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Market Recap & Technical Levels


May.09.2014

After a couple of quiet trading days, the FX market was treated to plenty of volatility yesterday, thanks to Mario Draghi and the ECB, leaving me frusstrated with my USD/CHF trade which rebounded a fraction of a pip short of my target. Tough days.

The Central Bank's governing council decided to leave its interest rate unchanged, which gave the euro a run of strength, which continued when Mr Draghi was speaking about the improvements in euro area productivity, which started to sound like very much like a broken record, before dropping in "the governing council is comfortable with acting next time", which immediately turned the market on its heels and started selling the single currency, fast. His words were caveated with him wanting to see what ECB staff projections for inflation are in June before making any decisions, but the governing council are apparently "dissatisfied about the projected path of inflation", meaning we're likely to see those numbers come out weak enough to justify some policy action next month - Finally!

Draghi also mentioned that the rising euro is not doing any good for the economy. In fact, he emphasized that euro strength is a serious concern and that ECB officials will hold another round of discussions to figure out the best way to address this issue.

Another interesting revelation to come from the press conference was the ECB's estimate on the size of capital outflows from Russia. They think as much as €160bn has left the country since the troubles began in February, almost four times what the Kremlin have said. If this is the case it would certainly go a long way to justifying why the euro has remained so strong of late. It may also mean that if the flows start to reduce, which they probably would do if the situation were to calm, we could see the euro weaken without intervention. Of course, the far larger problem revealed by these numbers is the one that Moscow faces. Such huge capital outflows - about the same size as the ones post-Lehman brothers - mean that Russia is in a lot more trouble than it is admitting to.

Far from problems working themselves out though, the Pro-Russian Eastern Ukrainians have decided to go against Putin's request to delay a referendum on independence in the region. On top of this Gazprom is to start taking payment up front for the gas it delivers to Ukraine. This comes after another missed payment by Ukraine, but more importantly for global trade, could mean disruption to the gas that flows through the same pipeline into Western Europe.

Yesterday the White House said that it was looking at its oil policies and perhaps easing the restrictions/outright ban on exporting their crude oil. There have been plenty that have urged the US to act on this immediately, but so far the administration has played its cards close. If there were to be a shift in policy it wouldn't only hurt Russia, it would probably hurt anyone that was long oil futures as it will distort the global market place. These consideration will, hopefully, be on the minds of the powers that be if they do decide to make changes.

Looking at today, investors will probably be starting to reposition themselves ahead of action from the ECB. Goldman Sachs along with a lot of other institutions have taken Mario Draghi's words as gospel and are forecasting policy action next month, so we expect the market to move accordingly to maximize their upside from any action. at 10:00 am EST, we’ll get U.S. wholesale inventories and JOLTS Job Openings .  Expectations are for a read inline with the previous number at 0.5% m/m.  This is a tier two event, so don’t expect a big reaction unless we get a big surprise.

Then at 6 pm EST, FOMC Member Kocherlakota Speaks to close out the economic data cupboard for the week.

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Intraday Forex Technical Levels

EUR/USD Intraday: the downside prevails.

Invest Diva's preference: Short positions below 1.383 with targets @ 1.3775 & 1.375 in extension.

Alternative scenario: Above 1.383 look for further upside with 1.386 & 1.388 as targets.

Comment: The pair stands below its resistance and remains under pressure.

Supports and resistances:
1.388
1.386
1.383
1.3783 Last
1.3775
1.375
1.373

GBP/USD Intraday: the downside prevails

Invest Diva's preference: Short positions below 1.6935 with targets @ 1.685 & 1.683 in extension.

Alternative scenario: Above 1.6935 look for further upside with 1.696 & 1.698 as targets.

Comment: The pair has broken below the lower boundary of a bearish channel and remains under pressure.

Supports and resistances:
1.698
1.696
1.6935
1.688 Last
1.685
1.683
1.68

USD/JPY Intraday: capped by a negative trend line

Invest Diva's preference: Short positions below 101.85 with targets @ 101.4 & 101.3 in extension.

Alternative scenario: Above 101.85 look for further upside with 102 & 102.2 as targets.

Comment: The pair and its intraday RSI are capped by declining trend lines.

Supports and resistances:
102.2
102
101.85
101.6945 Last
101.4
101.3
101.05

 USD/CHF Intraday: the upside prevails

Invest Diva's preference: Long positions above 0.88 with targets @ 0.884 & 0.885 in extension.

Alternative scenario: Below 0.88 look for further downside with 0.878 & 0.8765 as targets.

Comment: The pair stands above its support and remains on the upside.

Supports and resistances:
0.886
0.885
0.884
0.8837 Last
0.88
0.878
0.8765

NZD/USD Intraday: the downside prevails

Invest Diva's preference: Short positions below 0.867 with targets @ 0.8595 & 0.8545 in extension.

Alternative scenario: Above 0.867 look for further upside with 0.871 & 0.8745 as targets.

Comment: As long as the resistance at 0.867 is not surpassed, the risk of the break below 0.8595 remains high. The pair is trading within a bearish channel.

Supports and resistances:
0.8745
0.871
0.867
0.8641 Last
0.8595
0.8545
0.851

AUD/USD Intraday: supported by a rising trend line

Invest Diva's preference: Long positions above 0.9345 with targets @ 0.9395 & 0.9425 in extension.

Alternative scenario: Below 0.9345 look for further downside with 0.931 & 0.928 as targets.

Comment: The RSI advocates for further advance.

Supports and resistances:
0.946
0.9425
0.9395
0.9371 Last
0.9345
0.931
0.928

USD/CAD Intraday: the downside prevails

Invest Diva's preference: Short positions below 1.0875 with targets @ 1.0785 & 1.075 in extension.

Alternative scenario: Above 1.0875 look for further upside with 1.0905 & 1.094 as targets.

Comment: The RSI is mixed to bearish. The pair is trading within a bearish channel.

Supports and resistances:
1.094
1.0905
1.0875
1.0829 Last
1.0785
1.075
1.071

US DAILY INDEXES

S&P 500: as long as 1886 is resistance, look for choppy price action with a bearish bias.

Dow Jones: SHORT positions below 16575 with target at 16245 is the preference

Nasdaq: SHORT positions below 3605 with 3479 & 3455 as next target.
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