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Confidence Data Boosts Kiwi – Cautious BoE Slaps Sterling

Confidence Data Boosts Kiwi – Cautious BoE Slaps Sterling

2011-05-18 15:16:00
Michael Boutros, Technical Strategist
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Daily Winners and Losers

Confidence_Data_Boosts_Kiwi_Cautious_BoE_Slaps_Sterling_body_Picture_2.png, Confidence Data Boosts Kiwi – Cautious BoE Slaps SterlingConfidence_Data_Boosts_Kiwi_Cautious_BoE_Slaps_Sterling_body_Picture_3.png, Confidence Data Boosts Kiwi – Cautious BoE Slaps SterlingConfidence_Data_Boosts_Kiwi_Cautious_BoE_Slaps_Sterling_body_Picture_4.png, Confidence Data Boosts Kiwi – Cautious BoE Slaps Sterling

The Kiwi topped performance charts against the dollar overnight after breaking above the 0.7850 resistance level in early Tokyo trade. The move snaps a three day losing streak for the New Zealand dollar as steep declines in commodities and subdued risk appetite saw traders jettison the high yielding kiwi. Strong consumer confidence data overnight gave lift to the currency which eyes resistance at the 0.79-handle. A break here sees topside targets at 0.7930 and 0.7980. Interim support now rests at 0.7850 with subsequent floors seen at the 38.2% short-term Fibonacci extension taken from the May 12th peak and the overnight high at 0.7820, and 0.7770.

Key Levels/Indicators

Level/Indicator

Level

50-Day SMA

0.7748

20-Day SMA

0.7952

10-Day SMA

0.7886

2011 High

0.8120

Confidence_Data_Boosts_Kiwi_Cautious_BoE_Slaps_Sterling_body_Picture_5.png, Confidence Data Boosts Kiwi – Cautious BoE Slaps SterlingConfidence_Data_Boosts_Kiwi_Cautious_BoE_Slaps_Sterling_body_Picture_6.png, Confidence Data Boosts Kiwi – Cautious BoE Slaps Sterling

The highly anticipated minutes from the May 5th BoE policy meeting revealed a vote of 6-3 to keep interest rates unchanged at 0.5%, warning that raising rates, “could adversely affect consumer confidence.” The news had traders pushing back rate-hike expectations and weighed on the sterling which was the worst performer overnight against the greenback. Disappointing employment data accelerated the pounds decline after the April jobless claims report printed at 12.4K, missing calls for a flat read. The report marks the highest read on claims since January 2010 and highlights the fragility of the UK economy as the jobless count rate up ticked to 4.6% from 4.5% a month earlier. The sterling broke below support at the lower bound trend line of the ascending channel, plummeting 0.74% for a 132% move of its average true range. The pound found solace at trend line support dating back to April 21, just above the 1.61-handle. Relative strength suggests the pound may be oversold here with a short-term correction expected to encounter resistance at the 1.6170 level. Subsequent ceilings are eyed at 1.6190 and 1.6240, with downside targets held at the 1.61-figure, 1.6070 and the long term 50% Fibonacci extension taken from the 2009 and 2010 trough at the 1.60-handle. Retail sales data out tomorrow will provide traders with another gauge of the health of the UK consumer, with sales widely expected to have picked in April.

Upcoming Events

Date

GMT

Importance

Release

Expected

Prior

5/19

8:30

MEDIUM

Retail Sales ex Auto Fuel (MoM) (APR)

0.8%

0.2%

5/19

8:30

MEDIUM

Retail Sales ex Auto Fuel (YoY) (APR)

2.2%

0.9%

5/19

8:30

MEDIUM

Retail Sales inc Auto Fuel (MoM)

0.8%

0.2%

5/19

8:30

MEDIUM

Retail Sales inc Auto Fuel (YoY)

2.5%

1.3%

5/19

10:00

LOW

CBI Trends Total Orders (MAY)

-9

-11

5/19

10:00

LOW

CBI Trends Selling Prices (MAY)

-

36

Key Levels/Indicators

Level/Indicator

Level

50-Day SMA

1.6295

20-Day SMA

1.6432

10-Day SMA

1.6300

2011 High

1.6748

Written by Michael Boutros, Currency Analyst for DailyFX.com

To contact the author of this report, please send inquiries to:mboutros@dailyfx.com

You can also follow Michael on Twitter @MBForex

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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