GBP outperformed on a stronger−than−expected labour report

Currencies: GBP outperformed on a stronger-than-expected labour report. Otherwise, the ranges were narrow, with growth currencies slightly underperforming.

EUR/USD. Retracing after piercing downtrend resistance

EUR/USD (1.2715) is down overnight after a strong rally yesterday that allowed spot to close above the downtrend line off the December and April highs. The uplift apparently resulted from the promise of more lenient Basel capital requirements for European banks.

Technicals:

• Trend: Daily lower; Weekly higher.

• Overbought/Oversold (stochastics): Daily overbought; Weekly oversold.

• Support / Resistance Levels: Support for EUR/USD lies at 1.25 (psychological), 1.2152 (Jun 29 low), 1.1877 (Jun7 low), 1.1827 (Mar’06 low), and 1.1640 (Nov’05 low). Resistance lies at 1.2739 (Jul13 high), 1.3094 (May10 high), 1.3692 (Apr12 high), 1.3818 (Mar17 high), 1.4026 (Feb3 high), 1.4194 (Jan25 high), 1.4579 (Jan13 high) and 1.4626 (Nov low).

Positioning:

• The CFTC, EUR, non-commercial, net position (-38K) moderated, in keeping with the price action through last Tuesday.

• The risk reversal (3m, 25delta) ticked higher despite spot’s overnight decline. The reversal is still heavily skewed for EUR downside, but it lies in the middle of its six month range – suggesting two way price action.

• Implied Vol (3m) fell overnight and is trending sharply lower into the bottom ½ of its six-month range.

Cross-asset valuation: The significant correlations that EUR/USD has during the past 60 days are the 10yr yield spread (positive), the US10yr yield (positive) and the SPX (positive).

GBP/USD. Back in the uptrend

Cable (1.5247) is up strongly overnight after a strong labour report, and spot appears to have resumed its uptrend that began in May.

Technicals:

• Trend: Daily lower; Weekly higher.

• Overbought/Oversold (stochastics): Daily overbought; Weekly oversold.

• Support/Resistance Levels: Resistance lies at 1.5291 (Jul14 high), 1.5524 (Apr15 high), 1.5816 (Feb17 high), 1.6284 (Jan22 high), 1.6458 (Jan19 high), 1.6479 (61.8% retracement of Nov to Dec decline), 1.6722 (Dec 3 high), 1.6878 (Nov16 high) and 1.7043 (Aug high). Support lies at 1.50 (psychological), 1.4949 (Jun12 low), 1.4239 (May19 low) and 1.3503 (Jan’09 low).

Positioning:

• The CFTC, GBP, non-commercial, net-position deteriorated modestly to -39K, presaging the stall and potential decline in spot.

• The risk reversal (3m, 25delta) slipped overnight from the highs since Feb on the rally in spot.
  While it remains skewed for GBP losses, it is also in the upper end of its six-month range, which suggests an overbought condition.

• Implied Vol (3mo) fell overnight back to a new low since Jan.

Cross-asset valuation: The significant correlates over the past two months for GBP/USD have been the DXY (negative), EUR/USD (positive), and S&P500 (positive).

USD/CHF. Sitting on 1.05

USD/CHF (1.0577) rose overnight. Spot has stalled just above 1.05.

Technicals:

• Trend: daily higher; weekly lower.

• Overbought/Oversold (stochastics): Daily oversold; Weekly neutral.

• Support/Resistance levels: Resistance lies at 1.0676 (Jul12 high) and 1.1742 (Apr’09 high), while support lies at 1.0482 (Jul8 low) and 1.0435 (Apr1 low).

Positioning:

• The CFTC non-commercial net position moderated to -7K, but it remains among the lowest readings since 2007 and suggestive of USD/CHF weakness.

• The risk reversal (3m, 25delta) fell overnight despite the rise in spot. It remains near its low since Oct’09. This market segment has abandoned its bullish USD/CHF call, but the skew is very close to a six-month low, suggesting potential for a rally in spot.

• Implied Vol (3mo) is down overnight and cannot seem to escape the vicinity of multi-year lows.

Cross-asset valuation: USD/CHF has correlated mostly strongly during the past 60 days with EUR/USD (negative) and the USD index (positive).

USD/CAD. Consolidating in 1.03-1.04 range

USD/CAD (1.0333) is up overnight, but holding near the lows that came after Friday’s strong Canadian labor report.

Technicals:

• Trend: Daily lower; weekly ;lower.

• Overbought/Oversold (stochastics): Daily neutral; weekly neutral.

• Support/Resistance Levels: Resistance lies at 1.0677 (Jul5,6 high), 1.0680 (Jun high), 1.0853 (May25 high) and 1.1725 (Jul’09 high). Support lies at 1.0277 (Jul13 low), 1.02 (psychological), 1.0139 (Jun21 low), 1.0110 (May13 low), 0.9931 (Apr21 low), 0.9825 (May’08 low), 0.9712 (Feb’08 low), 0.9058 (Nov’07 low).

Positioning:

• The CFTC, non-commercial, net position fell to 11K and is threatening the uptrending channel it has traced out in recent months.

• The risk reversal (3m, 25delta) ticked higher overnight along with the rise in spot.

• Implied Vol (3m) is down slightly, and it lies near the middle of it’s range so far in 2010.

Cross-asset valuation: In terms of other assets correlating with USD/CAD, watch the SPX (negative), CRB (negative), crude oil (negative), and the 2yr spread (negative).

USD/JPY. Rebound stalled

USD/JPY (88.62) is down slightly overnight and the rebound from a test of the Jul1 low last week appears stalled.

Technicals:

• Trend: Daily higher; Weekly lower.

• Overbought/Oversold (stochastics): Daily oversold; Weekly neutral.

• Support/Resistance Levels: Support lies at 86.97 (Jul1 low) and 84.83 (Nov27 low). Resistance lies at 89.16 (Jul12 high), 92.89 (Jun4 high) and 94.99 (May4,5 high).

Positioning:

• The CFTC, non-commercial net position rose to 40K, near the top of the 6-month range. This is about as bullish as speculators have been in the past several years.

• The risk reversal (3m, 25delta) rose overnight despite the decline in spot. The skew is still in favor of USD/JPY downside, but lies in neutral territory relative to its range the past six months.

• Implied vol (3m): fell overnight and is now deep into the lower half of its 6-month range.

Cross-asset valuation: The correlations of USD/JPY with the US 10yr yield (positive), the US-JP 10yr (positive) spread, the S&P500 (positive), CRB (positive) and crude oil (positive) are significant.

AUD/USD. Testing Jun high

AUD/USD (0.8823) fell overnight, but not before it tested within 5pips of the Jun high.

Technicals:

• Trend: Daily higher; Weekly higher.

• Overbought/Oversold (stochastics): Daily neutral; Weekly neutral.

• Support/Resistance: Technical support lies at 0.8316 (Jul1 low), 0.8067 (May25 low) and 0.7704 (Jul’09 low). Resistance for AUD/USD exists at 0.8859 (Jun21 high), 0.9389 (2010 high), 0.9406 (2009 high), and 0.9850 (2008 high).

Positioning:

• The CFTC, non-commercial net position fell to 7K as spot consolidated before the Tuesday measurement.

• The risk reversal (3m, 25delta) is up overnight despite the slippage in spot, and it lies in the middle of its 6-month range.

• Implied Vol (3m) is down overnight, just below the middle of its range for 2010.

Cross-asset valuations: AUD/USD has correlated most strongly with equities (S&P500, positive), commodities (CRB, positive) and USD/JPY (positive.)

NZD/USD. Breaching Jun high, slipping at 0.72

NZD/USD (0.7178) is down overnight, partially retracing the surge yesterday in which spot breached the Jun high and tested above 0.72.

Technicals:

• Trend: Daily higher; Weekly higher.

• Overbought/Oversold (stochastics): Daily oversold; Weekly neutral.

• Support/Resistance: Resistance lies at 0.7207 (Jul13 high), 0.7326 (Apr30 high), 0.7442 (Jan14 high), 0.75247 (Nov high), and 0.7635 (Oct21 high). Support lies at 0.6795 (Jul1 low) and 0.6561 (May25 low).

Positioning:

• The CFTC non-commercial, net position rebounded to above 2K, but remains below the average reading for the past six months.

• The risk reversal (3m, 25delta) rose overnight, and lies just above the middle of its six-month range.

• Implied Vol (3m) fell overnight and continues trending lower through the middle of the 2010 range.

Cross-asset valuations: The strongest correlates for NZD/USD during the past two months have been AUD/USD (positive), stocks (S&P500, positive) and commodities (CRB index, positive).

http://www.fxstreet.com/technical/market-view/g10-fx-analysis/2010-07-14.html