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I like short positions at current levels (currently trading at 1.1330) from a technical standpoint. The cross is in a strong downtrend and downtrend resistance drawn from the March 14 high is now seen at 1.1407. The daily MACD is below zero, so the recent rally should be confined within this bearish trend. I would place a stop at 1.1440, just above the downtrend resistance and 50% retracement of the 1.1600 to 1.1213 sell-off. I will set a target of 1.1005. Fundamentally I continue to prefer long NZD positions, especially after yesterday’s stronger-than-forecasted CPI print.
JP Morgan (JPM)
I suggested long positions on JPM last week, a day before reporting quarterly earnings, with a stop at $49.50 and a target of $54.00. After yesterday’s rally in the US, JPM hit my target of $54.00, so I have moved to the sidelines on this name, although there’s a risk that the stock continues to move higher from here.
The pair has broken uptrend resistance on the daily chart, drawn from the August 2 low and my bias is to initiate short trades on rallies to 1.5965; stops could be placed at 1.6070. The rally we saw yesterday was driven by some rather strong jobs numbers and while I suspect the trend of solid data will continue for the next month or so, the pair seems to be topping out. What’s more, the rally tested and rejected the former uptrend, although failed to break back above – a potential bearish sign. In upcoming trade we get UK retail sales ex-auto (expected to print +0.3%), while on the USD side all eyes will be on the House vote on last night’s Senate plan. We also get US jobless claims, which are expected to fall to 335,000 after last week’s spike.
The US benchmark rallied 1.4% after confirmation that the Senate has come to an agreement to bring back the government and also extend the debt ceiling until 2014. The House will vote on the plan in the coming hours and is expected to pass the vote, after which it will be sent to the President to push through. The market should start to think more on next year’s negotiations now, while Q3 earnings and US monetary policy once again take centre stage. On the docket tonight we get earnings from Goldman Sachs, Verizon, Google and Baxter (a key competitor for CSL). Given the trend, I would be long until proven wrong.