Forex: Stronger Equities Boost Aussie, Kiwi; Franc Bets Unwind

DailyFX

ASIA/EUROPE FOREX NEWS WRAP

Risk appetite is well-supported this morning as investors continue to dump the Japanese Yen and the U.S. Dollar in favor of high beta currencies and risk-correlated assets. While this pressure on the safe havens isn’t unusual – both the Yen and the U.S. Dollar have been lagging for the past several weeks, in particular against the Australian and New Zealand Dollars, as well as the Euro – what is new has been the increased selling pressure seen in the Swiss Franc.

Truly, since the Swiss National Bank implemented the EURCHF floor at 1.2000, the majority of trading has occurred at the 1.2000 bound. While this trend started to change at the end of 3Q’12/the beginning of 4Q’12, the past two days have represented a drastic shift in sentiment regarding the situation in Europe, as well as the views on the Swiss Franc. With respect to the Euro’s side of the equation, one needs to look no further than that surprising European Central Bank policy meeting on Thursday for why the Euro is in high demand.

In regards to the Swiss Franc, the globe’s former darling safe haven during the crescendo of the Euro-zone crisis in 2011 has only served as a hedge against extreme tail risks on the continent since the floor was implemented. Accordingly, as the crisis has ebbed back towards a calmer state, it is of little surprise that demand for the Franc has softened as well. The Swiss CPI reading for December released on Friday shows that deflation is starting to rear its ugly head again, allowing speculators to bet that the SNB will implement further easing policies. Positioning is playing a role too: according to Bloomberg News, the three month 25-delta risk-reversal rate for the Franc versus the Euro reached a record 1.48 percentage points in favor of options to sell, earlier today. Bottom line: the Franc could be on the verge of a major unwind.

Taking a look at European credit, slight weakness in the periphery has prevented the Euro from appreciating further today. The Italian 2-year note yield has increased to 1.357% (+2.8-bps) while the Spanish 2-year note yield has increased to 2.391% (+4.4-bps). Likewise, the Italian 10-year note yield has increased to 4.146% (+2.7-bps) while the Spanish 10-year note yield has increased to 4.936% (+7.9-bps); higher yields imply lower prices.

RELATIVE PERFORMANCE (versus USD): 11:40 GMT

JPY: -0.02%

CAD: -0.03%

EUR: -0.10%

CHF:-0.27%

AUD:-0.29%

GBP:-0.32%

NZD:-0.67%

Dow Jones FXCM Dollar Index (Ticker: USDOLLAR): -0.09% (-0.04% past 5-days)

ECONOMIC CALENDAR

View gallery

.
Forex_Stronger_Equities_Boost_Aussie_Kiwi_Franc_Bets_Unwind_technical_analysis_fundamental_analysis_body_Picture_3.png, Forex: Stronger Equities Boost Aussie, Kiwi; Franc Bets Unwind

See the DailyFX Economic Calendar for a full list, timetable, and consensus forecasts for upcoming economic indicators.

TECHNICAL ANALYSIS OUTLOOK

View gallery

.
Forex_Stronger_Equities_Boost_Aussie_Kiwi_Franc_Bets_Unwind_technical_analysis_fundamental_analysis_body_Picture_1.png, Forex: Stronger Equities Boost Aussie, Kiwi; Franc Bets Unwind

EURUSD: The pair has continued higher, cutting through the May 2012 high at 1.3280 and running into the next leg up, the March 2012 high at 1.3380/85. Last week I said: “the RSI downtrend on the daily chart has been broken, despite price holding below the May/December highs at 1.3280/3310. Coincidentally, focus is on buying dips.” This remains to be the case even as price has started to catch up to momentum. Support comes in 1.3280/3310, 1.3120/45, 1.3060/65 (50-EMA), and 1.3000 (January low). Resistance is 1.3380/85 (mid-March swing high) and 1.3485 (late-February swing high).

View gallery

.
Forex_Stronger_Equities_Boost_Aussie_Kiwi_Franc_Bets_Unwind_technical_analysis_fundamental_analysis_body_Picture_2.png, Forex: Stronger Equities Boost Aussie, Kiwi; Franc Bets Unwind

USDJPY: No change: “The pair’s rally has continued to its highest level since June 2010, essentially leaving the door open for a run above 90.00. Given BoJ policy, any dips seen in the USDJPY are viewed as constructive for further bullish price action (though I would like to clarify that this view is only valid until the BoJ meeting on January 22; the market remains very net-short the JPY, so a near-term top marked by an event seems possible (think the US Dollar bottoming the day after QE3 was announced)). Resistance comes at 89.10/35 (daily high, weekly R1) and 90.10/15 (monthly R2). Support comes in at 88.40 (monthly R1) and 87.00/40 (weekly pivot).”

View gallery

.
Forex_Stronger_Equities_Boost_Aussie_Kiwi_Franc_Bets_Unwind_technical_analysis_fundamental_analysis_body_Picture_7.png, Forex: Stronger Equities Boost Aussie, Kiwi; Franc Bets Unwind

GBPUSD: No change: “The pair has fallen back from 1.6300, again, though with no follow through yet, my levels remain the same (they haven’t changed since early-December). However, the pair is now coming into ascending TL support off of the July and November lows at 1.6000. Support is there and 1.5900 (200-DMA). Resistance comes in at 1.6085/90 (50-EMA), 1.6180, and 1.6300/10 (post-QE3 announcement high in mid-September).” It should be added that a break below 1.6000 could accelerate through the 200-DMA towards the most recent swing low, at 1.5820/25 set in mid-November.

View gallery

.
Forex_Stronger_Equities_Boost_Aussie_Kiwi_Franc_Bets_Unwind_technical_analysis_fundamental_analysis_body_Picture_4.png, Forex: Stronger Equities Boost Aussie, Kiwi; Franc Bets Unwind

AUDUSD:No change: “The pair has broken the December highs and a break signals a push towards 1.0605/25. However, it’s worth noting that the daily RSI hasn’t pushed into overbought territory on any rally since February 2012. Accordingly, we’ll either see a move to new highs and with RSI confirming the breakout; or further consolidation/pullback is in order before the next leg higher. Support is at 1.0530/50 (weekly pivot, monthly R1), 1.0465/70 (weekly S1), and 1.0400/05 (weekly S2). Resistance is 1.0530/85 and 1.0605/25 (August and September highs).”

View gallery

.
Forex_Stronger_Equities_Boost_Aussie_Kiwi_Franc_Bets_Unwind_technical_analysis_fundamental_analysis_body_Picture_5.png, Forex: Stronger Equities Boost Aussie, Kiwi; Franc Bets Unwind

S&P 500: For the past several weeks I’ve maintained: “The S&P 500is back above a very significant zone of 1445/50 (descending trendline off of September and October highs, 100% Fibonacci extension off of the November 16 low, the November 23 high, and the November 28 low extension), and a move higher necessarily points to 1470/75.” With these levels to the upside breaking, a move above the September highs points to resistance at 1500 and 1520/25 (December 2007 high). Support comes in at 1450/55, 1425, 1400, and 1390 (200-DMA).

View gallery

.
Forex_Stronger_Equities_Boost_Aussie_Kiwi_Franc_Bets_Unwind_technical_analysis_fundamental_analysis_body_Picture_6.png, Forex: Stronger Equities Boost Aussie, Kiwi; Franc Bets Unwind

GOLD: No change: “Gold is at a make or break level right now, former Symmetrical Triangle support at 1630/40, and its lowest level since August, before the ECB and the Fed’s QE intervention hopes took hold. Additionally, when considering the move off of the September highs, a measured A-B=C-D (as expressed on the Daily) suggests that a bottom could be in place at these levels as well. Support is there at 1580. Resistance is 1690/95, 1735, 1755, and 1785/1805.”

--- Written by Christopher Vecchio, Currency Analyst

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

To be added to Christopher’s e-mail distribution list, please fill out this form

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
Learn forex trading with a free practice account and trading charts from FXCM.

Rates

View Comments (0)

Recommended for You

  • Tycoon buys 30 Rolls-Royces for Macau hotel

    A Hong Kong tycoon has placed the biggest ever order for Rolls-Royce cars, agreeing to buy 30 Phantoms to chauffeur guests at a luxury resort he's building in the global gambling capital of Macau. Stephen Hung's $20 million purchase surpasses the 14 Phantoms bought by Hong Kong's Peninsula Hotel in…

    Associated Press
  • 1 Tip To Lose Belly Fat

    It's Hollywood's Hottest Diet And Gets Rid Of Stubborn Fat Areas Like Nothing Else.

    AdChoicesagoodcooksSponsored
  • Tycoon's arrest sends shock wave through Russia

    Tycoon's arrest sends shock wave through Russia MOSCOW (AP) — The arrest of a Russian telecoms and oil tycoon has sent shock waves through the country's business community, with some fearing a return to the dark days of a decade ago, when the Kremlin asserted its power by imprisoning the country's…

    Associated Press
  • Before You Buy Alibaba, Check Out 4 Top China Stocks

    Before You Buy Alibaba, Check Out 4 Top China Stocks While investors gear up for Alibaba Group 's (BABA) hotly anticipated initial public offering, don't forget about other Chinese stocks that are worth keeping an eye on. Today's Young Guns Screen of

    Investor's Business Daily
  • Costco Stores in Canada to Stop Taking American Express

    “The credit card relationship between American Express and Costco Wholesale Canada will not be renewed when it expires” on Dec. 31, the company said today in an e-mail to Canadian customers. The message was attributed to Lorelle Gilpin, vice president of marketing and membership for Costco…

    Bloomberg
  • Play

    Citi, Bank of America Offer Discounted Mortgages

    Citigroup and Bank of America will offer mortgages at discounted interest rates to help borrowers with low incomes or subprime credit. AnnaMaria Andriotis joins MoneyBeat. Photo: Getty.

    WSJ Live
  • "The Retiree Next Door": How successful retirees stretch their savings

    "The Retiree Next Door": How successful retirees stretch their savingsBy the time she hit her late 40s, Toni Eugenia wasn’t sure she would ever be able to retire. Eugenia, 56, a pharmacy technician who lived in Houston, was nearly $200,000 in debt and

    Yahoo Finance
  • As Fed takes baby steps, Cramer's trick for profit

    In turn, Cramer says making money in the market, involves looking at the environment through the lens of the Fed. "The trick is to remember that they speak for the common person," Cramer said. "The Fed wants the common person to make money." With that backdrop always in mind, Cramer says it becomes…

    CNBC
  • Norwich Information Security MS

    Online, accredited, top ranked. NSA Center of Academic Excellence. Recognized by the Department of Homeland Security. Download your free brochure!

    AdChoicesNorwich UniversitySponsored
  • CNBC Anchor Calls Out Fed-Hater Bill Fleckenstein In Startling Shouting Match

    CNBC Bill Fleckenstein of Fleckenstein Capital appeared on CNBC's Futures Now program on Tuesday. Futures Now host Jackie DeAngelis came out swinging, asking Fleckenstein right at the top if he was willing to admit that he had misunderstood monetary policy. Sounding taken aback, Fleckenstein…

    Business Insider
  • Beanie Babies creator's sentence debated in court

    Beanie Babies creator's sentence debated in court CHICAGO (AP) — Federal prosecutors seeking to put the billionaire creator of Beanie Babies in prison for hiding millions in Swiss bank accounts told appellate court judges Wednesday that the toymaker's sentence of probation threatens to erode the…

    Associated Press
  • Apple to unveil new iPads, operating system on Oct. 21 : report

    The company plans to unveil the sixth generation of its iPad and the third edition of the iPad mini, as well as its operating system OS X Yosemite, which has undergone a complete visual overhaul, the Internet news website said. Trudy Muller, a spokeswoman for Apple, declined to comment. The iPad is…

    Reuters
  • Here's What Mark Cuban Wishes He Knew About Money In His 20s

    Cuban is the owner of the Dallas Mavericks basketball team. Billionaire investor and entrepreneur Mark Cuban is generous with his advice. When we asked him what he wishes he'd known about money in his 20s, he said:

    Business Insider
  • Margaritaville casino owners seek bankruptcy

    The owner of Biloxi's Margaritaville casino has filed for Chapter 11 bankruptcy protection Tuesday, only hours before a hearing where the landlord aimed to seize the property. The filing by MVB Holding LLC in U.S. Don Dornan, a lawyer for landlord Clay Point LLC, said the company had planned to ask…

    Associated Press
  • Play

    What the Fed Meeting Means for Bonds

    Janet Yellen & Co. are expected to hint at their timetable for raising interest rates. Here's how investors should prepare ahead of the meeting.

    WSJ Live
  • Master's Degree in Nursing

    CCNE accredited MS in nursing in as few as 18 months online. Learn more today!

    AdChoicesNorwich UniversitySponsored
  • Gilead Stock Is Falling On These Drug Setbacks

    Gilead Stock Is Falling On These Drug Setbacks Gilead Sciences (GILD) shares are backsliding Wednesday on news that the patient drop-out rate for hepatitis C drug Sovaldi is quadruple that of clinical trials. In addition, the biotech's Phase 2 study results

    Investor's Business Daily
  • Embraer to sell 50 E-175 jets to Republic in $2.1 billion deal

    Brazil's Embraer SA, the world's third largest commercial planemaker, said on Wednesday it booked a firm order from U.S. The deal, which will be included in Embraer's order book for the third quarter, is valued at $2.1 billion, the planemaker said in a securities filing. The planes will be operated…

    Reuters
  • SHOE COMPANY: Our CEO Just Disappeared And Most Of The Money Is Gone

    "and like that: he's gone." This is an actual headline from a company press release: "CEO and COO disappeared, most of the company's cash missing." (Via FastFT) In a statement, German-based shoe company Ultrasonic said its CFO,  Chi Kwong Clifford Chan, has been unable to reach the company's CEO,…

    Business Insider
  • Don't buy Alibaba stock: 'Dean of Valuation'

    Investors should steer clear of Alibaba , valuation expert Aswath Damodaran said Wednesday. On CNBC's " Fast Money ," Damodaran, a professor of finance at New York University's Stern School of Business, noted that he was looking at Alibaba stock from the perspective of a long-term investor, not a…

    CNBC
  • Billionaire Investor Says Chinese People Work Harder And Western Companies Could Face Deep Trouble After Alibaba IPO

    Michael Moritz, the chairman of VC firm Sequoia Capital, is a huge fan of Chinese internet companies and reiterated his enthusiasm for the Chinese market in an interview with The Wall Street Journal Wednesday. The billionaire investor described the Alibaba IPO as a “major landmark event” that is as…

    Business Insider
  • Top Analyst Upgrades and Downgrades: AEP, BHP, GE, Incyte, 3M, Tyco, Under Armour and More

    Top Analyst Upgrades and Downgrades: AEP, BHP, GE, Incyte, 3M, Tyco, Under Armour and More Stocks were firm on Wednesday morning ahead of the FOMC meeting outcome. Tuesday’s rally may have sparked higher interest again, and investors are looking for bargains

    24/7 Wall St.
  • Tired of Living Paycheck to Paycheck?

    New website reveals how to save $1,000's when you're living paycheck to paycheck. See exactly how.

    AdChoices Media ForceSponsored
  • 6 Things Debt Collectors Wish You Knew

    The work debt collectors do is not popular, and has become increasingly derided by those who don’t like what we do or simply don’t know the facts about debt collection. Too often, debt collection is painted with a broad brush to create a portrait that isn’t accurate, and doesn’t properly educate…

    Credit.com