Levels to watch in early European trade
- USD/JPY: 61.8% retracement of 103.70/93.85 at 99.90.
- EUR/USD: Sovereign bids 1.2970/80.
- Cable: Important technical support 1.5155/80, double-bottom neckline and 61.8% 1.4830/1.5750.
- AUD/USD: Short-term resistance at .9215, down-trend line and 61.8% 0.9330/0.9110.
Have we got a resident Mark Carney expert at FXWW?
Any old Funds traders out there who've been following the career of Mark Carney closely? What can we expect from him, dovish or hawkish tendencies? Does he like to use aggressive policies or is he a typical conservative central banker?
I'm really not sure what direction Mr Carney comes from but I have a feeling the GBP is in for some really big moves and I think it will be higher. I know I'm in a significant minority but that makes me even more confident.
USD/JPY: Every analyst seems to be super bullish
There's a good reason that banks never give analysts any trading limits! Their job is to get publicity for their employers and generally sound as if they know what they are talking about. You will also usually find that the analysts tend to follow each other's calls; less chance of them looking bad that way.
Currently it seems to be a matter of analysts trying to out-do each other with how high USD/JPY is headed (somewhere between 105/120 is common-place). I liken them to the Channel Ten weather team; great at telling you what today's weather was like but stuff-all use at forecasting tomorrow's weather :)
I'm firmly of the view that if all analysts are saying the same thing then the market will soon turn in the other direction so I'm staying in USD/JPY rally-selling mode, especially when technical levels hold firm. [Edit: The broader market probably has some way to go before it get's saturated with long USD/JPY positions so if you fancy being long, I'd do so soon].
EUR/GBP: Still capped below .8600; Carney taking over today
The GBP should be quite volatile once Europe gets up and running with big technical levels close by in both cable and EUR/GBP.
Today is also the first day at work for new BOE governor Carney and although its unlikely that he will be rocking any boats anytime soon, that will not stop the market from speculating on possible policy moves.
EUR/GBP has been capped in recent weeks below .8600 and cable has strong support at 1.5155/80 which we looked at earlier.
AUD/USD: Strong short-term technical resistance near .9215
If the bears are to maintain the current strong downside momentum, they will need to defend important technical resistance levels like .9215 (see chart). This is where the 1-hour downtrend and the 61.8% retracement of .9330/.9110 converge.
AUD/USD: No reaction to official Chinese PMI data
AUD/USD is trading near .9150 after the official Chinese manufacturing PMI data came in lower compared to last month. I can't see any value in trading the AUD/USD at current levels, preferring to wait and see how the next few sessions develop. I'm still running a small core long position but after a very tiring week last week, I'm happy to sit on the sidelines unless some dramatic trades jump out suddenly :)
Not hearing much on the flows and orders front, so I think I may not be alone in needing a break.
NZD: Demand for local bonds returns and Kiwi starting to look good on the crosses
- AUD/NZD consolidating below 1.2000 and further losses towards 1.1500 expected.
- NZD/JPY and NZD/CHF building bases above 75.50 and 72.00 respectively.
- Demand seems to have been picking up during the Asian session with FXWW888 reporting the return of demand in the bond markets.
- Most recent falls have been in overnight trade, which suggests to me that speculative accounts are still selling, thereby increasing the chances of some sharp short-covering rallies.
For those NZD bulls out there, AUD/NZD looks like the 'safest' play (wrong above 1.20) whilst NZD/CHF could offer the best risk-reward possibilities.
EUR/JPY: Maintaining preference towards selling rallies
Prices have stalled yet again just above 129.50 (see chart) and this pair is struggling to maintain momentum in either direction. I'm still in the sell-rally camp here but only looking for 150/200 pip swings. Prices have been struggling to hold above 129.50 but the market is trying to re-impose the bearish Yen play, so I think we may get a break higher in coming sessions to test Fibo resistance at 130.45/50.
I'm looking to sell a failure there, with a tight-ish stop, looking for pullback from there towards 128.50/129.00.
EUR/USD: Supported by Sovereign bids and a weekly trend-line
- Sentiment is bearish and positioning is headed that way with all of the major banks seeming to turn bearish at same time.
- Sovereign bids now reported 1.2970/80.
- Weekly trend line comes in near 1.2925 (see chart).
Cable: Strong technical support at 1.5155/80
- The 61.8% retracement of the move from 1.4830 to 1.5750 comes in at 1.5180 (see chart).
- The double bottom at 1.5000 has a neckline at 1.5155.
If these support levels can hold firm for a few days this would give cable bulls an excellent risk-reward trade opportunity.
USD/JPY: Favour a 98.75/99.90 range
The fundamental outlook is bullish given potential tapering from the Fed and expansionist BOJ policy, but remember that much of this is already written into the market. The big end of town is structurally long and as we saw a few weeks ago, if they start to dump positions across all asset classes, then USD/JPY will fall regardless.
Playing the swings looks like the better short-term strategy whilst buying-big-dips looks like the best medium-term play. There are some risk events today with the Tankan report followed later by Chinese PMI and I think that support should now be found near prior highs at 98.75 and the topside target is a Fibo at 99.90 (see chart).
AUD/USD: Looking for new trading range .9000/.9250
Despite the very weak technical close below .9140 on Friday, AUD/USD hasn't managed to break any further this morning. The early interbank market had a few goes at the downside but we are basically beginning the week where we finished the last one. Chinese PMI is the major risk event on today's economic calendar and of course there is the RBA tomorrow.
- AUD/USD traded very bearishly on Friday afternoon in Asia (see story) and the technical outlook certainly looks bearish for a test of levels below .9000.
- AUD/NZD also looks bearish and I think we are in a short-term consolidation phase between 1.1750/1.2000 before further falls eventuate.
- AUD/JPY and EUR/AUD are giving the AUD bulls some hope; strong technical support at 89.50 is still relevant (see chart) and EUR/AUD has spent another week below 1.4400 (see chart).
I would suggest that we sit back and watch for a few sessions, trading 150/200 pip swings in AUD/USD. The price-action on Friday was very bearish and we will need to figure out whether this was a one-off related to big end-of-month flows or if it was the signalling of bear-trend strengthening.
Major banks turning very bullish USD
The dollar had a very strong night on Friday, driven by significant month-end flows from US corporates and asset managers. Most of the big-bank research that I've read over the weekend is turning very bullish on the USD but I feel that this may be a bit premature. Purely from a trading perspective, whilst the overbought AUD and JPY have undergone major readjustments against the USD, none of the other majors are showing strong trending signals and still seem to be in sideways trading modes.
- USD/JPY: Undoubtedly still very bullish after the big move off lows near 76.00 last November but it has yet to regain 100.00 and the big macro players are still structurally long of this pair. It may go higher eventually but for me its trading like a pair which will stop out both bulls and bears for weeks, even months to come.
- The price action in AUD/USD on Friday was very bearish and it remains to be seen whether this was simply related to the month-end flows or whether the recent bear trend has re-established itself. If you really want to be long of USD, this looks like the safest bet, but I will still bet against you :)
- Cable has a double-bottom at 1.5000, a neckline at 1.5155, and retraced to an important 61.8% just below 1.5180 on Friday night. It may go lower, but if you were clever enough to sell near 1.57 then I'd be taking some profits off the table just in case. I'm long but I will stop out at 1.5100.
- The market is getting gung-ho bearish on EUR/USD, for the umpteenth time, and the EZ story this time isn't nearly as bad as it has been in the past few years. Sure it may go lower, but this market still screams "range-trade" to me.
- USD/CHF: This is the one pair which really confuses me as I feel we should be trading closer to parity and that the CHF crosses should be significantly higher. Timing as always is the big issue.
Let's see what Monday morning brings. Have a great week.
AUD/USD: Dumping my intraday longs
I've reduced my position back to my core longs and have taken a small profit on my intraday longs taken earlier today. A good source tells me that they bought a good chunk of AUD from .9260 through .9280 but as soon as they finished buying it came straight back in their face. He says the sellers came from plenty of different directions, usually a bearish sign in my view. It would not surprise me at all to see another spike lower later on so I'm taking the safety-first approach, after a tough week.
Cable: Play edges of wide 1.5150/1.5400 range
I don't think we will see either side of this range tonight but you just never know. If we get within 30/40 pips of either side then we will start to see some reasonable 'value' levels. The short-term trend is bearish but the medium-term outlook is reasonably bullish from a technical perspective after the double-bottom at 1.5000.
I'm still long but will definitely play swings if we see either of these edges.
Month-end flows expected to be EUR, USD positive; JPY, CHF and GBP negative
The London Fix on the last Friday of the month is usually a big event and today should be no different. Today's flows are expected to be overall JPY, CHF and GBP negative whilst being positive for the EUR and the USD. I've read mixed reports regarding the CAD and AUD but the more reputable reports suggest that flows will be positive in both cases.
In the past, bank dealers used to be well positioned ahead of the event in order to benefit from these flows but in today's new world order of 'no prop trading', it may be left up to hedge funds and Algos (and mugs like us) to pre-empt what's going to happen :)
Levels to watch through the European open
- EUR/USD: Support solidifying near 1.3000, not much in way of selling interest until 1.3100.
- USD/JPY: Looking bullish after break above 98.75, next resistance at 99.25.
- EUR/JPY: Former trend-line resistance at 128.50 should now form support, technical target at 129.90.
- AUD/USD: Intraday support at .9220 with resistance lines pretty clear .9345/50.
- Cable: Pre-GDP highs at 1.5330 should provide initial resistance.
- Gold: Support expected 1150 (ACB bids).
AUD/NZD technicals: Bears looking to weekly close below 1.1825
This pair looks very heavy to me but there is important technical support near 1.1825 (see chart) which is the 61.8% retracement of the big rally from 1.06 to 1.38.
Of course we have already had a spike below there but we haven't yet seen a weekly close below there. I think this level could prove to be very important when looking at medium term developments.