Sterling Well Bid in Overnight Trade; Kiwi Underperforms

MORNING SLICES

Fundys – Sterling has been the standout outperformer in the overnight session of trade with the better than expected Nationwide HPI report, positive M&A related flows and negative outlook on the German banking system all helping to bolster the single currency. The Dollar is generally offered across the board as currency, commodity and equity bulls look to take advantage of the latest dips to build on existing long positions. In cross related price action, Eur/Gbp has been a big mover on the day with yesterday’s technical break of some solid rising trend-line support now opening the door for a retest of the yearly lows by 0.8400. In the Eurozone, the German jobless data was better than expected, with unemployment rate holding steady at 8.3%, while Eurozone economic sentiment also managed to exceed expectations. Elsewhere, Kiwi was an underperformer overnight, with the antipodean weighed down by a downbeat accompanying outlook to the interest rate decision which resulted in an unchanged verdict at 2.50%. RBNZ governor Bollard suggested that interest rates could still go lower in order to stimulate economic recovery, while also expressing some concern over the strength of the New Zealand Dollar. Looking ahead, Canada industrial product (0.1% expected) and raw materials prices (3.0% expected) are due at 12:30GMT, along with US initial jobless claims (570k expected) and continuing claims (6300k expected). US equities point to a higher open, while oil is also bid and gold is marginally improved. 

Quant –


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

Techs - EUR/USD (See below). USD/JPY in the process of some consolidation ahead of the next major move. Overall structure remains bearish however and we favor a lower top at current levels and below 96.00 ahead of the next drop below 91.75 and towards 87.15 over the medium-term. GBP/USD price action remains very choppy and unpredictable but ultimately we look for a right shoulder to now carve out on the daily chart ahead of a drop back below 1.6000 and trigger of a major H&S topping pattern. As such any rallies towards 1.6600 on Thursday should be well capped. USD/CHF caught in some sideways consolidation following Wednesday’s impressive gains and we look for an eventual push higher through critical resistance by 1.1025 over the coming sessions. Any setbacks should now be well supported ahead of 1.0775.

Flows – Option expiries in Us/Jpy by 95.00. Swiss bank buying Aud/Usd. Middle Eastern, corporate and real money accounts buying Cable. French bank and UK clearer selling Eur/Gbp. 

Trade of the Day – Eur/Usd: We fear that things could get quite ugly today with the market showing the potential for a painful break higher before once again resuming the downward price action that we have seen over the past couple of days. As such, we will look to take advantage of any intraday rallies that overshoot the previous hourly double top neckline by 1.4120, in anticipation of a bearish continuation and fresh drop towards the double top measured move objective in the lower 1.3900’s. The 78.6% fib retracement off of the most recent 1.4200-1.4005 move comes in by 1.4155 and we will use the mid-figure as an ideal entry point for our short trade. STRATEGY: SELL @1.4150 FOR AN OPEN OBJECTIVE, STOP @1.4355. RECOMMENDATION TO BE REMOVED IF NOT TRIGGERED BY NY CLOSE (5pm ET) ON THURSDAY.



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.



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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
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