EUR/AUD macro view: Bullish weekly close
Since the EUR came into existence it traded pretty consistently against the AUD between 1.55 and 1.70, and then along came the GFC (see chart). EUR/AUD screamed higher above 2.00 when the big AUD carry trades were unwound in a hurry and then it collapsed back below 1.20 when the market thought the EUR was going out of existence. All seems pretty stupid now, but that's what takes markets to extremes.
The break and close above weekly resistance at 1.4400 is a danger sign for the AUD as we could easily see this pair move higher towards longer-term median levels around 1.55. The bull trend seems to be in control and the main question is whether we go straight higher from here or whether we get more typical stop-climbing movements. I'm guessing that it will be more of the latter type as EUR/AUD is no longer in the severely oversold state that it was earlier this year.
Very slow day in Asia, hard to find any insights
I think I shall go and have a nice dinner as it's been a long week. Today was a waste of time and I learnt nothing from the price action during Asian trade. I'm still long AUD/USD with a stop below .9000 and I'm basically short USD/JPY through the legs but without any really strong view yet on what the big levels are.
After this week my bullish AUD/USD view has become even stronger. The big macros and hedge funds continue to sell the Aussie on the back of a non-existent China story (in my view) and the bullish USD story has taken a big hit this week meaning for me that AUD/USD should return to levels .96/.98 in coming weeks. One potential fly (or 2 in fact) are the AUD/JPY and EUR/AUD crosses which, if the break 89.50 and 1.4400 respectively, will give the AUD bears a huge boost.
Thanks for your company this week and all of your good ideas and I promise that I will start the newsletter mail-out to registrants this weekend. More hot air! Have a great weekend.
So just how well are the current batch of hedge funds performing?
Well not very well at all according to this Businessweek article (you gotta love the caption :) ). I'd tend to agree with much of what they say. Sure there are some good traders in some of the hedge funds but the really great ones are the ones you never hear about, who trade their own money not other peoples, and consistently make large amounts of money without taking stupid risks.
Time to sit back and listen closely to what Mr Bernanke had to say
There has been so much verbal diarrhoea over the last few days and weeks, with everyone in the market screaming their views on 'tapering' and hoping to be heard. Well their views don't matter, in fact there is only view that matters and that is Mr Bernanke himself. I'm just reading a piece from BofAML and they refer to the following quote from the Fed statement;
"if both growth and inflation pick-up along the lines of the FOMC forecasts, the Fed will end QE in the middle of next year".
Central bankers are not likely to change their tune or their words from one week to the next. Unless something drastic changes, ignore all the useless pundits and read Helicopter Ben's lips :)
AUD/USD: Adjusting my trading range lower by 50 pips
I had been looking for consolidation between .9150/.9350 but it looks more likely that we see a .91/.93 range before this pair breaks (higher I still think). I know the big macros are still selling AUD but they were all limit long and wrong at 1.05 so I'm happy to take their cash :)
Macros were big GBP/AUD buyers over last 24 hours
Prime brokers report that big macro funds started bailing out of GBP shorts and into AUD shorts around the time of the FOMC statement. Not sure whether the two are related but one would have to think so? Obviously the amounts must have been very large as the GBP/AUD pair jumped from 1.62 to 1.66 in a little over 3 sessions.
EUR/USD: Anyone else smell a short market?
Maybe I'm reading too much into this, and I probably am as I don't trade it very much, but the viciousness of yesterday's short-covering rally tells me that this market was caught short and wrong. Certainly we've seen a pull-back since then towards 1.3000 but any market which jumps 400 pips in a straight line is telling us something!
If I had to have a position today, I'd be long, and in fact I've bought some near 1.3095 to turn my EUR/JPY shorts into USD/JPY shorts. I would not be at all surprised to see some big ranges in coming days.
USD/JPY: Looking quite bearish to me
- Most important factor here is short-term market positioning, and there has been again a big build up in long positions in recent weeks.
- Short-term charts look quite bearish (see chart) and a move lower towards 97.00 certainly looks feasible.
- The USD has lost some of its bullish glow.
- AUD/JPY and EUR/JPY have had false bullish breaks in recent days and also look susceptible to sharp-ish retracements?
- It's Friday! We often get sharp moves at the end of the week and for mine, today's risk is to the downside.
AUD/USD: Still looks reasonably constructive but....
- Technical picture shows a shallow basing pattern (see chart).
- Risk-reward favours buying dips with stops below recent lows.
- USD bull-bubble has been deflated, but not yet burst.
- EUR/AUD is nearing important resistance levels again, but AUD/JPY is looking bearish again and a break below 89.35 will trigger more selling.
AUD/USD: Buying back smalls at .9205
I sold some earlier at .9295, just buying them back now to improve the average! I still like the look of AUD/USD overall but I'm expecting some .9150/.9350 consolidation.
I'm done for the day. It certainly was a very eventful first few hours, and to think that the markets used to always be like that. No wonder my hair is grey! Catch you tomorrow++
AUD/USD: Happy to re-buy on dips towards .9180
EUR/USD still looks fairly heavy and it could drag AUD/USD with it back below .9200, but I see that as a good dip-buying opportunity. I'm sticking with my .9150/.9350 consolidation range.
I'm still hopeful of some deep intraday spikes in EUR/JPY and my bids are in at 127.75 and 127.10.
Early Europe walks in to see EUR at much higher levels
It will be interesting to see what the Europeans think of EUR/USD near 1.3100? I think we may see some selling initially as clever longs book their post-FOMC profits and some of the crosses return to more equilibrium levels. There is little reason for EUR/AUD or EUR/GBP to move significantly on Fed policy, but that is what happened.
EUR/JPY: Looking to trade 127/131 with definite bearish bias
I'm short this pair, having sold some more this morning, and I'm expecting to see some very choppy trade between 127/131 on the wide before we get a sharp break lower. Let's hope we get plenty of range trading and some good chances to build a decent sized possy.
AUD/USD: Taking small profits off table
I'd be silly to ignore the 250 pips on the table so I'm booking more partial profits at .9295 and will sit comfortably now on the balance of my long position at a healthy average. I expect to see more volatility in the crosses and will look to buy back on dips to .9150.
Levels to watch in afternoon trade
I'm still of the same view, the EUR has done a lot of its work already and is overbought on the crosses whilst the Yen should gain across the board as position unwinding picks up pace.
- AUD/USD: Play .9150/.9350 range with bullish bias as it will eventually break higher.
- USD/JPY: Sell any rallies as long liquidation to pick up pace; volatile 96.50/99.50 range favoured here with bearish bias.
- EUR/USD: Recovery feels overdone but dips will be well supported. I'm still totally neutral here but happy to look for extreme swings at 1.29 or 1.33.
- EUR/JPY: I'm bearish and short whilst this cross stays below 131.25.
USD/JPY: Looking soft again after BOJ do nothing
The JPY crosses still look very soft to me and the reaction post-BOJ suggests to me that the market is long and nervous. Sell rallies in USD/JPY is the way to go I think. AUD/JPY could get dangerous on downside in coming days, that's why I'm happy to sell AUD/USD rallies and look to book profits on dips after that (if/when cross turns toxic).
Australian jobs data: Topside risk for the AUD/USD
- There has been some poor economic data over the last two days but the AUD has risen in spite of this.
- FOMC burst the USD bullish bubble overnight.
- I see the main risk being to the topside post-jobs data. A strong number could set off another batch of short-covering (which I don't think has really yet begun in earnest!).
- .9150/.9350 likely to cover most eventualities in coming sessions but its going UP!!
EUR/JPY: Adding to shorts at 130.20
I've only got a very small position in this pair at the moment, thankfully given the wild volatility, but I really like the risk reward in being short near 130.25/50 with a 100 pip stop looking for 127.00. I'm keeping the position small for now as we still could see some wild swings. As usual, let's see how it develops.