Currencies:
18Apr The light global economic data leaves the currency markets in a whippy consolidation phase ahead of tomorrow’s much anticipated Spanish 10yr auction. Poor Chinese housing data and concern over Spanish banks’ non-performing loans is offering a modestly negative tone. Watch the speculation about China easing Reserve Requirement Ratios. See below for specific news and levels.
As we have mentioned in past comments, the “authorities” will make forays into the traded markets to prevent collapse, using more than actual monetary policy execution, but also the power of the press to change market conditions. This effect is maximized as the US Fed is now in a situation where another round of QE is being publicly debated.
This is another example of our common theme of the push-pull of the European and American debt/economic situations trading places on the front burner.
Risk-off trading will still tend to favor the USD and Japanese Yen.
Aussie: 18Apr The market has found resistance the last two sessions near our noted falling trend line (103.60) going back to early March. A sustained break out above would target the 38.2% retracement (1.0405) of the decline since the end of Feb. There are also plenty of additional rest stops at 50% retracement (1.0435) and the preceding series of highs: 27Mar 1.0461; 19Mar 1.0529; 08Mar 1.0552; 05Mar 1.0611.
Our Trend and Momentum indicators remain positive and recent action has shown a market clearly shifting to a much less negative technical bias but still vulnerable to negative global economic news. Volume has faltered after a strong showing on last Thursday’s rally.
On a closing basis, the market has found support at the 21-day moving average (1.0220) for the last two months. We also continue to eye the flattening 200-day Moving Average (1.0162). Stay attuned to directional indications for global trade, especially out of Asia, as that is what Australia’s economy depends on as a commodity exporter.
Seasonal Snapshot: The 5-year pattern trends generally higher until April 30th but with more day-to-day choppiness. The 15-year pattern is in a rising trend until May 4th. The 30–Year pattern is consolidating before heading higher on 01May.
British: 18Apr The market is currently testing our important 1.60 significant support and resistance level going back to late February’s peak. Additionally, during craziness of late October-early November, much of the action traded around this level. A sustained move above targets the 31Oct 1.6160. Volume has been decent on this week’s strength.
This morning’s attention was drawn to BOE meeting minutes, where any additional quantitative easing seems to be going out the window. Inflation concerns abound:
http://online.wsj.com/mdc/public/pag...3-globalEconom......
Better jobless claims are also supportive this morning….
On a closing basis, the Sterling has found decent support at the 200-day moving average (1.5840) for the last three weeks, shifting the currency’s technical bias to a less negative profile. Our Momentum indicator has joined our rising Trend.
How Sterling reacts if there is any further material weakness in the Euro is to be watched closely.
Seasonal Snapshot: All three patterns are biased to rising action until April 30.
Canadian :18Apr Quiet consolidation of yesterday’s strong gains (on strong Volume) after BOC raised the possibility of withdrawing accommodative policy sooner than expected, based on an improving view of the global economy:
http://www.bloomberg.com/news/2012-0...nada-keeps-rat......
This morning’s release of BOC’s full outlook confirms their view.
The Canadian is testing the upper boundary of its two-and-a-half month consolidation range bound by 0.9933-1.0157. The sudden move has flipped our Momentum and Trend indicators positive. It also tests the recent (02Apr) high at 1.0096 and may put the recent “topping bias” we have noted at risk.
That said, as we have noted and from what we interpret from the BOC statement, the currency may be waiting more for a more definitive news or data from Europe, China or the U.S. as to the state of the global economy before making a definitive move outside its recent range.
Seasonal Snapshot: All three patterns are in a positive bias that lasts well into May.
Dollar Index: 18Apr The index remains entrenched in its recent range (symmetrical triangle?) bound by 78.80-80.45, with lower highs and higher lows since the end of Feb. As a result, our Trend and Momentum indicators are unstable, seemingly trying to go negative after a positive move over the last week, echoing our consolidation view. Volatility remains low and falling.
On a negative note, the highs continue to set up as the right shoulder of what could be construed to be a bearish Head and Shoulders pattern.
Watch for any evidence the Dollar is not the safe haven under crisis market conditions. This would change existing assumptions dramatically.
Seasonal Snapshot: All 3 patterns exhibiting falling action seasonal patterns until April 30th.
Euro-FX: 18Apr Somewhat whippy consolidation as the market (and apparently the whole world) awaits tomorrow’s Spanish 10yr auction. Peripherally, this morning’s release of Spanish non-performing loans, showing a sharp rise, offered early pressure:
http://www.bloomberg.com/news/2012-0...ain-s-surging-......
However, it is a Feb number (stale) and focuses only on Spanish banks. We believe another problem lies with the larger European banks, which lent money to anyone who would take it with no regard for if they could (or would) pay. Germany is exposed in so many ways…
While the market successfully defended the “line in the sand” 1.3000, it has been unable to retake the 21-day moving average (1.3205) and, therefore, the recent highs. It’s a slippery slope below, with little to stop a sustained move until the 13Jan low (1.2627). However, this would require a break out below –2STD of the 21-day moving average, which has not happened on a closing basis since 14Dec.
Our Trend and Momentum indicators remain on the defensive, but our Rate of Change is trying to sustain a turn higher, bouncing off action from several sessions ago. Our RSI’s bounce is from an area from which the Euro has rallied materially in the past several months but is barely out of the Oversold zone.
Volatility is falling again and is now firmly in the Low range (-1 STD or lower below the 150-day Moving Average).
Seasonal Snapshot: All three patterns are trending higher until the end of April.
Yen: 18Apr More speculation about BOJ intervention has pressured the currency back below our noted Fibonacci 38.2% retracement (12360) of the Feb-Mar decline. The rising 21-day moving average (12170) should initially support any dips.
A return of the recent strength would target the 50% retracement (12510). This level coincides with a triple top (23, 24 & 28Feb) and may offer some resistance.
For amusement, we offer a story about Japan providing $60B to IMF to “shield the global economy from the European debt crisis”. We welcome any ideas on where they might get the funds. The last we saw, their public debt was over 200% of GDP:
http://www.bloomberg.com/news/2012-0...pan-will-provi......
Seasonal Snapshot: All 3 patterns are now poised to bottom and head higher until approximately April 20th.
Disclaimer:
A commodity and currency report brought to you by Providio Trading Consultants, Inc. There is risk in trading futures and options. One's financial suitability should be considered carefully before placing any trades. Past performance is not indicative of future results.
This post has been edited by providiotrading: Apr 19 2012, 06:28 AM
