Levels to watch today (but don't expect them to be challenged!)
- EUR/JPY resistance at 131.10/20
- AUD/USD short-term technical edges at .9170/.9300
- EUR/GBP, prior resistance becomes support at .8600.
- Cable resistance at 1.5280/1.5300.
I think we will have range trading for rest of week. My trade-of-the-moment is still the short EUR/JPY play which offers excellent risk-reward possibilities and the events of overnight have done nothing to dull my enthusiasm.
Best to sit back and see how market wants to react
- The statement from Mr Bernanke that all options are still on the table and policy decisions are data dependant would seem at first glance to be risk-positive and USD-negative.
- No sign of any big moves in AUD/USD or the Yen crosses would seem to belie this notion.
- No sign of any sharp moves higher in EUR/USD so last week's sharp short-covering rally might have been a one-off event?
- EUR/JPY still trying to form its right shoulder.
In other words, the market gave no big hints in overnight trade and I think it's probably best to sit back for a session or two and see if the market does start to move one-way.
I remain overall USD bearish with a slightly risk-off bias so I still prefer the sell-rally play in USD/JPY.
Cable: Decent technical resistance near 1.5280
Nice rally in the GBP after the MPC minutes and cable is back above 1.5200. There is decent technical resistance starting at 1.5280 (see chart) which should prove difficult to overcome.
EUR/GBP is back below .8650 and the target there is hourly lows at .8610.
The GBP was sold heavily yesterday after CPI data and is being bought today on central bank minutes. All of which will be forgotten after Bernanke tomorrow.
Get-together for Sydney traders next Thursday, the 25th
This will be a very small informal affair but it will be nice to put faces and voices to well-recognised names and monikers. We will meet in North Sydney next Thursday, July 25th, and I'll send exact details out before the end of the week.
EUR/JPY fast approaching technical resistance at 131.10
I'm really not sure what is driving the EUR/JPY higher from these already lofty levels but if 131.10/20 resistance breaks (and nullifies the potential topping pattern) then we are likely to see stops going off.
Best way to trade Bernanke speech is with no fixed position
Honestly I feel that it could go either way after the prepared speech is released at 08:30 am NY time and the grilling in front of Congress begins 90 minutes after that. My tendency is to be bearish on the USD but I feel that I am in a significant minority. It's unlikely that Mr Bernanke will come out with any major surprises so the best way to trade it is to have no (or very small) positions and use volatile swings as trading opportunities.
I still believe that the reaction of EUR/USD after last week's FOMC is a very telling indicator. If we start to get another such reaction tonight, then it will be time to go "all in" on the bullish EUR/USD trade.
Bernanke likely to hint at taper dates
I'm definitely not an expert on Fed-speak but some buddies in the bond market follow Ben's every word religiously and they expect to hear some definite hints on when the tapering is likely to start. Early next year is best guess. What will that mean for the FX market?I think we will see some impatient USD longs getting squeezed but any falls should be limited.
Edit: The speech will be released 90 minutes before Mr Bernanke starts his Q&A in congress so we could see big swings as interpretations may differ from the tone of his answers. Best way to trade it is to have no positions and wait for wild swings.
EUR/USD outlook: Still looking moderately bullish
The biggest clue to the immediate future for the EUR/USD came in the aftermath of the FOMC; a 400 pip rally in a matter of a few hours told us a lot about market positioning and I think the path of least resistance for the EUR/USD is now higher.
The crosses are giving mixed signals, EUR/GBP is definitely bullish as is EUR/AUD but there is a possibility that the break above 1.4400 was a false one? EUR/JPY is trying to form a topping formation but if this pair can get back above 131.50 then the overall bullish case for EUR/USD will be looking a lot stronger.
Looks like a 1.30/1.33 range in EUR/USD and I'd suggest a dip-buying bias but keep a close eye on the crosses at all times.
AUD/USD intraday outlook: Buy dips towards .9170 looking for .9300 re-test
Overall market sentiment is still bearish AUD so I wouldn't chase it higher just yet, something major would have to change for that to happen. If you're bullish, look to levels near .9170 to hold and if they do, then you can try a quick long trade for a test of .9300 (see chart).
USD/JPY: Favour selling intraday rallies for test of 98.30
- The possible Head-and-Shoulders formation in EUR/JPY is still relevant.
- AUD/JPY looks to be in 90/93 consolidation.
- USD bulls getting nervous ahead of another Bernanke speech?
I favour selling intraday rallies in USD/JPY. I'd expect it to stay below 99.50 and target 98.30 in the short-term.
AUD/USD: Important resistance .9300/50
I'm pretty annoyed with myself for selling 1/2 my long position at .9170 yesterday, probably one of the dumbest trades I've made in recent times and believe me it's got some competition for that title! It looks like .9000/.9350 are the edges of the range for now but I'm maintaining my bullish bias. Much will depend on what happens in the crosses and if EUR/AUD breaks below 1.39, AUD/JPY breaks above 93.00 and/or AUD/NZD breaks above 1.18, then the AUD/USD will get a much stronger bullish bias.
GBP/JPY getting smashed lower after UK CPI
So much for the GBP buyers today, GBP/JPY is well over 100 pips lower than earlier session highs after lower than expected CPI data. GBP/AUD is also getting smashed and the focus is again squarely on the crosses.
These are really difficult markets.
AUD/USD: Lightening up on long position
I'm taking a little profit off the table here at .9170 as resistance at .9185/90 has held firm and the Yen crosses have turned south. I think we may see some extended range trading .90/.92.
Edit: Wish I hadn't done that :(
EUR/JPY: Nearing right shoulder of H&S formation
There is quite a nice H&S formation here with a right shoulder at 131.15. We can expect to see selling at this level with stops above. I'm already short with a stop above 131.40 and will sell more if the level is tested and confirmed.
Prefer to play the USD from the short side intraday
I don't have any strong reason for this bias, simply that pairs like AUD/USD, EUR/USD and GBP/USD are all looking more likely to go up rather than down. The market has been bullish USD for quite a few weeks but it feels as though we are entering the holiday periods earlier than usual and that usually means that positions start being reduced. I favour buying dips in the above pairs, but be warned I'm talking my position (long AUD/USD) and my timing has not been particularly good recently.
AUD/USD: Decent sized orders nearby
Dealers have their eyes on stop-loss buy orders above .9195 but first have to get through decent sized sell orders at .9180/85.
EUR/GBP trade idea: Short based on expected flows
This comes from a friend in HK who normally has very good insights into upcoming flows. He has sold at .8650 with a stop at .8725 looking for a return to .8500 at least.
Must say I'm not tempted by this one. I've been getting my timing wrong in the GBP of late and am leaving it alone. Although I do agree with the direction, it's getting the timing right which is proving very hard to do.
Note: FXWW888 reckons that long cable might be the way to play this idea, what with EUR/USD looking quite well bid? The cable has hurt me recently and I'm reluctant to jump on but I'll keep a sharp eye on it during London trade and see if any opportunities arise.