MIDDAY SNAPSHOT
The stronger than expected release of ISM non-manufacturing data this morning, at 43.7 versus estimates for a 42.0 print, and record low Libor, have failed to inspire additional buying of risk, with the USD finally finding some bids as investors are seemingly reminded that we are still in a bear market and recent rallies could be approaching overdone. US equities are also tracking lower on the day, with the Nasdaq easily leading the way, down over 1%. Much of the focus has been on the testimony of Fed Chair Bernanke and ongoing Q&A session in which the Bernanke fields a broad range of questions on the economy, the Fed’s role and the stress tests. Although Bernanke has expressed some optimism with regard to the outlook for the economy, there have been a number of tempered remarks, with the Fed Chair saying that business investment indicators remain “extremely weak” and are likely to remain weak. Although there has been no clear insight into the result of the stress tests, Bernanke warns that a relapse in the banking sector could stall the recovery. ISM has also been on the wires with its economic outlook and unlike Bernanke, expects to not see a recovery until 2010. Elsewhere, EU Almunia is back on the wires talking of his positive outlook for the global economy. After trading to fresh 2009 highs by 0.7480, Aussie has backed off and trades closer to 0.7400 heading into the London fix, with the highly equity correlated currency weighed down by the pullback in US stocks. The currency has also suffered from a recent McCrann article in which the Herald Sun business editor writes of the potential for a downgrade to the AAA rating for the state of Victoria. Leveraged accounts and models continue to show good interest on dips however. The NZD is the outperformer on the day, while the Swissy is the big loser. Oil has pulled back below $54, and gold trades modestly higher.
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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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”).
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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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“Daily Classical” – A Daily Technical Overview of the Major Currencies.
Monday-Friday (published between 2:00pm-3:00pm EST)
