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USD Sold on More China Reserve Currency Talk (Morning Slices)

Friday, 26 June 2009 10:09:28 GMT  |  Joel Kruger, Technical Currency Strategist

A data light overnight session failed to dissuade traders from selling their USDs and buying back into currencies, with Sterling leading the charge. China was back on the wires talking down the USD reserve currency status after calling for the world to cut its reliance on a small set of reserve currencies through the creation of a super-sovereign currency.

MORNING SLICES

Fundys – A data light overnight session failed to dissuade traders from selling their USDs and buying back into currencies, with Sterling leading the charge. Middle Eastern names and model fund accounts were rumored to be driving Cable back above 1.6500, while CTA stops were tripped in Eur/Usd above 1.4080. German import prices hardly factored into price action after coming in on the weaker side and putting in the biggest annual drop since March of 1987. Meanwhile, the Swiss KOF leading indicator came in better than forecast, but also failed to influence directional moves. China was back on the wires talking down the USD reserve currency status after calling for the world to cut its reliance on a small set of reserve currencies through the creation of a super-sovereign currency. Elsewhere, ECB Sramko was rather downbeat after saying that uncertainty remained high and a recovery was seen deeper into 2010. Kiwi has been the laggard on the session, weighed down by the weaker overnight GDP reading. US equity futures point to a lower open, while commodities are bid, led by oil back above $71. Looking ahead, personal consumption (0.1% expected), personal income (0.3% expected) and personal spending (0.3% expected) are all due at 12:30GMT, followed by Michigan confidence (69 expected) at 14:00GMT.

Quant –


For information on the above tables, please visit our Guide to Morning Slices Quant section

Techs - EUR/USD (See below). USD/JPY back under pressure in the final session of trade for the week and a lower top could be in place by 96.60 ahead of the next drop below 94.90 and towards key support at 93.55-85. Levels to watch over the coming session come in by 96.10 and 95.00. GBP/USD well bid on Friday and looks like it could be poised for a retest of the 2009 high at 1.6665. Key levels to watch today come in by 1.6605 and 1.6365. USD/CHF finally starting to give back some of the latest sharp up moves with the market trading back into the 1.0800’s thus far. However, our bias remains quite constructive since breaking above 1.1000 and any dips should be well supported today into the mid 1.0700’s.  

Flows – Middle Eastern and model demand for Cable. CTA stops tripped in Eur/Usd. Option expiries in Usd/Cad at 1.1415, 1.1530 and 1.1600. Central bank offers in Aussie; option expiries at 0.8140.

Trade of the Day – Eur/Usd: No compelling set-ups on Friday thus far, but the market already has the feel of a strong USD down day, with currencies pushing to fresh daily highs across the board. While we still hang on to our USD bull bias, it looks as though this could really be tested today as the major trades back towards the recent range highs. The key levels to watch over the coming session come in by 1.4140 and 1.4175 with a break above to accelerate gains to 1.4200 on what is sure to be some significant stop-hunting. Nevertheless, we think any rallies above 1.4200 should be well capped and we will look to sell by the 78.6% of the 1.4340-1.3750 move which comes in just over 1.4200 if given the chance. Strategy: SELL @1.4205 FOR AN OPEN OBJECTIVE, STOP @1.4355.  Recommendation to be removed if not triggered by NY close (4pm ET) on Friday. 

Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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Quant section prepared by David Rodriguez, Quantitative Strategist for DailyFX.com
To contact, e-mail drodriguez@fxcm.com

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