As New York traders begin their trading day, the strongest currency is the New Zealand dollar as it rises against all the other major currency pairs. Later today, the global dairy trade auction results will be released. At the last auction, the price increased by 2.4%. Traders may be anticipating another positive result today. The results are published HERE, but not at a set time. So there is event risk for the pair.
The strongest and weakest currencies in trading today as NY enters.
Technically,
- The move higher in the NZDUSD over the last 2 trading days has taken the price back up to the 200 hour moving average (green line in the chart below). The 200 hour moving average comes in at 0.7748 and the high for the day came in at that level. So traders are using that area to define and limit their risk.
- The 100 hour moving average (blue line in the chart low) is also close by at the 0.7750 level. A move above this area, should solicit additional buying with 0.7760 and 0.7 770 as the next targets (see chart below). A move above those levels will have traders even more bullish.
Note that any break of the 100 and 200 hour MA will make that level the “new” support floor as sentiment switches even more to the upside.
On the downside, the pairs move lower last week below the bottom trend line was the shot for the sellers to take charge. However, the move failed. So now the 0.7700 level will be support again (see hourly chart).
NZDUSD tests 200 hour MA and finds sellers. Awaiting dairy auction results now.
The weakest currency today is the GBP as Markit service PMI came in at 55.8 vs. 58.5 estimate, and the composite PMI was also weaker a 55.2 vs. 57.4 estimates.
The GBPUSD traded at the lowest level going back to July 2013 as it took out the low price from yesterday’s trade by a few pips at the 1.51796 level. Today’s low is at 1.51753.
Looking at the 5 minute chart below,
- The pair has been consolidating at low levels over the last few hours – keeping the bears more in control.
- The London and New York session low from yesterday’s trading, came in at the 1 5202 level. This is now close resistance for traders today. Stay below and the dip buyers against yesterday’s low levels will remain nervous.
- A move above the 1.5202 may have traders thinking in terms of a test of the 50% retracement and the 100 bar moving average (blue line in the chart below) as thoughts turn more toward the double bottom scenario. That will be a key level for traders if tested.
Trading lesson: If the market is intent on keeping a trend going (and it is down today (and really over the last few days), the 50% of a move is my initial line in the sand to stay below (and the 100 bar MA as well). That shows me that the sellers want and remain in control.
The GBPUSD 5 minute chart.
Looking at the weekly chart in the GBPUSD, the pair has moved below trend line support again, at the 1.5745 level. Traders also did a good job of selling against the 1.52699 level (i.e., the highs for the trading day can in at 1.52728 and then 1.52695). That level corresponds to the low going back to 2012 (see weekly chart). From October 2011 to May 2012, the pair had 3 lows in a confined area from 1.52318 to 1.52699. Finding the sellers against this area keeps me more bearish on the pair from that perspective. The lower trend line connecting the 2010 and 2013 lows at the 1.5089 level will be the next major target for a continuation of the downside momentum.
The GBPUSD weekly chart showing bears in control.
Stocks are little changed in Europe and in pre-US trading after yesterday’s sharp falls. The US 10 year bond is below 2%. The German 5 year is below 0.0%.
Economic data:
- The final Markit Composite and Service PMI will be released at 9;45 PM with 53.8 and 53.6 the preliminary benchmarks.
- The US Factory Orders will be released at 10 AM (for November). The estimate is -0.5%. Durable Goods which is part of that number, was released on December 23rd and came in weaker at -0.7% vs +3.0% estimate. The ex transportation was also weaker at -0.4% vs +1.0% estimate. So the market may be looking to see if there was any revisions to the data.
- ISM Non manufacturing Composite will also be released with 58.0 estimate vs 59.3 last month. Employment last month fell to 56.7 from 59.6. New orders rose to 61.4 vs 59.1. The Manufacturing ISM was weaker with Prices leading the way down but overall, most components were also lower and disappointing.
In Canada, the Industrial Product price and Raw Material Price Indices will be released with -0.7% and -4.7% the estimates (vs -0.5% and -4.3% last month. The USDCAD is consolidating the gains from last week with a move above 1.1787 eyed on the topside now.
Stocks and bonds snapshot for Jan 6th
