Posted by Mulder Venture at 3:51 am
The Yen, Sterling and Australian Dollar have been the standout currencies on the day thus far, with price action in these currencies being driven by some obvious fundamentals.
FUNDYS
The Yen, Sterling and Australian Dollar have been the standout currencies on the day thus far, with price action in these currencies being driven by some obvious fundamentals. For the Yen, the rally has been all geopolitical with the news that North Korea has fired into the no sail zone waters by South Korea attributed to the safe haven Yen buying. In the UK, Sterling has found some fresh bids on some rather upbeat comments out from BOE Sentance. Meanwhile in Australia, the firmer than expected inflation data has once again generated some fresh buying in the antipodean, which is the second best performer on the day. Nevertheless, gains have been capped somewhat after Australian Treasurer Swan downplayed the CPI result and said that inflation was expected to remain low for some time.
Relative Performance Versus USD on Wednesday (As of 10:00GMT) –
1) YEN +0.29%
2) STERLING +0.27%
3) AUSSIE -0.03%
4) SWISSIE -0.04%
5) EURO -0.10%
6) CAD -0.23%
7) KIWI -0.25%
Elsewhere, the Euro trades somewhere in the middle of the pack on Wednesday, but has found some sell interest on the back of comments from Dr. Doom Roubini who says that he’s never been more pessimistic over the EMU than he is at present. Also seen weighing on the Euro are comments from EU Juncker who expresses dissatisfaction over the imbalances created by an overvalued Euro and undervalued USD and Yuan. ECB Weber has managed to balance things out a bit after predicting that Eurozone growth in 2010 will be better. Weber does however concede that the crisis is probably not over. Finally, ECB Trichet has offered his support for Obama’s plan to control the banks, but also says that proposals should be coordinated globally. UK CBI distributive trades was not yet released at time of print.
Looking ahead, US mortgage applications are due at 12:00GMT, followed by the more market moving new home sales (374k expected) at 15:00GMT. Things then quiet down for a couple of hours until the highly anticipated afternoon event risk in the form of the FOMC rate decision. While it is widely anticipated that the Fed will leave rates unchanged at 0.25%, the focus will be on any modifications to the accompanying statement that provide hints as to the direction of monetary policy over the medium-term. US equity futures are marginally offered, while oil trades flat and gold is lower.
GRAPHIC REWIND
TECHS
EUR/USD After breaking down through a multi-day consolidation below the 200-Day SMA to signal a material shift in the structure and expose a measured move objective by 1.3800 further down, the pair has been in the process of a fresh bout of consolidation between 1.4030 and 1.4190. We anticipate that the consolidation will soon be broken to the downside, with a break below 1.4030 and close below 1.4000 seen accelerating declines to 1.3800. Only back above 1.4200 delays outlook and gives reason for pause.
USD/JPY (See below)
GBP/USD Gains have stalled out by 1.6455, with the market looking like it is now ready for bear trend resumption after the formation of a bearish daily gravestone doji-like candle in the previous week. Key short-term support comes in by 1.6085 and we will look for a break below this level to reaffirm our bearish outlook and accelerate declines back towards critical medium-term support by 1.5700 over the coming days. For now, any intraday rallies should be well capped ahead of 1.6370.
USD/CHF The market is in the process of carving out a major base since dipping down below parity in November 2009. Look for a higher low by 1.0130, to be confirmed on a break back above 1.0500 over the coming sessions. Above 1.0500 will then open a fresh upside extension back towards next key resistance in the 1.0700 area. Only back under 1.0130 would delay outlook and give reason for pause. Bulls should look for opportunities to buy on dips into the 1.0250-1.0300 area.
FLOWS
Funds and importers on the bid in Usd/Cad; US prime name on the offer. US prime name and some private clients selling Nzd/Usd aggressively. UK clearer selling Gbp/Usd. Leveraged accounts and macro funds building short Eur/Usd positions.
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