp. Model funds bidding Eur/Usd. Leveraged accounts and buy-side shops back on the bid in Aussie.
 

TRADE OF THE DAY
 

Eur/Usd: The objective from the 1.4200-1.4600 consolidation break has now been reached, with the market dropping sharply into the 1.3800’s on Friday ahead of the latest minor bounce. While our core view continues to favor additional downside, short-term technical studies are now oversold and warrant a much needed and healthy corrective bounce. At a minimum, look for a push back into the mid-1.4000’s before considering the potential for a bearish resumption. Next major support comes in by 1.3745, the June 2009 lows, with shorter-term support now at 1.3850. STRATEGY: SELL @1.4060 FOR AN OPEN OBJECTIVE; STOP 1.4210. RECOMMENDATION TO BE REMOVED IF NOT TRIGGERED BY NY CLOSE (5PM ET) ON WEDNESDAY. 3X LEVERAGED.

PORTFOLIO OVERVIEW
 

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