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Great Britain pound fell down to a new absolute minimum level against the euro today as the fresh economic data from U.K. signaled that the output growth will probably slow down significantly.

The survey by the Royal Institution of Chartered Surveyors showed that more than at any time since 1978 (the year when they started to collect this data) of its members are reporting lower prices.

The British Retail Consortium also reported that the retail sales in U.K. decreased in March by 1.6% — for the first time in two years, signaling that a weakness in the consumer sector of the economy is accompanying the housing market slump.

EUR/GBP rose from 0.8010 to 0.8041 as of 9:02 GMT today on Forex. Its daily maximum was reached at 0.8063 before retracing to its current rate.

Manufacturing in the Empire State rebounded as measured by the Federal reserve bank of New York. The general business conditions index rose to 0.6 after consecutive months of contraction. The improvement was fueled by a jump in shipments to 17.49 from -5.2, a gain in new orders and a reduction in unfilled orders. However, not all the news was positive, as employment was flat and prices paid increased. The expectations that manufacturing activity may receive a boost from the weak dollar, hasn’t been realized to date. The news may be worse going forward as consumer confidence and employment continue to decline and will continue to weigh on demand. The efforts of the Fed to promote growth, hasn’t been realized as banks continue to tighten their lending standards, making it difficult for companies to get the necessary financing for new projects. Experts are predicting that the central bank will need to cut rates another 50 points at their April 30 meeting, as they try and prevent the economy from entering a recession.

DailyFX

Disclaimer

Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.

The unified trajectory around dollar weakness that had dominated trading in recent weeks continues to deteriorate, with the majors pulling even further in opposite directions. Euro price action has tightened just below the 1.5900 level, wedged between a triple top and a supporting trend line. Pound and Yen both look weak against the dollar. Meanwhile, the Australian and New Zealand Dollars, the Franc and the Canadian Dollar both look to further gains.

 
  Fibonacci Forum.

EUR/USD

Strategy: Bullish above 1.5800, Targeting 1.6000

We noted last week that EURUSD is showing price action that is very reminiscent of February’s orderly ascent along the trend line, with consistent bullish days separated by shallow bearish Hammer candlesticks. The pair picked up a bit of volatility mid-week, putting in a triple top just below 1.5900. Though the G7 meeting briefly weighed EURUSD lower, the pair closed above trend line support to remain with the dominant up trend. As the pair coils up tighter, the proximity of a breakout nears. While the 1.5900 level is clearly strong, we feel there is a psychological need to reach 1.60 in the market before Euro sells off.

GBP/USD

Strategy: Bearish against 1.9750, Targeting 1.9360

Last week we identified a downward sloping resistance trend line guiding the GBPUSD lower, aiming at a decline to 1.9860. Our analysis proved correct – Pound sold off to penetrate support at the 61.8% Fibonacci retracement of the 01/30-02/20 down leg at 1.9725. Shortly after, the bears pared back allow a bounce back higher from the 50% retracement of at1.9658 to test resistance once again. Price action is now wedged between the 61.8% Fib and the downward sloping trend line. We continue to favor a bearish tone as the pair works through stacked support levels eyeing 1.9360.

USD/JPY

Strategy: Bullish against 100.70, Targeting 105.19

USDJPY failed to hold above the multi-year support level at 101.50, slipping lower below the 38.2% Fibonacci retracement of the 12/27/07-03/17 decline near 102.90 to find support at 100.70, a level marking the top of the range that contained USDJPY before the most recent push upward. Though 101.50 did not hold, downside momentum has been minimal and we do not see substantial evidence to change our bullish bias. Rather, it makes sense that such a major level (which is now turned from support to resistance having been broken in March) would not give way easily. We continue to look for USDJPY to move towards the 50% Fibonacci retracement above 105.

USD/CHF

Strategy: Bearish below 1.0100, Targeting 0.9840

Validating last week’s bearish bias, USDCHF has continued to grind lower below the 38.2% Fibonacci retracement of the 02/14-03/17 decline at 1.0196 eyeing the record-lowest close and the bottom of the recent range at 0.9840. Price action has been slow, and the pair is only about half of the way to our target. With no substantial evidence to change our stance, we remain bearish as the move plays out.

USD/CAD

Strategy: Bearish against 1.0250, Targeting 1.0120

Last week, we noted an upward-sloping trend line connecting recent lows offering support to USDCAD as it oscillated in the middle of the long-term 0.9793-1.0250 range (established in August of last year). USDCAD rallied from this area above the 61.8% retracement near 1.0120 to find itself in at the bottom of a familiar range, the very same one it had occupied since 03/20. We reckoned the pair would move higher form here to test the range top at 1.0250, which played out precisely as we suggested. With a rejection at the range top sending the pair lower to start this week, our bias flips to bearish as we look for a what will happen on a descent back to the 61.8% retracement level.

AUD/USD

Strategy: Bullish against 0.9220, Targeting 0.9500

The AUDUSD looks to have overextended itself somewhat last week, piercing through the 61.8% Fibonacci retracement of the 02/29-03/20 drop at 0.9287. The pair stalled here to end the week, with the weekend’s G7 communiqué sparking a dollar rally to push AUDUSD back lower. Australian dollar bulls have refused to give up easily, however, with the test at the 50% Fib bear 0.9220 sending the Aussie upward once again. AUDUSD now finds itself just below the 61.8% Fib, looking likely to ease lower to establish a base for further upside. This may see the pair turn at the 50% Fib, or extend lower to once again test trend line support. With the yield gap still firmly in the antipodean currency’s favor, we retain our long-term bullish bias.

NZD/USD

Strategy: Bullish against 0.7902, Targeting 0.8100

Last week we took a bullish view on NZDUSD on a break past the 38.2% retracement of the 01/22-02/27 advance near 0.7900. The pair rallied to test 0.8000 but failed to reach as high as our target at 0.8100. The weekend’s G7 meeting spooked risk appetite, bringing the pair lower and back to Fib support. With that event risk behind us, we expect upside to continue in earnest for a test at last week’s target at 0.8100.

To contact Ilya regarding this or other articles he has authored, please email him at ispivak@dailyfx.com.

Latest CFTC Release Dated April 8, 2008:

The COT Index is the percentile of the difference between net speculative positioning and net commercial positioning measured over the last 52 weeks. A reading close to 0 suggests that a bottom is forming and a reading close to 100 suggests that a top is forming. The readings are for the actual currency, not the currency pair. For example, a reading of 100 on the Canadian Dollar suggests that the Canadian Dollar is close to a top (USDCAD close to a bottom).

Readings of 95 and higher as well as 5 and lower are in boldfaced red type to indicate potential market extremes. The last 4 weeks of the COT Index are shown because it is just as important to know where the index is coming from. For example, an increasing index is bullish until the index is extreme (near 100), at which time the risk of a reversal or pause in the trend increases.

US Dollar Index: The 52 week COT index is at 80, indicating that plenty more selling is possible. However, the 13 week index has bounced from 0, which introduces the possibility that sentiment towards the USD has turned from a bearish extreme and that the USD will rally further from its low. The composite COT is increasing too, which is USD bullish.

Implications: forming a bottom

EUR: The 52 and 13 week indexes are at 12 and 50. Similar to the USD (but inverse) the 52 week index suggests that the larger bullish trend could continue. However, the 13 week index has rolled over from elevated levls (83), which is bearish. The composite COT is declining (not a surprise since the USD composite COT is increasing), which favors Euro weakness.

Implications: forming a top

GBP: The 52 and 13 week indexes are low, at 4 and 17. This, combined with the fact that the decline from 2.0396 is choppy, favors the idea that the GBP is forming some sort of a low. How significant this low ends up being remains to be seen of course.

Implications: Bullish

CHF: The 52 and 13 week COT indexes are at 57 and 8 after rolling over from near exteme levels. This indicates that sentiment has turned from a bullish extreme. The CHF is expected to underperform over the next few weeks.

Implications: Bearish

JPY: The 52 and 13 week COT indexes are at 82 and 25 after rolling over from extreme levels. This favors a continued correction in the Yen (rising Yen crosses) for a few more weeks.

Implications: Bearish

CAD: The 52 and 13 week COT indexes are at 8 and 25 after being at 4 and 0 last week. Readings this low warn of a bearish sentiment extreme. As such, the CAD is expected to outperform over the next few weeks.

Implications: Bullish

AUD: The 52 and 13 week COT indexes are at 71 and 92. The sharp increase in Aussie longs may be the beginning of the a bull leg that leads to a major reversal within a few weeks.

Implications: Bullish but forming a top

NZD: The 52 and 13 week COT indexes are at 10 and 8 after being at 8 and 0 the week before. Similar to the CAD, readings this low are suggestive of a bearish sentiment extreme. Look for opportunities to buy the NZD as it should outperform in the coming weeks.

Implications: Bullish

DailyFX

Disclaimer

Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.

This time last year we were talking about the brilliant run the Canadian dollar was making towards dollar - parity. Sure enough, in dramatic fashion, the Loonie crossed the $1 mark.

But for much of that historic run, the Canadian dollar traded in a tight negative correlation to the U.S. dollar - the dollar went down as the Loonie went up, or vice versa. It was in August of last year that the correlation began to fall apart. The red vertical line in the following chart marks the spot …

Keep in mind, late August was also when the Fed began an extensive rate - cutting campaign in order to alleviate the impact of credit turmoil on the economy. The Bank of Canada followed up with their first rate cut a few months later as it was believed that Canada’s economy could be vulnerable to similar concerns.

That maneuver marked the top for the Canadian dollar. And it’s not been able to take another shot at those levels even while crude oil prices (normally a boon to Canada’s economy) have risen to record levels.

Since August, the correlation between the buck and the Loonie has loosened and also become slightly positive - the Loonie goes up when the buck goes up, and vice versa.

Unfortunately, when it comes to currencies, you don’t really want that distinction. Could a break to all - time lows for the dollar spark a similar breakdown for the Canadian buck?

Jack Crooks Black Swan Capital
http://www.blackswantrading.com

Black Swan Capital’s Currency Snapshot is strictly an informational publication and does not provide individual, customized investment advice. The money you allocate to futures or forex should be strictly the money you can afford to risk. Detailed disclaimer can be found at http://www.blackswantrading.com/disclaimer.html