Greenback Dumped Yet Again Overnight (Morning Slices)

MORNING SLICES

Fundys – The New Zealand Dollar has taken front and center stage on Tuesday with the single Currency racing higher on the back of some solid Global risk appetite , better c urrent account data and news that local dairy Giant Fonterra has raised its payout Forecast to farmers. Also seen bolstering the antipodean to fresh 2009 highs has been the NZIER’ s upwardly revised economic Growth Forecasts For the first time in over a year. Currencies in general are back on the bid with any USD rallies from Monday being completely negated. The EUro and Swissie have also joined in on the USD beat up, and have rallied to fresh 2009 highs. Sterling remains relatively weak with the Currency getting hit hard of late against the EUro, Aussie and Kiwi. The more downbeat assessment from the BoE and general shift in sentiment towards the economy of late has been seen as the primary driver For the weakness. Meanwhile UK PM Brown has come out saying that continued stimulus is vital For the global recovery, while also downplaying any talk of a quick exit strategy. Elsewhere, the Currency head at UBS has been on the wires overnight saying that the G7 should deal with the falling USD and initiate some Form of a coordinated intervention to prop the beleaguered currency. Nothing really of note in the EUropean session, with ECB Weber reiterating that rates are appropriate. There was however some geopolitical risk in South Africa , with US government offices reportedly shut down on Tuesday due to threats. Looking ahead, Canada retail sales (0.5% expected) are due at 12:30GMT, followed by the Richmond Fed (16 expected) and US house price index (0.5% expected) at 14:00GMT.

Techs - EUR/USD has rallied to fresh 2009 highs on Tuesday above 1.4800 after totally negating any hopes for a short-term TOP by 1.4770. However, with daily studies still showing overbought we continue to look for opportunities to sell into rallies. Any gains beyond 1.4800 on Tuesday are seen limited. USD/JPY Back under pressure on Tuesday with the gains from the break of a double bottom by 91.65 neckline resistance stalling well shy of the 93.30 objective in favor of a resumption of the broader downtrend. It is too early to tell at this point, but a lower TOP could now be in place by 92.55 ahead of the next drop below 90.00 and towards critical support by 87.15. Back under pressure on Tuesday with the gains from the break of a double bottom by 91.65 neckline resistance stalling well shy of the 93.30 objective in favor of a resumption of the broader downtrend. It is too early to tell at this point, but a lower TOP could now be in place by 92.55 ahead of the next drop below 90.00 and towards critical support by 87.15. GBP/USD We continue to maintain a sell on rallies approach to this market with the view that the pair has made a meaningful high above 1.7000 this year. The market looks to be in the process of carving the right shoulder of a head & shoulders top that ultimately would project setbacks to 1.5000 over the coming weeks. We are now nearing and expected to test key neckline support which comes in just under psychological barriers at 1.6000. Any intraday rallies above 1.6400 on Tuesday should be sold into. USD/CHF The recent break below 1.0275 now opens the door for a deeper drop into the lower 1.0200’s over the coming hours. However, daily studies are now oversold and we would recommend looking to take advantage of any dips towards the 1.0200 figure to establish a very playable long trade. The 1.0200 figure coincides with the 78.6% fib retracement off of the major 2008 low-highs and should serve as a formidable level to prop any additional declines.

Flows – Models selling Usd/Cad ; German account on the bid. UK clearer bids in Usd/Jp y . US prime name  buying Cable .

Trade of the Day – Eur/Nzd: We simply can’t ignore the aggressive drop in this market so early in the day with the cross rate already moving some 100 points more than its average true range and leaving the hourly studies severely oversold. Any additional pullbacks from here are seen limited with the greater risk for a more significant corrective bounce. The market had been attempting to base above critical psychological barriers at 2.0500 over the past several days before mounting a mild recovery rally last week. However this was negated today with the break below 2.0500 to fresh 2009 lows. Nevertheless, we view the drop as more of a stop chase than any real effort to take the cross much lower and as such, we have established a long position just over 2.0500 and will be looking for a sizeable bounce over the coming hours/days. POSITION: LONG @2.0520 FOR AN OPEN OBJECTIVE, STOP @2.0270.



NO CHANGE TO P&L TODAY; BUT CURRENTLY RUNNING 4 OPEN POSITIONS IN EUR/GBP, GBP/AUD, EUR/NZD, AND NZD/USD.

Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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