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Mr. British Pound Dancing Along Mr. Ichimoku


Jun.03.2014

the pick of the day is GBP/USD, as Mr. British pound and Ms. USA are neatly dancing along side the rising Ichimoku cloud. They were not able to break inside last week and are back above the 50% Fibonacci level, remaining within the upward channel. The RSI is struggling to get back to neutrality area and we are looking for the pair to move back up and reach our targets at 1.704 and 1.74 in extension.

A downside breakout of 1.6450 would call for 1.62 and 1.5870 in extension. Intraday the pair remains under pressure and we could see more down moves below 1.6855 with targets at 1.68 and 1.678 in extension.

GBPUSD technical analysis daily candlestick chart Ichimoku fibonacci upward channel

Intraday we are looking at long positions above 1.672 with targets @ 1.678 & 1.682 in extension.

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 Hot Market Events Recap

Manufacturing numbers painted a mixed picture of Europe yesterday. Notable successes include Spain, whose PMI reading hit a four year high and was well clear of the break-even level for the sixth month running. Holland and Italy also posted reasonable numbers, but Germany and France let the side down. Germany posted a seven month low and also threw in a falling inflation number to boot, whilst France fell back into contraction territory after two months of growth.

France also came under pressure from Brussels to 'step up' its austerity. Doubts have been cast over whether Paris has any kind of grip over its spending (or more importantly, saving). The demand from the European Council rubs salt in the wound for Francois Hollande after his sizeable defeat in European elections and subsequent calls to scale down the power that Europe has in calling the shots. France are also reeling from a $10bn fine that could be levied on BNP Paribas by the US authorities. French newspaper Les Echo has called it "a declaration of war". The far bigger implication for the bank would be if the US banned it from clearing US dollar transactions, which it is considering doing after the bank apparently repeatedly broke US sanctions by dealing with blacklisted countries.

With the poor numbers posted by the two largest economies in Europe, it's only right that the equity markets should rally, which they did. Investors took the 'bad meaning good' , meaning Mario Draghi will have to act approach to stock trading yesterday and pushed on higher. The Euro itself was a slightly different story, but only in that the moves were minimal and, for the time being, nobody wants to place a decent sized bet on how much lower it could go on Thursday.

A US centric article that is really worth a read is this piece in the FT by Axel Weber, former member of the ECB and head of the German Bundesbank. Mr Weber describes the likely underscoring of policy divergence between the US and the ECB this month, when Europe cut rates and the US continue on their path to tightening. Thereafter the US needs to unwind its massive central bank balance sheet, which could cause more tremors for developed and emerging markets - tremors bigger than those we saw last year when Ben Bernanke first hinted at pulling the plug. Mr Weber also gives his thoughts on why there has been a persistent, relative weakness of the Dollar. A man with this much experience and very little political agenda is worth listening to.

Overnight we had more good news from China. The state collected non-manufacturing numbers rose to beat expectations. On the other side HSBC's manufacturing index missed expectations and shows greater than expected contraction. The market obviously chose to listen to the better news and Asian equities have rallied.

Australia kept rates on hold, much as expected. The governor of the RBA has reiterated that rates are likely to remain stable for some time, but that the Aussie Dollar remains high by historical standards. Last year the RBA were very vocal in trying to talk down their currency, also helping it lower with rate cuts. More recently the Aussie has been creeping back up as investors remain hungry for a yield that's more than 2% igher than its US counterpart.

We go into today relatively unaffected by Asia's strong session. futures are mixed and currency markets are exactly where they were yesterday (and the day before). Data of note; European core CPI, European unemployment. UK construction PMI reading and US factory orders.

Intraday Forex Technical Levels

EUR/USD Intraday: rebound.

Invest Diva likes: Long positions above 1.3585 with targets @ 1.363 & 1.365 in extension.

If pair goes nuts: Below 1.3585 look for further downside with 1.3555 & 1.351 as targets.

What’s up on the dance floor: The pair is rebounding and is breaking above its resistance.

Supports and resistances:
1.367
1.365
1.363
1.3618 Last
1.3585
1.3555
1.351

 

USD/JPY Intraday: the upside prevails.

Invest Diva likes: Long positions above 102.15 with targets @ 102.5 & 102.65 in extension.

If pair goes nuts: Below 102.15 look for further downside with 102 & 101.8 as targets.

What’s up on the dance floor: The pair is rebounding and is shaping a bullish flag.

Supports and resistances:
102.8
102.65
102.5
102.366 Last
102.15
102
101.8

 

USD/CHF Intraday: under pressure.

Invest Diva likes: Short positions below 0.8995 with targets @ 0.8955 & 0.8935 in extension.

If pair goes nuts: Above 0.8995 look for further upside with 0.901 & 0.9025 as targets.

What’s up on the dance floor: The pair has broken below its support and remains under pressure.

Supports and resistances:
0.9025
0.901
0.8995
0.8969 Last
0.8955
0.8935
0.892

 

NZD/USD Intraday: key resistance at 0.8475.

Invest Diva likes: Short positions below 0.8475 with targets @ 0.843 & 0.84 in extension.

If pair goes nuts: Above 0.8475 look for further upside with 0.85 & 0.8515 as targets.

What’s up on the dance floor: A break below 0.843 would trigger a drop towards 0.84. The 0.8475 former support is now acting as a resistance (polarity principle). However, the RSI is gaining upside momentum, this call for caution.

Supports and resistances:
0.8515
0.85
0.8475
0.8461 Last
0.843
0.84
0.835

 

AUD/USD Intraday: under pressure.

Invest Diva likes: Short positions below 0.929 with targets @ 0.923 & 0.9205 in extension.

If pair goes nuts: Above 0.929 look for further upside with 0.9315 & 0.933 as targets.

What’s up on the dance floor: Even though a continuation of the technical rebound cannot be ruled out, its extent should be limited. Indeed, the 0.929 area maintains a downside pressure.

Supports and resistances:
0.933
0.9315
0.929
0.9263 Last
0.923
0.9205
0.9165

 

USD/CAD Intraday: bullish bias above 1.0885.

Invest Diva likes: Long positions above 1.0885 with targets @ 1.094 & 1.096 in extension.

If pair goes nuts: Below 1.0885 look for further downside with 1.082 & 1.078 as targets.

What’s up on the dance floor: The RSI is well directed. The pair remains on the upside and is breaking above its previous top.

Supports and resistances:
1.099
1.096
1.094
1.0917 Last
1.0885
1.082
1.078

US Index Levels

S&P500

Long positions above 1914 with targets @ 1926 & 1932 in extension.

Alternative scenario: Below 1914 look for further downside with 1904 & 1894 as targets.

 

Dow Jones

Long positions above 16630 with targets @ 16770 & 16870 in extension.

Alternative scenario: Below 16630 look for further downside with 16560 & 16465 as targets.

 

Nasdaq 100

Long positions above 3706 with targets @ 3745 & 3765 in extension.

Alternative scenario: Below 3706 look for further downside with 3688 & 3660 as targets.

 

Russell 2000 (ICE)

Long positions above 1118 with targets @ 1137 & 1145 in extension.

Alternative scenario: Below 1118 look for further downside with 1109 & 1100 as targets.

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