Greenback Seen Lower into Thursday (Daily Classical)

EUR/USD – While today’s break below 1.2515, to fresh 2009 lows at 1.2455 now opens the door for a retest of 1.2330, there is room for a corrective rally over the coming days, before considering resumption of the broader downtrend. The bullish hammer-like price action on Wednesday, suggests that at a minimum, we should see some more upside into Thursday. Ultimately however, any rallies are expected to be well capped below the 20-Day SMA at 1.2755 which has acted as a ceiling on a close basis throughout 2009. Strategy: SIDELINED; AWAIT CLEARER SIGNAL.

USD/JPY – The latest three day consolidation has been broken and despite highly overbought readings the price has pushed higher to easily exceed previous resistance by 98.70-90 (26Feb high/50% fib retracement) into the mid 99.00’s thus far.  While in the more medium-term we favor additional upside above 100.00 into the 104.00 area after the pair had broken out of a major double bottom at 94.60, in the shorter-term we continue to favor looking for compelling opportunities to fade the current up-move. There is some formidable resistance just over 100.00 as well, in the form of the 200-Day SMA (100.15) and upper Bollinger (100.10).  Strategy: SIDELINED; AWAIT CLEARER SIGNAL. We had issued a sell recommendation earlier today at 100.15 but it does not look like the trade will trigger.

GBP/USD – Wednesday’s break back above Tuesday’s 1.4160 high should now delay additional setbacks temporarily in favor of some corrective action into Thursday. The market looks to be putting in a bullish outside day following 3 consecutive down days and we see the risk for a move back towards 1.4385 (26Feb high). Ultimately, any rallies should eventually stall out ahead of the 50-Day SMA at 1.4445 which has proved to be a formidable resistance point for much of the downtrend. Strategy: SIDELINED; AWAIT CLEARER SIGNAL.

USD/CHF – Remains locked in a choppy multi-day sideways consolidation with price action largely confined to the 1.1465-1.1890 area. The overall structure however remains bullish and we expect dips to continue to be well supported ahead of an eventual break to challenge the key 2008 highs at 1.2300. Back above 1.1890 should accelerate gains and open fresh upside, while only below 1.1465 delays. It is worth noting that despite the sideways chop, the market has now managed to put in 7 consecutive daily higher lows to reaffirm overall bullish bias. Strategy: SIDELINED; AWAIT CLEARER SIGNAL.