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Wed, Mar 10 2010, 12:25 GMT
by Cornelius Luca

CME Group | View company’s profile

Most of the foreign currencies futures open as expected in the US, with all the European and commodity currencies but the pound up, and the yen down. The pound, which remains the weakest of the major European currencies, was hurt today by an unexpected contraction of the UK industrial production. Meanwhile, the euro failed to benefit properly from strong regional industrial production reports because it remains marred by the Greek financial tragedy. The US economic agenda remains barren for a second day, adding to the lack of trading direction.

The Asia/Pacific stock markets ended flat, while the European bourses, oil and gold are trading higher. The US stock indexes are up in pre-open market; watch out for the declining volume seen in the past week or so.

The short-term outlook is still slightly bullish for the European and commodity currencies and bearish for the yen. The medium-term outlook remains bearish for the European currencies and sideways for the yen and the commodity currencies. My model is long all of the foreign currencies futures except for the yen and the pound.

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Analysis based on:

“Trading in the Global Currency Markets” – Prentice Hall Press, 3rd edition 2007

“Technical Analysis Applications” – McGraw-Hill, 2004

Overnight:

• China: The country recorded a trade surplus of $7.6 billion in February, down from the $14.2 billion surplus in January.

• Australia: Westpac Consumer Sentiment Index rose 0.3 index points to 117.3 in March.

• Australia: The leading indicator of employment fell to -1.019 in March from -0.939 in February.

• Japan: Core machinery orders in Japan fell 3.7% in January following the 20.1% surge in December. On an annual basis, machine orders declined 1.1% following the 1.5% fall in the previous month.

• Germany: The foreign trade balance showed a surplus of EUR 8 billion in January, down from EUR 13.4 billion in December. Exports fell 6.3% and imports grew 6% on a monthly basis.

• Germany: CPI was revised to +0.4% in February from 0.2%. The CPI was down 0.6% in January. The CPI rose 0.6% year-on-year in February, slower than the 0.8% growth in the previous month.

• France: Industrial production grew 1.6% in January following a revised 0.2% fall in December (from -0.8%).

• Italy: Industrial production grew a seasonally adjusted 2.6% month-on-month in January, rebounding from the revised 0.2% decrease in the previous month (from -0.7%).

• Italy: The final revision of the GDP for the fourth quarter of 2009 was -0.3%, slightly faster than -0.2% estimated previously. This contraction follows a revised 0.5% growth in the third quarter, when the economy ended five quarters of negative GDP.

• Eurozone: Formation of a rescue fund for Europe would not be a solution for Greece’s budget crisis, Jean-Claude Juncker, head of the group of euro area finance ministers, said.

• UK: Industrial production fell unexpectedly by 0.4% in January after recording 0.5% increase in December. Annually, the index of production fell 1.5% in January, smaller than December’s 3.7% decrease.

Today’s economic calendar:

• US: The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications increased 0.5% for the week ended March 5.

• Canada: No data

EUR- March

Luca Model: Long since February 26

The March euro opens higher in the US after closing off its lows on Tuesday and is trading in a short-term triangle. The short-term outlook is slightly bullish. The medium-term outlook is bearish but my model is long.

The 21-day moving average resists at 1.3670. The next caps are 1.3737 and 1.3800.

Immediate support is at 1.3573. Below 1.3520, the low of the downtrend is 1.3433.

INDICATORS

Fast stochastics: Slightly bullish

MACD: Bullish

Ichimoku: Bearish

OUTLOOK

NEAR-TERM: Slightly bullish

MEDIUM-TERM: Bearish

LONG-TERM: Bearish

JPY – March

Luca Model: Short since March 5

The March Japanese slipped overnight, as expected, after closing up on Tuesday. The short-term outlook is slightly bearish. The medium-term outlook remains sideways and my model reversed its long signal.

Initial support is at 110.50 from the 55-day moving average. The bottom of the Ichimoku cloud follows at 110.02. Distant support lies at 109.24.

Strong resistance is at 111.22 from the 21-day moving average. Above 111.56, distant resistance is at 112.49.

INDICATORS

Fast stochastics: Bearish (oversold)

MACD: Bullish

Ichimoku: Bullish

OUTLOOK

NEAR-TERM: Slightly bearish

MEDIUM-TERM: Sideways

LONG-TERM: Bullish

GBP – March

Luca Model: Short since March 9

The oversold March pound remained under pressure overnight following the weak industrial production report. The short-term outlook is sideways to slightly bullish though, as the worst is behind it. The medium-term outlook is bearish and my model is short.

Initial resistance is at 1.4990. The next caps are 1.5041, 1.5095 and 1.5174. The 21-day moving average resists at a very distant 1.5308.

Wednesday’s low is 1.4872. Further support is at 1.4778.

INDICATORS

Fast stochastics: Slightly bearish

MACD: Sideways

Ichimoku: Sideways

OUTLOOK

NEAR-TERM: Sideways to slightly bullish

MEDIUM-TERM: Bearish

LONG-TERM: Bearish

CHF – March

Luca Model: Long since February 26

The March Swiss franc struggled higher overnight after closing off its low on Tuesday and is trading in a short-term triangle. The short-term outlook is slightly bullish. The medium-term outlook remains bearish, but my model is long.

Immediate resistance is at .9332 from the 21-day moving average. This is followed by .9393. Above .9442, distant resistance is at .9525.

Good support is at .9250. Further support is at .9208. The low of the downtrend is .9176.

INDICATORS

Fast stochastics: Slightly bullish

MACD: Sideways

Ichimoku: Bearish

OUTLOOK

NEAR-TERM: Slightly bullish

MEDIUM-TERM: Bearish

LONG-TERM: Bearish

CAD – March

Luca Model: Long since February 26

The March Canadian dollar opens flat in the US after hitting the second high of the uptrend on Tuesday. The short-term outlook is slightly bullish. The medium-term outlook is sideways and my model is long.

The top of the uptrend is .9780. Above .9827, distant resistance is seen at .9898.

Immediate support is at .9730. Further support is at .9697 and .9669. The 21-day moving average supports at .9608.

INDICATORS

Fast stochastics: Slightly bullish

MACD: Bullish

Ichimoku: Slightly bearish

OUTLOOK

NEAR-TERM: slightly bullish

MEDIUM-TERM: Sideways

LONG-TERM: Bullish

AUD – March

Luca Model: Long since February 26

The March Australian dollar remained firm overnight, climbing to a new high for the upmove. Check out the free-angle Fibonacci retracement on this chart; the Aussie is advancing within the 38.2%-61.8% channel now. The short-term outlook is slightly bullish. The medium-term outlook is sideways and my model is long.

Nearby resistance is at .9169. The next cap is .9200. The top of the uptrend is .9275.

Immediate support is at .9128. The next floors are .9091 and .9050. The 21-day moving average follows at .8994.

INDICATORS

Fast stochastics: Slightly bullish

MACD: Bullish

Ichimoku: Sideways

OUTLOOK

NEAR-TERM: Slightly bullish

MEDIUM-TERM: Sideways

LONG-TERM: Bullish

Published on Wed, Mar 10 2010, 12:47 GMT