The pound led the June foreign currencies futures lower overnight, as expected, after rallying on Friday. The pound’s losses were accelerated by comments from UK officials; Bank of England policy maker Kate Barker said the UK economy may face a quarter of declining GDP without returning to recession and PM Gordon Brown said further details of cuts to come in the budget may hurt reelection. Incidentally, PM Brown’s government estimates the deficit will hit 12.6% of GDP, basically as high as the 12.7% in Greece, a level that drove European leaders to consider a bailout. The pound has lost 6.9% so far this year. Meanwhile, Eurozone finance ministers hope to reach agreement today on how to support Greece if it fails to refinance its debts direct loans from individual governments and a system of loan guarantees). Adding icing to the cake, Moody’s Investors Service warned that the US and the UK have moved substantially closer to losing their AAA credit ratings because the cost of servicing their debt rose.
The European bourses and oil are down, while gold is up. The US stock indexes are lower in pre-open market.
The short-term outlook for the foreign currencies futures was bullish early and is now bearish. The medium-term outlook is sideways for the European currencies and the yen and bullish for the commodity currencies. My model is long all of the foreign currencies futures except for the yen.
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Analysis Based On:
“Trading in the Global Currency Markets” - Prentice Hall Press, 3rd edition 2007
Overnight:
China: Chinese Premier Wen Jiabao said that the yuan was not undervalued.
Australia: No data
Japan: The consumer confidence rose to 40 in February from 39.4 in January.
Eurozone: The employment decreased 0.2% on a sequential basis in the fourth quarter, compared to the 0.5% fall in the previous quarter.
Switzerland: The producer and import prices fell 0.3% on a monthly basis in February, following a 0.3% rise in January. On an annual basis, the index fell 1%. The producer price index dropped 0.2% month-on-month, taking the annual decrease to 1% in February, while import prices fell 0.3% from January and dipped 0.9% annually.
UK: The average asking price for a home rose only 0.1% in March following a 3.2% increase in February, property tracking Web site Rightmove said. On an annual basis, home prices were up 5.3% following the 6.1% increase in the previous month.
Today’s Economic Calendar:
US: Empire manufacturing for March
US: Net long-term TIC flows for January
US: Industrial production/capacity utilization for February
US: NAHB housing market index for March
Luca Model: Long since February 26
The June euro opens lower after rallying on Friday. Its close above the 21-day moving average signals the end of the triangle and an upgrade of the medium-term outlook to sideways. Still, it needs to also close above the trendline declining since December 3 to signal sustained strength from here on, and this should not happen today. My model is long. The short-term outlook was bullish early and is now bearish.
The 21-day moving average supports at 1.3682. This is followed by 1.3655 and 1.3600.
Initial resistance is at 1.3471. The next caps are 1.3800, 1.3853 and 1.3900.
INDICATORS
Fast stochastics: Sideways
MACD: Bullish
Ichimoku: Bearish
OUTLOOK
NEAR-TERM: Slightly bearish
MEDIUM-TERM: Sideways
LONG-TERM: Bearish
JPY - March
Luca Model: Short since March 5
The June Japanese yen slipped overnight in an inside range. The short-term outlook was bullish early and is now bearish. The medium-term outlook remains sideways and my model is short.
Initial support is at 109.84. Distant support lies at 109.24.
Immediate resistance is at 110.59. The 21-day moving average caps at 111.06. Above 111.56, distant resistance is at 112.49.
INDICATORS
Fast stochastics: Bearish
MACD: Bearish
Ichimoku: Sideways
OUTLOOK
NEAR-TERM: Slightly bearish
MEDIUM-TERM: Sideways
LONG-TERM: Bullish
Luca Model: Long since March 11
Ongoing concerns about the budget deficit torpedoed the sickly June pound to reverse its Friday’s gains. The short-term outlook was bullish early and is now bearish. The medium-term outlook turned sideways and my model is (still) long.
Monday’s current low is 1.5010. The next support is 1.4940. Distant support is 1.4864.
Initial resistance is 1.5086. The next caps are 1.5126, 1.5169 and the 21-day moving average follows at 1.5247.
