Risk Correlated Assets Well Offered on Rallies in European Session

Text goes here

In this Issue...

Get up to date - Breaking News

Read what our Top Contributors are saying

By Joel Kruger, DailyFX Technical Strategist

Talking Points

Euro rallies met with very solid offers above 1.2800

Risk correlated assets back under pressure in European session

Fitch downgrades Japan ratings; Yen sells off

OECD and IMF out with some downbeat global comments

UK inflation softer than expected

Early rally attempts in risk correlated assets on Tuesday were met with solid resistance in the European session. Market participants shrugged off upbeat news that Germany and France would make strong efforts to keep Greece in the EMU, and the reports that Greek banks would receive a Eur18B recapitalization down payment on Friday. Instead, focus remained on a Fitch downgrade to Japan, and downgraded Chinese growth forecasts from the OECD.

Relative performance versus the USD Tuesday (as of 10:45GMT)

CAD -0.10%

GBP -0.42%

AUD -0.43%

JPY -0.50%

CHF -0.53%

EUR -0.55%

AUD -0.59%

The IMF also came out with some downbeat comments, adding to an intense intraday pullback in the Euro from levels above 1.2800 down into the mid-1.2700's. From here, it will be interesting to see how things play out into North American trade, but with US equity futures already pointing lower, things are not looking pretty. Still, market conditions are quite choppy right now and we continue to recommend staying on the sidelines.

ECONOMIC CALENDAR

TECHNICAL OUTLOOK

EUR/USD:

The market remains under intense pressure and the focus for now is squarely on a retest of the 2012 lows from January at 1.2625. While we would not rule out a possibility of a test of this level over the coming sessions, short-term technical studies are correcting from oversold and are showing a need for some form of a corrective bounce from where a fresh lower top is sought out. Ultimately however, any rallies should now be very well capped by previous support turned resistance at 1.3000 in favor of additional weakness over the medium-term that projects deeper setbacks into the lower 1.2000's.

GBP/USD:

The market remains under intense pressure since breaking back below 1.6000 and setbacks could now extend towards next key support in he 1.5600 area over the coming sessions. Still, daily studies are now stretched and we would prefer looking to sell into rallies towards 1.6000 where a fresh lower top is sought out.

USD/JPY:

The market continues to consolidate around 80.00 and is in the process of looking for a medium-term higher low ahead of the next major upside extension back above the yearly highs at 84.20 and towards 90.00 further up. However, for the time being it remains in question whether the market will still head lower towards the 200-Day SMA by 78.50 before ultimately reversing higher. The key level to watch above comes in by 80.60, and a break and close above this level will officially alleviate downside pressures and suggest that a higher low has now been carved in the 79.00's.

USD/CHF:

Overall the structure remains highly constructive and we continue to project additional upside over the coming months back above parity. For now, the latest break and close above 0.9335 is expected to accelerate gains for a retest of the yearly highs by 0.9600, while any intraday pullbacks should be very well supported ahead of 0.9200. Ultimately, only back under 0.9000 would negate outlook and give reason for pause.

--- Written by Joel Kruger, DailyFX Technical Currency Strategist

Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts. Any opinions, news, research, analyses, prices, or other information contained in this email are provided as general market commentary, and do not constitute investment advice. Dailyfx will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. The content in this email is subject to change at any time without notice, and is provided for the sole purpose of assisting traders to make independent investment decisions. Dailyfx has taken reasonable measures to ensure the accuracy of the information, however, does not guarantee its accuracy, and will not accept liability for any loss or damage which may arise directly or indirectly from the content or your inability to access the content, for any delay in or failure of the transmission or the receipt of any instruction or notifications sent through this email. Please read the full disclosures here. Additionally, Dailyfx takes your privacy seriously. Please click here to read our privacy policy.

Valuable Resources