A fairly narrow range overnight

EUR/USD. Stonewalled at 1.30

EUR/USD (1.3003) is up overnight and continuing to press upwards for a breach of 1.30. However, 1.30 continues to prove stubborn resistance, leaving the currency to languish in a sub-1.30 consolidation.

Technicals:

• Trend: Daily lower; Weekly higher.

• Overbought/Oversold (stochastics): Daily overbought; Weekly neutral.

• Support / Resistance Levels: Support for EUR/USD lies at 1.25 (psychological), 1.2152 (Jun 29 low), 1.1877 (Jun7 low), 1.1827 (Mar’06 low), and 1.1640 (Nov’05 low). Resistance lies at 1.3029 (Jul20 high), 1.3094 (May10 high), 1.3692 (Apr12 high), 1.3818 (Mar17 high), 1.4026 (Feb3 high), 1.4194 (Jan25 high), 1.4579 (Jan13 high) and 1.4626 (Nov low).

Positioning:

• The CFTC, EUR, non-commercial, net position (-26K) moderated slightly, consistent with the continued test higher to above 1.30 in EUR/USD up to Tuesday.

• The risk reversal (3m, 25delta) rose along with the rally in spot. The reversal is still heavily skewed for EUR downside, but it lies in the middle of its six month range – suggesting two way price action.

• Implied Vol (3m) fell overnight. It has dropped into the bottom-third of its six-month range but is not yet extreme.

Cross-asset valuation: The significant correlations that EUR/USD has during the past 60 days are the 10yr yield spread (positive), the US10yr yield (positive) and the SPX (positive).

GBP/USD. In upchannel, breaching 1.55

Cable (1.5528) rose overnight and looks to be accomplishing a breach of 1.55 resistance.

Technicals:

• Trend: Daily lower; Weekly higher.

• Overbought/Oversold (stochastics): Daily overbought; Weekly neutral.

• Support/Resistance Levels: Resistance lies at 1.5535 (Jul27 high), 1.5816 (Feb17 high), 1.6284 (Jan22 high), 1.6458 (Jan19 high), 1.6479 (61.8% retracement of Nov to Dec decline), 1.6722 (Dec 3 high), 1.6878 (Nov16 high) and 1.7043 (Aug high). Support lies at 1.50 (psychological), 1.4949 (Jun12 low), 1.4239 (May19 low) and 1.3503 (Jan’09 low).

Positioning:

• The CFTC, GBP, non-commercial, net-position position moderated further to -28K, consistent with the rally in cable to a test of 1.55 up through Tuesday.

• The risk reversal (3m, 25delta) slipped overnight and is starting to trend lower. However, it remains near the highs since Feb. While it remains skewed for GBP losses, it is also in the upper end of its six-month range, which suggests an overbought condition.

• Implied Vol (3mo) ticked higher overnight but remains near the low since Jan.

Cross-asset valuation: The significant correlates over the past two months for GBP/USD have been the DXY (negative), EUR/USD (positive), and S&P500 (positive).

USD/CHF. Nascent rally from 1.05 support

USD/CHF (1.0587) is up overnight and posting a higher since early in the month, suggesting the potential for a rally from 1.05.

Technicals:

• Trend: daily higher; weekly lower.

• Overbought/Oversold (stochastics): Daily oversold; Weekly neutral.

• Support/Resistance levels: Resistance lies at 1.05 (psychological), 1.0676 (Jul12 high) and 1.1742 (Apr’09 high), while support lies at 1.05 (psychological), 1.0395 (Jul22 low) and 1.0131 (Jan low).

Positioning:

• The CFTC non-commercial net position inched higher into positive territory (+14K) as USD/CHF continued to consolidate at 1.05. The position is significantly positive for CHF relative to the past six months and could suggest a potential turn higher in USD/CHF, especially with spot stalled around 1.04 support.

• The risk reversal (3m, 25delta) fell overnight despite the rise in spot. It remains near its low since Oct’09. This market segment has abandoned its bullish USD/CHF call, but the skew is very close to a six-month low, suggesting potential for a rally in spot.

• Implied Vol (3mo) is down overnight and cannot seem to rally from multi-year lows.

Cross-asset valuation: USD/CHF has correlated mostly strongly during the past 60 days with EUR/USD (negative) and the USD index (positive).

USD/CAD. Wedging within 1.02-1.08 range

USD/CAD (1.0296) is down overnight, testing lower within the increasingly tight range it has plied since late-May.

Technicals:

• Trend: Daily lower; weekly lower.

• Overbought/Oversold (stochastics): Daily neutral; weekly neutral.

• Support/Resistance Levels: Resistance lies at 1.0584 (Jul16 high), 1.0677 (Jul5,6 high), 1.0680 (Jun high), 1.0853 (May25 high) and 1.1725 (Jul’09 high). Support lies at 1.0277 (Jul13 low), 1.02 (psychological), 1.0139 (Jun21 low), 1.0110 (May13 low), 0.9931 (Apr21 low), 0.9825 (May’08 low), 0.9712 (Feb’08 low), 0.9058 (Nov’07 low).

Positioning:

• The CFTC, non-commercial, net slipped to 18K, keeping the uptrending channel for this times series since early-2009 intact.

• The risk reversal (3m, 25delta) ticked lower overnight with the decline in spot. It remains roughly in the middle of its six-month range, providing little direction for the trend in spot.

• Implied Vol (3m) is down slightly, and it lies just below the middle of it’s range so far in 2010.

Cross-asset valuation: In terms of other assets correlating with USD/CAD, watch the SPX (negative), CRB (negative), crude oil (negative), and the 2yr spread (negative).

USD/JPY. Consolidating lows since Dec

USD/JPY (87.42) is down overnight and near the Jul lows. The market remains wary of BoJ intervention after testing to a low since Dec earlier this month.

Technicals:

• Trend: Daily higher; Weekly lower.

• Overbought/Oversold (stochastics): Daily oversold; Weekly oversold.

• Support/Resistance Levels: Support lies at 86.27 (Jul16 low) and 84.83 (Nov27 low). Resistance lies at 89.16 (Jul12 high), 92.89 (Jun4 high) and 94.99 (May4,5 high).

Positioning:

• The CFTC, non-commercial net position fell to 40K as spot stalled at lows since Dec. The position is among the most bullish JPY readings and suggesting limited downside for USD/JPY.

• The risk reversal (3m, 25delta) rose overnight with spot. The skew is still in favor of USD/JPY downside, but lies in neutral territory relative to its range the past six months.

• Implied vol (3m): fell overnight and remains deep into the lower half of its 6-month range.

Cross-asset valuation: The correlations of USD/JPY with the US 10yr yield (positive), the US-JP 10yr (positive) spread, the S&P500 (positive), CRB (positive) and crude oil (positive) are significant.

AUD/USD. Marching higher to new highs since May

AUD/USD (0.9053) rose overnight, trading a new high since May and decisively breaching resistance at 0.90.

Technicals:

• Trend: Daily higher; Weekly higher.

• Overbought/Oversold (stochastics): Daily overbought; Weekly neutral.

• Support/Resistance: Technical support lies at 0.8634 (Jul19 low), 0.8316 (Jul1 low), 0.8067 (May25 low) and 0.7704 (Jul’09 low). Resistance for AUD/USD exists at 0.9066 (Jul27 high), 0.9389 (2010 high), 0.9406 (2009 high), and 0.9850 (2008 high).

Positioning:

• The CFTC, non-commercial net position rose to 32K, consistent with the rally in spot towards 0.90 and a high since May.

• The risk reversal (3m, 25delta) fell overnight despite the rise in spot, but it is trending higher in the middle of its 6-month range.

• Implied Vol (3m) fell overnight down below the middle of its range for 2010.

Cross-asset valuations: AUD/USD has correlated most strongly with equities (S&P500, positive), commodities (CRB, positive) and USD/JPY (positive.)

NZD/USD. New high since Jan

NZD/USD (0.7369) is up overnight. Spot has breached resistance from the highs of Jul and Apr and posted a high since Jan.

Technicals:

• Trend: Daily higher; Weekly higher.

• Overbought/Oversold (stochastics): Daily overbought; Weekly neutral.

• Support/Resistance: Resistance lies at 0.7375 (Jul27 high), 0.7442 (Jan14 high), 0.75247 (Nov high), and 0.7635 (Oct21 high). Support lies at 0.7030 (Jul19 low), 0.6795 (Jul1 low) and 0.6561 (May25 low).

Positioning:

• The CFTC non-commercial, net position rose to 8K, still a neutral reading and in no way a deterrent to additional Kiwi strength.

• The risk reversal (3m, 25delta) slipped overnight despite the rally in spot. It lies just above the middle of its six-month range.

• Implied Vol (3m) rose overnight but still managed to trade a new low since May, suggesting the potential for spot to trade higher.

Cross-asset valuations: The strongest correlates for NZD/USD during the past two months have been AUD/USD (positive), stocks (S&P500, positive) and commodities (CRB index, positive).