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G10 FX: Greenback & Pound Sterling in the Doghouse

TJ Marta from The Overnight Express at 10/13/09


The greenback and British pound underperformed overnight. The GBP was weighed by a lower-than-expected CPI print as well as a statement by the British Chamber of Commerce that the BOE needed to expand its asset purchase program. The USD fell on concerns about the economy and a paring back of expectations that the Fed will be hiking.

DXY – Sitting on new low since Aug ’08 – The DXY index (75.993) is down again overnight, unable to rebound off the low since Aug ’08 traded Thursday. Support lies at 75.767 (Oct 8 low), 75.165 (76.4% retracement of Mar ’08 to Mar ’09 rally, and 75.00 (psychological). Resistance lies at 76.668 (Oct 12 high), 77.475 (Oct 2 high), 77.688 (Dec ’08 low) and 78.00 (psychological). Currently, DXY correlates most strongly with gold, crude oil, and the CRB index (all negative). The S&P 500 is less significant (negative).

EUR/USD – Testing new recent high. EUR/USD (1.4828) is up overnight, testing yet again the Sep high. Resistance lies at 1.4844 (Sep 23 high) and 1.4866 (Sep ’08 high). Support lies at 1.4481 (Oct 2 low) and 1.4447 (Aug high). The short-term correlates for EUR/USD are crude oil (positive) and, to a less extent, the S&P 500 (positive). 

GBP/USD – Breaking lower. Cable (1.5798) is up slightly overnight but traded a new low since May overnight. Confidence in the pound has collapsed. The CFTC net short position spiked by 14k contracts to a record last week of -62.8K. Technical support lies at 1.5708 (Oct 13 low) and then 1.55 (psychological). Resistance lies at 1.6126 (Sep 30 high), 1.6742 (Sep 11 high), 1.6743 (Jun high) and then 1.7043 (Aug high). The strongest correlates over the past two months for GBP/USD have been the DXY (negative), EUR/USD (positive). Crude oil (positive) and the S&P 500 (positive) are still significantly correlated, but the relationships have waned.

USD/JPY – Stuck around 90. USD/JPY (89.59) is down overnight, apparently stuck for the short-term around 90 after rebounding from the low since Jan made Wednesday. Resistance now lies at 90.46 (Oct 12 high), 92.53 (Sep 21 high) and 93.30 (Sep 7 high). Support lies at 88.01 (Oct 7 low) and then 87.13 (Jan ’09 low). The correlations of USD/JPY with the U.S. 10yr yield and U.S.-JP 10yr spread remain strongly significant but are slipping.

USD/CAD – New low since Oct ’08. USD/CAD (1.0287) continues to plummet, testing below the Sep ’08 retracement low. Support lies at 1.0287 (Oct 13 low) and then parity. Resistance lies at 1.10 (psychological) and then 1.1125 (Aug high). In terms of other assets correlating with USD/CAD, watch the CRB, and crude oil (both negative). The USD index (positive) and SPX (negative) are also strongly significant.

AUD/USD – New high since Aug ’08. AUD/USD (0.9104) is up overnight and traded a new high since Aug ’08. Technical resistance for AUD/USD exists at 0.9116 (Oct 13 high) and 0.9275 (May’08). Support lies at 0.8859 (Oct 1 high), 0.8570 (Oct 2 low), 0.8545 (Sep 14 low) and 0.8478 (Aug high). AUD/USD has correlated most strongly with equities (S&P 500, positive) and commodities (CRB, positive). The correlation with gold (positive) is slipping.

NZD/USD – Holding on near high. NZD/USD (0.7391) is up overnight and clawing to remain near the new high since Jul ’08 traded Thursday. Resistance lies at 0.7454 (Oct 8 high) and 0.7500 (psychological). Support lies at 0.7255 (Oct 12 low), 0.7079 (Oct 2 low), 0.7000 (psychological) and 0.6897 (Aug high). The strongest correlates for NZD/USD during the past two months have been AUD/USD (positive), stocks (S&P 500, positive), the USD index (negative), and commodities (CRB index, positive).

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