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الثلاثاء، 25 سبتمبر 2012
High Beta Currencies Strengthen Intraday Amid ECB Bond-Buying Rumors
The commodity currencies, already bolstered by supportive words from the Reserve Bank of Australia, have been bolstered further by hopeful commentary out of Europe, which has lifted risk-appetite across the board. Despite a sharp retort from the European Central bank itself yesterday, rumors continue to swirl that a bond-buying program to cap sovereign bond yields will be announced nonetheless. Accordingly, the Euro has surged back to its highest level in two-weeks against the US Dollar while the Australian and New Zealand Dollar threaten to break short-term bearish patterns, lining up the Federal Open Market Committee August Meeting Minutes as a potential make or break event for the risk landscape this week.
The continued flow of rumors have benefited peripheral European bond markets, though it appears that much of the news has been priced in over the past several weeks, given the lack of enthusiasm today. The Italian 2-year note yield has dropped to 2.871% (-11.3-bps) while the Spanish 2-year note yield has slid to 3.269% (-16.2-bps). Likewise, the Italian 10-year note yield has eased to 5.664% (-8.4-bps) while the Spanish 10-year note yield has dropped to 6.148% (-7.5-bps); lower yields imply higher prices.
RELATIVE PERFORMANCE (versus USD): 10:30 GMT
Dow Jones FXCM Dollar Index (Ticker: USDOLLAR): -0.41% (-0.20% past 5-days)
There are no data due on Tuesday in the North American trading session. As such, we suspect that headlines and news will have a great influence on price action should they materialize, though given recent trading volumes, the implication is for a quiet day once the European session ends.
BB represents Bollinger Bands ®
EURUSD: The bounce off of the range low has materialized, and key levels to the upside are being tested amid the swirling rumors; indeed, we could very-well be seeing the beginning of a bullish move towards 1.2760. For now, we’re watching 1.2405 in the EURUSD, the potential Neckline on what could be an Inverse Head & Shoulders bottoming pattern. Given the Head at 1.2040/45, this would draw into focus 1.2760 on a daily close above 1.2405. Near-term support comes in at 1.2310/30, 1.2250/65, and 1.2155/70.
USDJPY: A string of better than expected US data has shifted the fundamental bias of this pair, and indeed, the Rounded Bottom on the hourly charts has materialized a bullish outcome, as expected. This could be the first step towards the USDJPY Inverse Head & Shoulder formation playing out. With the Head at 77.60/70 and the Neckline at 80.60/70, this suggests a measured move towards 83.60/70 once initiated. The daily close above 79.15/20 (200-DMA) yesterday, in our opinion, brings near-term resistance in focus at 79.60/65 (100-DMA), which is also where the pair topped out today. We suspect that the pair may still be overbought on shorter-term time frames and a pullback may be warranted before further bullish movements. Interim support comes in at 79.15/20, 78.60 (former swing lows) and 78.10/20 (lows from last week).
GBPUSD: Although the sideways price action has continued, the GBPUSD is now back at the top of a short-term channel, pressing resistance at 1.5465/70. And despite the very thin trading conditions, at least based on levels, this would be a significant move to the upside. The pair is threatening to close above its 100-DMA and 200-DMA for the first time since mid-May; and a close above 1.5770 would suggest a breakout for a move towards 1.5880/1.5900. Near-term support comes in at 1.5685/90 (10-DMA), 1.5635/40 (last week’s low), and 1.5625 (ascending trendline support off of August 6 and August 10 lows).
AUDUSD: Given recent price action, we must alter our perspective for the near-term. Although a top appeared to have formed on the 4-hour chart, dating back to late-July given the break of August lows intramonth (thus suggesting a reversal), we now caution that perhaps a Bull Flag has formed off of the August 9 high at 1.0613. The key bull/bear level for today is 1.0485/95: a close above should lead to gains back into 1.0600 while failure should lead to a pullback towards 1.0400/10. At current price, daily support comes in at 1.0480/1.0500, 1.0435/45 and 1.0380/85, though with shorter-term timeframes showing exhaustion, we suspect a bounce could be had first. Interim resistance comes in at 1.0535/45 (former swing highs), 1.0580, 1.0600/15 (August high) and 1.0630. Should we see a rally up towards 1.0600 again, another failure would market a Double Top and signal a push for a test of 1.0195/1.0200 (100-DMA).