USD Rallies Across the Board in Overnight Trade (Morning Slices)

MORNING SLICES

Fundys – The economic calendar overnight has been on the lighter end with the only key releases coming from Switzerland and the Eurozone. However, even these releases have failed to factor into price action with Swiss PPI coming in as expected, and Eurozone industrial production slightly weaker. The story of the day has been the come back in the USD, with the greenback gaining across the board. Some have attributed the price action to nothing more than minor profit taking while others have attributed the USD rally to an escalation in safety buying following the announcement that the US government would impose 35% tariffs on Chinese exports. In the UK, Ernst & Young’s warning that the UK housing slump will resume into 2010, Cadbury’s rejection of the takeover proposal from Kraft Foods, and a Moody’s report that the credit outlook for UK banks remains negative, have all been seen weighing on Sterling. Aussie and Kiwi however are the weakest currencies on the day with the pullback in global equities prices, US-China trade tension, and drop in commodities all seen driving the price action. Elsewhere, Japanese Minister of Finance Tango has said that the administration is watching currency moves closely, but will not comment on specific levels. Looking ahead, Canada capacity utilization (65.0% expected) is due at 12:30GMT. On the official circuit, Fed Lacker is slated to speak at 16:30GMT on financial regulation, while Fed Yellen speaks later in the day at 19:50GMT on the economic outlook. US equities point to a lower open by some 1%, while commodities have also come under pressure.

Techs - EUR/USD We are entering optimal levels to start to look to build longer-term and more meaningful short positions. Daily studies are rolling from overbought and the market should be well capped by resistance in the 1.4600-1.4720 area. Look for any rallies above 1.4700 to be unsustainable with the greater likelihood for a minimum pullback into the 1.4300’s. While the 50-Day SMA at 1.4230 is a ways a way at this point, this will be the key medium-term level to watch below. A break will shift the structure. USD/JPY While the overall structure remains intensely bearish, the recent break below 91.75 leaves daily studies oversold and in need of a healthy corrective bounce. Recommend looking to take advantage of current dips to the 78.6% fib retracement off of the 2009 low-highs (90.25) in favor of some decent upside over the coming days/weeks. Inability to bounce over the coming sessions however, will expose direct retest of critical 87.15. GBP/USD We continue to maintain a sell on rallies approach to this market with the view that the pair has made a meaningful high above 1.7000 this year. The ensuing price action is more choppy consolidation than any threat of a fresh upside extension beyond 1.7000. Arguably, the market could even be in the process of carving the right shoulder of a head & shoulders top that ultimately would project setbacks to 1.5000 over the coming weeks. Friday’s gravestone doji formation and Monday’s bearish follow through could act as the catalyst. Above 1.7000 negates. USD/CHF The multi-week prominent range trade has now been broken to the downside with the market taking out psychological barriers at 1.0500 and descending to fresh 2009 lows by 1.0340. However, with daily studies oversold, any additional declines are seen limited, in favor of a sizeable corrective bounce back towards the 1.0700-10900 area over the coming weeks. Friday’s bullish reversal close is showing some good positive follow through on Monday thus far, which could get things going.

Flows – UK clearer bids in Eur/Gbp; Russian account, German bank and US custodial offers. Sovereign bids in Gbp/Usd. Importer bids in Usd/Jpy. Option expiries at 1.4600 in Eur/Usd.

Trade of the Day – No Trade: We have lightened up our exposure on Monday after exiting USD/CAD at cost and trailing stops to lock additional profit in Gbp/Aud. The only other open position is long Usd/Jpy at 90.90 from Friday.

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 been 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.



Additionally, please feel free to check out a full profit and loss statement since inception on June 1, 2009.

 

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