A positive close in US equities on Wednesday has also helped to reinfuse some risk appetite, but it remains to be seen if we will indeed see any follow through today.
Relative Performance Versus USD on Wednesday (As of 11:00GMT) –
1) AUSSIE +0.65%
2) KIWI +0.51%
3) STERLING +0.16%
4) CAD +0.13%
5) EURO +0.01%
6) SWISSIE -0.06%
7) YEN -0.54%
There is a lot of data out of the US today including; ADP employment, non-farm productivity, unit labor costs, initial jobless claims, continuing claims, factory orders, ISM non-manufacturing, ICSC chain store sales, and oil and gas inventories. On the official circuit, Fed Lockhart is slated to speak on the US outlook, while Fed Rosengren and Fed Hoenig are also slated to speak. Treasury Secretary Geithner will attend the G-20 meeting in South Korea. There has been a bit of a divergence between currencies and other markets, with the Euro pulling back ahead of the US open, while US equity futures and oil prices are higher.
EUR/USD: The market looks to be attempting to establish a short-term base ahead of 1.2100, and our outlook over the coming days is constructive, with Wednesday’s break back above Tuesday’s high helping to confirm the shift in structure. Initial resistance comes in by 1.2450, and a break above this level should accelerate gains back towards next key topside resistance at 1.2670. Only back below 1.2100 would negate outlook and force a resumption of the broader downtrend.
USD/JPY: The whipsaw price action from violent trade in early May has delayed our outlook but certainly does not change our overly constructive bias. The medium-term higher low from early March just over 88.00 remains intact, with the market stalling out ahead of the level, and we now look for a push higher from here back towards and through next key topside barriers by 95.00. Only a break back below 88.00 would negate and give reason for pause.
GBP/USD: The market is in the process of correcting since basing out by 2010 lows at 1.4240 in mid-May. Look for additional upside back towards the 1.5000 area from where the next lower top is sought out ahead of a fresh downside extension back below 1.4240, and towards 1.3500 further down. Ultimately, our core outlook remains bearish while below 1.5500, with only a break back above this level required to shift.
USD/CHF: The overall outlook remains highly constructive and while daily studies do not rule out the possibility for some form a pullback to allow for technicals to unwind, any setbacks should be very well supported ahead of 1.1200, in favor of an eventual push towards 1.2000. In the interim, short-term support comes in by 1.1430 and a break and close below will be required to trigger the onset of a short-term corrective pullback.
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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