Katy Perry was the highlight of the MuchMusic Video Awards

EUR/USD. Uptrend broken

EUR/USD (1.2287) is down slightly overnight. It rallied a bit in Asian trading before selling off hard in the European morning. It is stabilizing coming into the US open. After failing at 1.25 Monday, spot slipped and has since stabilized. However, the lack of upward momentum has caused it to breach the recent uptrend.

Data release: Euro Zone industrial orders rose less than expected (0.9%, consensus 1.6%). Nonetheless, the EUR has managed to stabilize after selling off earlier in the European day.

Technicals:

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Trend: Daily higher; Weekly higher.
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Overbought/Oversold (stochastics): Daily neutral; Weekly oversold.
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Support / Resistance Levels: Support for EUR/USD lies at 1.2245 (Jun 23 low), 1.1877 (Jun7 low), 1.1827 (Mar’06 low), and 1.1640 (Nov’05 low). Resistance lies at 1.2487 (Jun21 high), 1.2672 (May 21 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:

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The CFTC, EUR, non-commercial, net position (-55K) moderated sharply, consistent with the recent uptrend in EUR/USD. However, we’d caution that after the position moderated from a record +119K in May’07, EUR continued to strengthen from 1.35 to 1.60.
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The risk reversal (3m, 25delta) slipped overnight along with spot, but remains within its uptrend from the record low as the options market attempts to price in a rebound in spot.
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Implied Vol (3m) ticked up overnight but remains in a downtrend from the highs since Apr’09.

Cross-asset valuation: The significant correlations that EUR/USD has during the past 60 days are the 5yr yield spread (positive), the 10yr yield spread (positive), the US10yr yield (positive) and the SPX (positive).

Katy Perry flaunts her California Gurls cleaavage

Underlying Themes
Yet more television opportunities for those on Capitol Hill as they quiz BP CEO Hayward for a massive seven hours. This after hauling in the bankers et al as they attempt to blame everyone other than themselves on the current mess. Unfortunately it is becoming all too apparent that forefront in many minds are November’s mid-term elections. Meanwhile their suggested solution to the haemorrhaging Government Sponsored Enterprises Sallie Mae and Freddie Mac is to de-list them from the stock exchange. Guaranteeing or owning half of all US mortgages, yet lawmakers are not even discussing what to do with these as part sweeping financial reforms.

What to watch for next week
Sunday the 20th Presidential election in Poland and the runoff of Colombia’s. Monday, the summer solstice, quiet with just Japanese April All Industry Activity Index, May Convenience Store, Tokyo and Nationwide Department Store Sales and UK June Rightmove House Prices. Tuesday April EZ16 Current Account, US House Price Index, May Existing Home Sales, German June IFO and Eurozone Consumer Confidence while UK Chancellor Osborne publishes his emergency budget. Wednesday Bank of England Minutes of its June 10th MPC meeting, BBA Mortgage Approvals, June PMI’s for various European countries, German July GfK Consumer Confidence, US May New Home Sales, the Fed’s FOMC and Norges Bank’s rates decisions (expected unchanged at 0.25% and 2.00%) and Iceland’s too (a cut of 50 or 100 bp from 8.5% expected). Thursday Japan May Corporate Services Prices and Trade Balance, US Durable Goods Orders and Eurozone April Industrial Production. Friday Japan May Nationwide and Tokyo June CPI, US final Q1 GDP and June University of Michigan Confidence Survey while in Huntsville, Ontario, Canada hosts a G8 summit with G20 meeting in Toronto though to Sunday the 27th.

Positioning and Technical Analysis

Things might limp along for another week or so but the ultra-long term trend to lower Treasury yields should continue even further, taking many top-rated borrowers to new records. Sub-investment grade institutions will suffer though as spreads widen, those of suspect quality being marked down well before the rating agencies take a look. Safe-haven Japan and Switzerland should gain, creating headaches for companies and the authorities there, and Gold should remain a popular choice. Eurozone money market likely to fret as one-year ECB loans expire to be replaced by fixed-rate three-month cash.