Strategy Reports

MIDDAY UPDATE
12:42 p.m. GMT

 USD/CAD has fallen to a 19-month low after the February Canadian employment report showed unexpected strength. Canada added 20.9K jobs in February compared to the 5.5K expected and +43.0K prior. Meanwhile, the unemployment rate fell to 8.2% from 8.3%, no change at 8.3% was expected.

The pair was trading virtually unchanged at 1.0240 ahead of the announcement but plunged to a low of 1.0162 immediately afterwards. The move blew through huge support at 1.0207. That represented the bottom of the 7-month range from 1.02 to 1.08. The fall generates a very negative technical picture for the pair and is a strong signal that USD/CAD will fall to parity.

The U.S. dollar is down against all G10 currencies after Bloomberg reported sources saying that Fed Reserve Bank of San Francisco President Janet Yellen is President Barack Obamas pick for vice chairman of the central bank. Yellen is the arch dove on the FOMC, she has repeatedly voted for lower interest rates and shown no inclination to hike.

The euro has been one of the better performers against the USD as it touched the highest levels since Feb. 12. That generates a technical buy signal as the market is growing increasingly confident that the crisis is Greece has abated.

Even the Japanese yen is stronger than the USD (however only slightly) despite comments from Japanese Prime Minister Yukio Hatoyama who said the government must take firm measures to keep the rising yen from hurting the economy. That was reiterated by Japanese Finance Minister Naoto Kan, who said the government is ready to intervene in the foreign-exchange market if movements are abrupt. Technically, USD/JPY formed a doji star pattern on the daily chart yesterday and is danger of forming another one today. The momentary directional indecision points to an impending powerful move. On the weekly charts, the bias is to the downside. 

DAILY MARKET MORNING REVIEW

March 12, 2010
2:00 am GMT

CURRENCIES

EUR/USD: On Thursday, the euro traded in a range of 1.3621 to 1.3687, and has traded in a range of 1.3670 to 1.3689 so far today. Short term support lies at 1.3531, 1.3436 and 1.3424, with resistance at 1.3736 and 1.3788.

GBP/USD: On Thursday, cable traded in a range of 1.4947 to 1.5067, and has traded in a range of 1.5042 to 1.5087 today. Short term resistance lies at 1.5317, and 1.5575 with support at 1.4787, and 1.4784.

EUR/GBP: On Thursday, the EUR/GBP traded in a range of 0.90637 to 0.91215, and has traded in a range of 0.90709 to 0.90903 today. Short term resistance lies at 0.91488 and 0.91497, with support at 0.89218, 0.88682, and 0.87507.

USD/JPY: On Thursday, the USD/JPY traded in a range of 90.21 to 90.72, and has traded in a range of 90.48 to 90.75 today. Short term resistance lies at 91.29 and 92.15 with support at 88.94, 88.14, 87.37 and then 84.83.

AUD/USD: On Thursday, the AUD/USD traded in a range of 0.9111 to 0.9170, and has traded in a range of 0.9140 to 0.9163 today. Short term resistance lies at 0.9243, and 0.9328, with support at 0.8979, 0.888 and then 0.8801.

NZD/USD: On Thursday, the NZD/USD traded in a range of 0.6964 to 0.7025 and has traded in a range of 0.6986 to 0.7008 today. Short term resistance lies at 0.7098, 0.7151, and 0.7170 with support at 0.6889, 0.6848 and then 0.6818.

USD/CAD: On Thursday, the USD/CAD traded in a range of 1.0230 to 1.0322, and has traded in a range of 1.0234 to 1.0252 today. Short term resistance lies at 1.0340, 1.0574, and 1.0680 with support at 1.0207, 1.0128, and 1.0071.

USD/CHF: On Thursday, the USD/CHF traded in a range of 1.0682 to 1.0689, and has traded in a range of 1.0679 to 1.0696 so far today. Short term resistance lies at 1.0732, 1.0794, and 1.0810, with support at 1.0676, and 1.0649.

COMMODITIES

Gold: On Thursday, gold traded in a range of $1100.85 to $1111.75. After markets opened in Asia on Friday, the commodity has traded in a range of $1108.85 to $1111.70. There is short term support at $1088.50, and $1078.06, with resistance at $1141.65, $1144.98 and then $1146.45.

Silver: On Thursday, silver traded in a $16.815 to $17.2 range, and is currently trading in a $17.115 to $17.2325 range. Support lies at $16.86, $16.3025, and $15.5975 with resistance at $18.045 and then $18.860.

Crude: On Thursday, NYMEX crude oil futures traded in a range of $81.33 to $82.38, and has traded in a range of $82.15 to $82.38 on Friday so far. Short-term support lies at $79.47, $78.48, and $77.05, with resistance at, $83.95, and $84.83.

HEADLINE

Friday offers traders a range of opportunities, particularly during the North American session, when U.S. advance retail sales, the University of Michigan survey of consumer sentiment, and Canadian employment will be released.

The North American day begins in Ottawa at 7:00 a.m. EST, when Statistics Canada is expected to reveal that the country’s economy created a net 15.5k jobs in February. Nonetheless, this would be less than the 43.0k increase the month before.

Meanwhile, the Canadian unemployment rate is slated to remain at 8.3% in February.

If the data exceed the consensus forecast – larger than expected job creation and/or lower unemployment rate – the loonie should rally. The reverse argument is just as valid: downbeat jobs data would likely send the Canadian dollar downwards.

At 8:30 a.m. EST, market participants will cross the border to the U.S. for the February retail sales report. Core sales (excluding autos) are expected to rise by 0.1%, a pull back from their 0.6% advance in January.

Meanwhile, core sales (excluding both autos and gas) are projected to increase by 0.3% in February, halving their 0.6% pace the month before.

Finally, headline sales are expected to slip by 0.2%, denting their 0.5% rise in January.

Traders are advised to focus on the two core figures as these exclude volatile elements. A greater-than-expected rise in either core component should support the greenback, while below-consensus or, worse, declines in core sales, should send the U.S. dollar lower.

Finally, at 9:55 a.m. EST, the preliminary University of Michigan consumer confidence report for March will be released. It’s forecast to rise to 74.0 from 73.6 in the final report for last month.

An above-consensus improvement in sentiment should be U.S. dollar-friendly. However, if the rise in confidence is not achieved or deteriorates, expect the greenback to weaken.

INTEREST RATES

ADDITIONAL RESOURCES

• To learn more about upcoming events go to Financial Calendar
• For real-time, up to date news flashes see our Market Commentary
• For in depth analysis per market session read The Overnight Express

Have a great trading day!