Crosses get out of whack in these volatile stop-driven markets
This is how I see it. The market got way overly-exuberent on its taper-driven USD rally and we will now see a correction. EUR/USD has done most of its correcting already meaning that the EUR crosses are somewhat overbought in short-term. Pairs like EUR/JPY and EUR/AUD offer good risk-reward shorting opportunities near current levels. I still think that the AUD/USD offers an excellent catch-up opportunity, and this pair will soon catch a sharp bid tone and march higher towards .9650.
So selling rallies in EUR/AUD and EUR/JPY are my cross-plays of the moment, and the real exotics can consider selling CHF/JPY as I still think that something is going to happen to the Swissy.
AUD/USD: Reasonably orderly compared with EUR/USD! Look to book profits .9325/40
Certainly the size of short positions in the AUD/USD hasn't been as big as in EUR/USD, judging by the reactions of both pairs to the FOMC statement. AUD/JPY could still be an important player today with jobs data and the BOJ upcoming, so I am looking to booking profits on AUD/USD longs to .9325/40, hoping for a pull-back towards .9200 from there?
As for EUR/USD? It could see 1.3300 before it slows down but will be a great short-term selling opportunity up there somewhere!
EUR/USD: Wild wild short-covering
The market loves to be short EUR/USD but they're getting well and truly hammered this morning post-FOMC. Those clever enough to have bought yesterday below 1.2800 should take their profits off the table as this is a simple case of stop-loss squeezing gone mad in thin market conditions.
AUD/USD: Stops going off above .9250
The USD bulls are in for a torrid day it seems! Next resistance in the AUD/USD is at .9340.
USD/JPY: Downside risk now very real
I've thought for weeks that USD/JPY is likely to stop everyone out in extended periods of volatile range trading and I think we may now see the bulls getting hurt. The market is long of the JPY crosses and the delayed taper from the Fed will hurt the bullish USD sentiment. Add in to the mix that it's mid-July and many big players will start exiting their positions pre-holidays and we could be in for a sharp downside clean-out. I would not be surprised to see the market back below 95 quite soon.
Hope you're making sense of all this whip-saw trading
We have seen some quite wild moves in all pairs over the last few hours, quick swing traders will undoubtedly find interesting 50/70 pip trade opportunities, but the rest of us must sit back and decide what to do. Usually an indication that the Fed will keep stimulus going should be bearish for the USD and bullish for risk trades; therefore AUD/USD would seem like the obvious trade. But with EUR/AUD up sharply from yesterday and AUD/JPY down sharply, the market doesn't yet seemed to have completely shaken its bearish-AUD stance.
I have a feeling that USD/JPY might get very interesting in coming sessions and I don't think the danger is to the topside!
Have a good day.
EUR/JPY: Play wide 126.50/129.00 range
I certainly didn't expect it to fall so quickly, but I guess that's the point; no-one else did either and hence the sharp fall. Selling rallies looks like the safer play in EUR/JPY and any levels now towards 129.00 look like reasonable entry points for bears. There isn't much in the way of support until 126.50 hourly lows.
AUD/USD: Taking small profit off table at .9225
The Yen crosses are turning lower and I'm a bit worried that AUD/JPY is stabilising back below 92.50. I'm taking 1/3rd of my AUD/USD long position off the table, leaving me with a comfortable average and a free trade, just as we like it. Next resistance is at .9250 and if that holds, we could see a pull-back towards .9125 so let's see how it plays out.
EUR/JPY: If the EUR is to break lower, this could be the driver
I've just had a long look at the EUR crosses, trying to find some reasons to be bearish, and the one pair that really sticks out on many fronts is EUR/JPY. The main argument at the moment is that the big macro funds are quite long of this pair still, having bought it aggressively from 105 up through 120 and they have had little reason to become overly worried about their positions. I'm not sure what might drive them out, but the technical picture is showing a nice topping pattern on the dailies (see chart). Of course for EUR/JPY to fall aggressively, we would probably need to see a big risk-off event, and that doesn't tie in well with my bullish AUD prognosis. Opinions change I guess, best to leave it to the market to figure it out.
I've taken a small EUR/JPY short at 128.70, let's see how it develops.
EUR/USD: Risk-reward would seem to favour the (brave) bulls
I'm in a huge minority in the FX market in that I very seldom trade EUR/USD. I much prefer to trade the crosses and only really look at EUR/USD trade ideas if they are very clear-cut. I don't see anything clear-cut about EUR/USD at the moment and I still think it's in one big sideways range trade. I don't see it near 1.15 anytime soon nor do I see it near 1.40 either. In my view, its fairly cheap near 1.25/1.27 and its expensive near 1.35/1.37.
The crosses at the moment are quite well supported; EUR/CHF has been on a bit of a bull move in recent sessions, EUR/GBP continually frustrates the bears, and even EUR/JPY has been quite resilient near 130. If the EUR/USD were about to crash then the crosses would be very heavy also IMHO.
There is strong technical support in EUR/USD near 1.2750 and if this holds through the FOMC, watch out then for a sharp rally back to mid-range levels near 1.31.
EUR/AUD: Mightn't be a bad idea for shorts to book some interim profits near 1.3900?
I know many people have been trying, some successfully, to pick a top in this cross between 1.4250/1.4350. It has dipped fairly aggressively but with EUR/USD nearing strong support at 1.2750 and with AUD/USD nearing strong resistance at .9250, it might not be a bad idea to book some partial profits and look to re-sell on rallies? Just a thought.
AUD/USD: Hourly chart looks more constructive amid fresh highs
I think its safe to say that momentum is still relatively weak (see chart) but I expect that to change if/when .9250 is broken. An hourly trendline is forming near .9150 and this should provide support. and we should get a test of .9250 later tonight. The hourly chart continues to make new highs in a constructive fashion, and the fact that it's doing this while the economic news has been quite bad, tells me a lot about market positioning.
(Edit: Heavy turnover above .9200 shows still plenty of selling interest. I have a trailing stop on my .9050 purchases now at .9120).
EUR/JPY: 200 pips lower since yesterday's false break
This happens a lot in the FX market; all eyes are on one level and the market anticipates a break. Then it happens, hangs around for a few hours, and then reverses sharply catching many off-guard.
That's exactly what has happened in EUR/JPY over the last 12 hours. Our hedge fund insider @FXWW888 did warn of stops below 100.75/80 in USD/JPY and we've seen them triggered in last hour of trade.
If the AUD can't fall on bad economic data, then it must be going up
The interbank guru @FXWW303 has been selling the AUD today but I must say I disagree with him this time. The AUD rallied yesterday after poor domestic business data virtually ensured an August rate cut and it is back at opening levels again today despite more poor Chinese trade data. I think the AUD has fallen far enough, as we are currently seeing on the crosses against the EUR etc, and I expect to see some very nasty short-squeezes in coming sessions.
Modest NZD selling noted in early trade
There isn't much going on this morning with only some modest NZD selling to report from the interbank market. AUD/USD has drifted 15 pips lower from the NY close but it's all pretty uninspiring so far.
Dealers say that important support near 1.2750 in EUR/USD could be one of the keys to the session.
I'm out for a few hours, catch you later+
JPY session outlook: Looking to AUD/JPY for leads
- Market is not expecting any major developments from BOJ minutes.
- Big Japanese players were noted buyers of AUD/JPY when it broke above 92.50 yesterday afternoon.
- USD/JPY orders are reportedly heavy either side of 100.00/101.50 range, suggesting some extended range trading.
- EUR/JPY had false break above 130.20 and the picture is very muddled here.
AUD session outlook July 10th; short-covering picking up pace
The market has sold a lot of AUD/USD in recent weeks and the big question is, where will the big trailing stops be situated? I'm hearing that they will be above .9270 and again above .9360, and that certainly makes sense when you look at the charts (see chart). The AUD short-covering has already begun in earnest against the EUR, GBP, CHF and JPY and against this back-drop, I feel it's inevitable that the AUD/USD will break higher in the short-term.
There are a few risk events today with BOJ minutes, Australian consumer confidence and Chinese trade. Yesterday's data seemed to confirm an August RBA rate cut yet the AUD has rallied; when a market rallies on bearish news then you really need to take heed!
AUD/JPY should be one of the lead pairs in Asia and the technical close above 92.50 is an interesting development.
Wild moves on the crosses and more to come
- The AUD was the first mover, recovering after poor domestic business conditions data and taking out stops in AUD/JPY above 92.50. The market has closed above this important technical level and I'm firmly in the buy-dip camp on this cross.
- EUR/CHF was the next mover with real-money and hedge fund buyers emerging in early Europe pushing it quickly from 1.2400 to 1.2460.
- The GBP was next to move, falling heavily on poor economic data and eventually breaking support in the cable at 1.4830. EUR/GBP was a big mover, from .8600 to .8665 in the space of a few hours.
- The EUR bulls were next to come undone after Italy's debt was downgraded and EUR/AUD fell back below 1.4000 whilst EUR/GBP gave back all of its earlier gains.
- (And I hope someone listened to me on NZD/CHF a few weeks back?)
Conclusion: Short GBP/AUD still looks like a good directional play but its already fallen quite sharply so pick your entry levels carefully. The so-called risk on trades like AUD/JPY and AUD/CHF also look like decent dip-buying plays.