Most of the attention overnight was centered around the UK with a number of negative developments weighing heavily on Sterling to force yet another round of selling in the single currency which had just recently surged to fresh 2009 highs by 1.6665 on Wednesday. Looking ahead, all eyes now turn to the highly anticipated US NFP release (-521k expected), and unemployment rate (9.2% expected) at 12:30GMT.
MORNING SLICES
Fundys – Most of the attention overnight was centered around the UK with a number of negative developments weighing heavily on Sterling to force yet another round of selling in the single currency which had just recently surged to fresh 2009 highs by 1.6665 on Wednesday. But Cable is now well off of those highs and now trades significantly lower back towards 1.6000 on Friday. Although UK PPI was broadly in line with expectations, the overnight slump in construction output, which put in the biggest drop since 1963, has forced the ONS to come out and downwardly revise its Q1 GDP figures closer to -2.2% from -1.9% previously. Additionally, the Cabinet reshuffle and resignations in the government have left many traders with a sense of insecurity and uncertainty over the outlook on the political front, which has not helped the currency. In Switzerland Swiss CPI came out with an on the whole worse than expected result after the yearly rate put in its biggest decline since 1959. Elsewhere, Usd/Jpy continued to rally with an escalation in geopolitical tensions helping to fuel bids after Japan supposedly announced that it would deploy interceptors over the North Korea threat. Canada unemployment data was released this morning and came in worse than expected after the unemployment rate rose to 8.4%, when analysts had been looking for a rise to 8.2%. Several officials on the wires overnight with ECB Weber warning that although recent central bank efforts have helped, the economic outlook was still far from certain. EU Almunia expressed concerns over the state of the Central and Eastern European economies, and ECB Hurley reiterated that the central bank had not ruled out the possibility for lower rates. In Japan, Bank of Japan Mizuno said that the Japanese economy was moving in line with expectations and discouraged the tactic of buying bonds to monetize public debt, favoring measures to provide ample liquidity. Looking ahead, all eyes now turn to the highly anticipated US NFP release (-521k expected), and unemployment rate (9.2% expected) at 12:30GMT. On the Fed circuit, both Rosengren and Yellen are slated to speak on the panel at a Fed conference at 18:15GMT. Consumer credit (-6.0B expected) comes out just after at 19:00GMT. The Australian Dollar is the strongest currency on the day, while the Yen Is the weakest. US equity futures point to a higher open, but commodities are flat to lower.
Quant –
For information on the above tables, please visit our Guide to Morning Slices Quant section
Techs - EUR/USD is starting to show signs of a potential top, after posting fresh 2009 highs by 1.4340 on Wednesday. However, the market will need to break below 1.4070 to open a fresh wave of selling and accelerate declines. Back above 1.4245 concerns. USD/JPY finally broke above some shorter-term triangle resistance on Thursday to once again put pressure back on the recent range high by 97.25. A break above should accelerate gains while back under 95.85 will shift focus back on downside. GBP/USD continues to correct off of the 2009 highs by 1.6665 from Wednesday with next support now eyed by 1.5920. Only back above 1.6200 delays for now. USD/CHF looks to be attempting to carve out a base after positing its 2009 lows by 1.0590 earlier in the week, with a break back above 1.0765 to accelerate gains and expose the 1.0955 recent highs. Look for dips to now be well supported ahead of 1.0600.
Flows – Asian central bank and Russians selling Euro; Dutch bank on the bid. Japanese offers in Usd/Jpy. Heavy demand in Eur/Gbp from a number of accounts. CTA stops above 1.0765 in Usd/Chf. Swiss bank on the bid in the lower 1.6000’s in Cable; US investment house and models on the offer. Option expiries in Aussie at 0.8025 and 0.8090.
Trade of the Day – Gbp/Aud: After breaking to 12 year lows by 1.9700 in early May below the critical psychological barriers at 2.00, the market underwent a decent sized correction back above the 2 handle to 2.0600 in late May before finally pulling back once again over the past several days. However, we do not see and real potential for the cross rate to sustain itself below 2, and with the latest pullback stalling out by the 78.6% fib retracement off of the 1.9700-2.0600 move, this sets up a very playable and compelling counter-trend opportunity. Additionally, with shorter-term studies also showing the daily ATR (Average True Range) already exceeded, and with the hourly RSI well below the oversold 30 level, any risk for additional setbacks intraday are also limited. We have cued off of a 30 minute reversal to establish the position. Position: LONG @1.9915 FOR AN OPEN OBJECTIVE, STOP @1.9680.
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
If you wish to receive Joel's reports in a more timely fashion, e-mail [email protected] and you will be added to the "distribution" list.
Quant section prepared by David Rodriguez, Quantitative Strategist for DailyFX.com
To contact, e-mail [email protected]
Joel Kruger publishes 6 daily pieces:
“Tech Talk” – A Daily Video Highlighting Technical Developments in the Overnight Session of Trade.
Monday-Friday (between 5:30am-6:30am EST)
“Morning Slices” – Morning Overview using Fundamental, Technical, Flow, and Quantitative Analysis (Includes “Trade of the Day”).
Monday-Friday (between 6:30am-7:30am EST)
“Indicator of the Day” – A Feature Report that Highlights our Most Significant Technical Indicator of the Day.
Monday-Friday (between 8:00am-9:00am EST)
“Cross Country” – A Midday Fundamental Update, along with Technical Analysis of Selected Cross Rates.
Monday-Friday (between 10:30am-11:30am EST)
“Scandi Daily” – A Specialized Daily Fundamental and Technical Overview of the Nordic Currencies. (This report is only distributed through email. Please contact [email protected] if you would like to be added to distribution.)
Monday-Friday (between 11:30am-12:30pm EST)
“Daily Classical” – A Daily Technical Overview of the Major Currencies.
Monday-Friday (published between 2:00pm-3:00pm EST)
