Euro Threatening Break Above Key Short-Term Moving Average

MORNING SLICES

FUNDYS

Currencies are back on the bid on Tuesday, with some notable interest in the Euro, after EU Juncker was out saying that EU FinMins had agreed that new measures on Greece needed to be taken by March 16. The measures included lowering Greece’s fiscal deficits to 4% versus GDP. The Australian Dollar has performed quite well thus far on the day, to even outpace the major currencies, despite a somewhat more balanced and cautious RBA Minutes. The impressive business confidence data and higher local equity prices have been attributed to the relative strength and have managed to easily offset any concerns over the Minutes. RBA Assistant Governor Debelle has also been propping the Aussie on Tuesday after saying that the risks for the US and European economies are to the downside, while in Asia, the risks are to the upside. Elsewhere, BOJ Shirakawa has been out saying that the central bank will act boldly should market conditions get messy. However, these comments have hardly influence Yen price action.

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

1)    KIWI               +0.89%
2)    AUSSIE          +0.60%
3)    EURO             +0.33%
4)    SWISSIE       +0.27%       
5)    CAD               +0.22%
6)    STERLING    +0.15%   
7)    YEN                +0.02%

In European trade, the Euro remained well bid on a continued rally in global equity and commodity prices, while local data failed to materially influence price action. A stronger than expected German ZEW was somewhat offset by a softer Eurozone ZEW. Meanwhile, in the UK, data was also relatively in line, with the CPI the main focus, and coming in on consensus. The news of some solid profits at Barclays did little to promote any relative GBP strength. In the end, any rallies in the Euro, remained well capped ahead of the 10-Day SMA, with the market trading back into the mid-1.3600’s.

Looking ahead, US Empire manufacturing (18.0 expected) and Canada manufacturing shipments (1.8% expected) are due at 13:30GMT, followed by US TIC data ($50.0B expected) at 14:00GMT. NAHB housing (16 expected) caps things off at 18:00GMT. On the official circuit, Fed Lockhart speaks at 17:30GMT in Atlanta, while Fed Kocherlakota speaks in St. Paul at 17:45GMT.  US equity futures and commodities are well bid, with the gold rally continuing to stand out.

GRAPHIC REWIND
 

TECHS
 

EUR/USD It is difficult to determine where we go from here in the short-term, with the market seemingly caught in some choppy bearish consolidation, but also at risk for a bounce given the oversold technical studies. We do however retain a bearish bias and would look for the 10-Day to continue to cap gains ahead of a renewed bout of weakness through 1.3530. A close back above the 10-Day SMA would however delay and open the door for additional corrective gains potentially towards 1.4000 before bearish resumption.   

USD/JPY The violent pullback from several days back certainly dents our outlook in which we had been projecting significant upside over the medium-term. However, the market has still not managed to close below 89.00 and it will be interesting to see how things play out from here. In some ways, the recent whipsaw price action makes it a little easier to call. A break back below 88.55 will confirm bearish resumption, while above 91.30 should accelerate gains to the topside and put the constructive outlook back in play. Until then we remain sidelined.   

GBP/USD The market has finally taken out the key October lows just over 1.5700 to likely open the door for some medium-term setbacks over the coming weeks. However, daily studies are now looking quite stretched and there is a risk for some choppy consolidation before any renewed weakness. Key levels to watch over the coming session comes in by 1.5770 above and 1.5610 below.

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 days. However, given the intensity of the run-up over the past few days from 1.0200 into the 1.0800’s, a short-term corrective pullback and consolidation can not be ruled out. Nevertheless, we would look to use any dips into the 1.0500 region as a formidable opportunity to build on existing longs in anticipation of a fresh higher low.

FLOWS

US custodial and EU central bank agent on the offer in Eur/Usd. Russian demand for Gbp/Usd. Cross yen demand from various accounts. Models still selling Eur/Aud.
 

TRADE OF THE DAY

No Trade: Currently running a long Eur/Cad position and no new set-ups just yet.

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