| By Christopher Vecchio, DailyFX Currency Analyst
A lack of data and news in the overnight has left the majors trading in tight ranges over the past few hours, with no major gaining or losing more than +/-0.18% against the US Dollar thus far on Tuesday. The top performer has been the New Zealand Dollar, followed closely by the Japanese Yen, whereas the Canadian Dollar and the Euro are trailing the pack. The implication is clear: neither the high beta and risk-correlated currencies nor the safe havens have been able to establish a clear direction on the day.
An interesting development that did occur shortly into the penning of this article was the release of some flow data by Standard & Poor's with respect to the Swiss National Bank. According to their research, the SNB purchases some €80 billion of core Euro-zone credit during the first seven-months of 2012, which help artificially lower French and German yields amid the SNB's quest to keep the EURCHF exchange rate tempered near 1.2000.
What's interesting about this is that some of the concerns about the discrepancies between core and peripheral credit may have in fact been provoked by the SNB - making the European Central Bank's job that much more difficult (as the crisis thus looked more exaggerated). Accordingly, a positive feedback loop was potentially created, in which the EURCHF floor is maintained by buying core debt, which makes peripheral debt look worse, which makes investors flee to safety, which pressures the EURCHF floor, which forces the SNB to buy more debt (printing Swiss Francs)...perhaps the SNB floor had consequences after all.
Taking a look at credit, peripheral European bond yields are creeping higher. The Italian 2-year note yield has increased to 2.283% (+9.8-bps) while the Spanish 2-year note yield has increased to 3.003% (+8.3-bps). Similarly, the Italian 10-year note yield has increased to 5.086% (+5.8-bps) while the Spanish 10-year note yield has increased to 5.665% (+4.6-bps); higher yields imply lower prices.
RELATIVE PERFORMANCE (versus USD): 10:58 GMT NZD: +0.10%
JPY:+0.09%
GBP:+0.02%
CHF:-0.06%
AUD:-0.08%
EUR:-0.14%
CAD: -0.18%
Dow Jones FXCM Dollar Index (Ticker: USDOLLAR): +0.01% (+0.04% past 5-days) ECONOMIC CALENDAR The economic docket is fairly light today though there are a few data due that have piqued our interesting. At 08:30 EDT / 12:30 GMT, CAD Retail Sales (JUL) will be released and should show a small rebound. At 10:00 EDT / 14:00 GMT, the USD Consumer Confidence (SEP) report will be released, and sentiment is expected to have risen to its highest level in two-months. Also released at that time is the USD House Price Index (JUL), which is expected to show slight price growth, thought at a slower rate in June.
TECHNICAL OUTLOOK
Nothing has changed: "Price has traded below soft support at the 61.8% Fibo retracement (February 2012 high to the July 2012 low) at 1.2934 today, breaking to fresh lows unseen in the Fed's QE3 era. The daily RSI has exited overbought territory and is trending lower, though the 4-hour RSI is close to oversold again with some significant diverging (given the relationship between price and RSI the last time the 4-hour RSI was at this level). Interim resistance lies at 1.2930/35, 1.2950/55 (5-EMA), 1.3145, 1.3165/70, and 1.3240. Near-term support comes in at 1.2820/30 (200-DMA, late-April swing high) and 1.2825/30 (20-EMA, 200-DMA)." USDJPY:
 BB represents Bollinger Bands ® The USDJPY continues to move lower off of the pullback at trendline resistance last week, spurred on by a general feeling of disappointment on the BoJ's newest stimulus measures has created the ideal sell-off situation. Now that price is below 77.90, 77.65/70 (June 1 low), 77.45/50, and 77.10/15 (September low) are in focus. A close above 77.90 leaves open the possibility for a rebound to 78.10/20, 78.60 and 79.10/30 (100-DMA, 200-DMA, descending trendline off of the April 20 and June 25 highs). Nothing has changed: "The pair has pulled back to the key 5-EMA at 1.6215 (for an indication of short-term strength) and as noted last Thursday, "the gap between the 5-EMA and the 20-DMA has started to turn lower, suggesting a compression of price is occurring. If the 5-EMA holds, we're looking for further rallies; if not, support is close by." This has proven to be the case the past few days, though a break of the 5-EMA is threatening today. The key 1.6120/40 level, broken on Friday, remains our guide for bullish/bearish price action. As long as the GBPUSD closes above said level this week, the door is open for a move towards 1.6400 by the end of the month. The former April swing highs at 1.6260 (by close), 1.6300 (by high) are in focus, now that the descending trendline off of the April 2011 and August 2011 highs broke last week. Below 1.6120/40 support comes in at 1.6030/35 (20-DMA), 1.5970 (ascending trendline off of August 2 and August 31 lows, former channel resistance off of June 20 and August 23 highs), and 1.5770/85 (late-August swing lows)." AUDUSD:  The descending trendline off of the August 9 and August 23 highs has kept the pair supported the past four-days, and it remains that the 20-EMA overlapping at 1.0420/25, a base could be building for the next move higher. As long as this level holds today - despite the intraday spike lower - we continue to look higher. Near-term resistance comes in at 1.0425 (20-EMA, mid-August swing lows), 1.0480/85, 1.0550/60, and 1.0615/30 (August high). Interim support comes in at 1.0380/85 (descending trendline off of the August 9 and August 23 highs, 50-EMA), 1.0365 (last week's low), 1.0335/40 (200-DMA), and 1.0270/80.
--- Written by Christopher Vecchio, DailyFX Currency Analyst
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