MIDDAY SNAPSHOT & SELECTED RATES
The US equity market has responded impressively to pressure overnight after futures were showing a lower open. This has helped to attract fresh bids in currencies and out of safe-haven USD and Yen trades with the Euro, Swissie and Cable all rallying back to daily opening levels. Data out of the US this morning was on the weaker side after initial jobless claims came in higher than expected and continuing claims posted another record high. Meanwhile PPI was relatively inline with consensus estimates, although notable declines were seen in women’s apparel, electricity, natural gas, tobacco, computers and aircraft prices. Oil prices have also bounced out from their daily lows but still track lower by over 1% after the IEA has cut demand forecasts. Switzerland has been in the news a lot today with the disastrous producer prices released overnight putting in the biggest yearly drop in over 20 years. This was followed this morning by SNB Jordan who was on the wires once again reaffirming the central bank’s commitment to the active depreciation of the Franc. GM CEO Henderson says that bankruptcy is now more probable, but stresses that in order for it to work, it needs to be quick. Elsewhere, rumors of a Russian bank failure were confirmed but also mitigated by the fact that the bank was a very small and insignificant, having no real impact on the global macro economy.
ANALYSIS OF SELECTED RATES
Gbp/Jpy: We are not entirely convinced of the prospects for this trade to trigger by the New York close, but if it does, we will be there to happily take it on. The cross has been trending higher since basing out by historic lows at 118.85 back in January. However, a break below rising trend-line support at the end of April started to suggest that the correction could soon be nearing expiration. The market has since traded back above the trend-line, before once again breaking back below on Wednesday to set up the potential for a 1-2-3 top and open the door for a resumption of the broader downtrend. The cross has now put in consecutive daily lower highs, and we look for a fresh lower top ideally just under 147.00 to be confirmed on a break back below Thursday’s 143.90 lows. We realize that our entry is quite a ways off, but we will not chase trades and always prefer for our levels to come to us rather than chasing levels that aren’t really there. Strategy: SELL @146.85 FOR A 140.85 OBJECTIVE, STOP @148.85. Stops to be trailed to cost on a break back below 145.85. If trade triggers and 145.85 not broken, position to be closed out at NY close (5pm ET) on Thursday. Recommendation to be removed if not triggered by NY close on Thursday.
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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Monday-Friday (between 5:30am-6:30am EST)
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“Indicator of the Day” – A Feature Report that Highlights our Most Significant Technical Indicator of the Day.
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“Cross Country” – A Midday Fundamental Update, along with Technical Analysis of Selected Cross Rates.
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