Click here for PDF version

EURUSD

For the past two weeks, the EURUSD has consolidated as a number of generally market moving indicators fell on deaf ears.  Today, the congestion was finally cleared as the US dollar met selling on a poor showing from the Leading Indicators Index and Philly Fed survey. Early in the New York session, the Conference Board released its composite index of leading economic indicators for September.  Used to forecast economic growth in the coming three to six months, the report was met with mixed feelings.  Though the indicator was able to rebound with a positive mark, it was below the markets expectations.  The consensus among economists was for the foreward looking indicator to grow 0.3 percent following a modest contraction.  Instead growth only stepped up 0.1 percent, and primarily on the merits of a massive 0.3 perent contribution from consumer sentiment for the period.  Since the improvement in this component was largely attributed to the sharp drop in gas prices, market participants worried that the following months read would not find the same help from a single group.  A little later in the day, The Philly factory activity number for October contradicted the strength in the previously released Empire read.  Typically enjoying a higher correlation to the national ISM number, the Philly survey dropped for the second month, to its lowest level since April of 2003.

From a technical perspective, todays strong EURUSD run looks exhausted.  Both the RSI and Slow Stochastics have already begun to fall off of oversold levels on the lower time frames.  For solid levels, the 1.2635/45 area that has stopped bulls cold also happens to be the level that acted as support through all of September.  A rebound would likely take the pair right back to 1.2500, which would leave a new range for traders to work in.

NZDUSD

While the commodity bloc was taking advantage of broader dollar weakness, the kiwi received special attention due to its carry status and chart position.  Commodity markets were broadly bullish in US exchanges today as energy, precious and industrial metals and agricultural goods were all picked up on a solid bid.  Undoubtedly the most attractive move on the session came on the part of crude oil, which notched up its own 1.65 percent advance by the end of floor trade after Saudi Arabia joined issued its own forecasts on supply forecasts.  Only a short time after OPEC confirmed the cut in production by a million barrels a day, Saudi Arabia (usually amongst the most liberal producers in the cartel) announced that further cuts may be discussed at the normal December meeting.  While this and other commodity moves were floating the entire commodity bloc, the kiwi stepped out as the leader, helped along by its carry status.  While the USDCAD short is a negative carry and the AUDUSD long has a 75 basis point advantage,  the NZDUSD permits the biggest carry with a 200 basis point spread. 

Another factor playing into the strong kiwi advance was the technical positioning in its dollar pairing.  Over the past few sessions, the NZDUSD has bounced along a rising trendline that began with the spike low on June 29th.  Already postioned with a low that was well above that of the same session yesterday, the pair found an easy time making the break above the 0.6665-resistance level that has recently stood up to three tests.  Tripping up stops along the way, the pair carried on to 0.6695 before showing any real signs of slowing down.  Now the pair sits just below the psychological 0.67 figure and September 29th's spike high sits only 25 points higher should bulls return for another go.

USDCHF

Unlike the other majors, the anti-dollar currency in this pair was providing the impetus behind its strong move.  Early this morning, currency traders responded to surprise jumps in the trade account and retail sales.  Taking the indicators chronologically, Septembers trade balance started to build in franc bids.  Already prepared for a sizable rebound in the suplus, the market was met with a record SFr 1.83 billion positive gap. Officials attributed the favorable outcome to trade activity between Switzerland and nations in the European Union as the franc depreciated 2.2 percent against the euro over the month.  Another factor in the record number was the sharp drop in the import energy bill as crude prices continued what would be a 26 percent slide in a little under two months.

With swissie bulls already primed for the flush in liquidity that comes with the open of North American markets, a reaffirmation of strength was provided when August retail sales followed up with its own surprise.  Expected to print a 2.8 percent year-over-year rise, the report instead came in at 4.5 percent.  Domestic spending was padded for the period as strong employment trends kept Swiss consumers pockets lined with money.  Though this was not a particularly astounding jump in sales for the recently volatile indicator, it helped to snuff out any doubts behind a swissie run.

After todays daily bar covered substantial distance in the USDCHF, a number of support levels have come into view to make a continuation tough going.  The 200-day SMA currently sits at 1.2578, just above current spot.  Furthermore, 1.2560 has acted as a significant support and resistance level in some capacity for more than a year.