EUR/JPY should be key pair this week
The EUR was pulled in different directions by large flows last week; on one side there were reports of a EUR15 billion buy order against the AUD whilst on the other side there were reports of 10billion+ in stops below 129.00 in EUR/JPY. Little wonder that AUD/JPY took a bashing at times! I’m presuming that much of these flows are already soaked up and now it becomes a matter of picking the right levels in the volatile pairs.
- EUR/JPY: Break and weekly close below 129.00 was a bearish event but the market closed on Friday with a very bullish tone. There are certain to be heavy short-stops now above 129.50 and I wouldn’t be surprised to see these triggered, perhaps even on Monday morning? Nevertheless the trend is still bearish in the short-term so I’m looking to re-sell on any exhaustive rally towards 131.00.
- GBP: I’m bullish and I bought a small GBP/CHF position on Friday in line with this view. Cable may dip back towards 1.5350/1.5400 depending on what happens to the USD early next week but the overall flow of funds seem to be GBP-positive and I’m expecting some big gains for the pound in coming months.
- AUD: Asset managers are still trying to get out of over-exuberant long Australian-asset positions and I suspect that the AUD still has quite a way to fall on the crosses. I will stress that I think the recent AUD weakness will remain primarily against the crosses (GBP, CAD, SGD etc) rather than against the USD and I remain a buyer of big dips in AUD/USD.