Cable: Entering a bullish technical phase
The double-bottom on the 4-hour (see chart) was followed by a very strong rally to 1.5750 and this move is currently retracing. The 61.8% retracement of this entire 1.5010/1.5750 move comes in near 1.5290 and if the technical set-up is to remain strong then these types of levels should hold.
I'm building a long-term strategic position here and have added this morning at 1.5315, with further bids at 1.5290. I'm still keeping positions fairly small as my stop-loss level is a long way away, but if the technicals hold then I will sharply increase my position and of course raise the stop.
NZD: Crosses suggest more gains ahead
- We had a look earlier this week at the bullish set-up in NZD/CHF (see story) and the cross is already 100 pips higher from there.
- AUD/NZD is in a solid downtrend and technical/psychological resistance at 1.2000 is now looking formidable.
- NZD/USD is in a long-term sideways pattern and is starting to near 'cheap' levels.
It's a matter of picking your poison here, with AUD/NZD looking like the safest bet, but overall I really like the NZD at current levels. There is trade data out later this morning so medium-term positioners so stay away until that event is out of the way.
AUD makes ground on crosses; stop-loss driven rather than any fundamental change
AUD/USD reached highs just above .9340 overnight, which is exactly where the hedge fund trailing stops were reported to be. It retraced immediately by almost 100 pips which suggests that the rise was totally stop-loss driven in the first place. The AUD also made decent gains against the EUR and the GBP and the worst seems to be over for the Aussie, for now at least.
The AUD/USD has a series of higher lows on the hourly (see chart) so I still think it makes sense to play from the long side intraday. I reduced my long position on 2 occasions overnight and am now sitting with a much more comfortable position with a healthy size and average. Big improvement from earlier in the week! Now its a matter of letting it run and hoping for the best.
Good luck today.
AUD/USD holding on to earlier gains
The AUD is up across the board, especially against the GBP where its almost 1% higher on the day. AUD/USD is still holding onto gains around .9300 and the bullish case is looking a bit stronger. Mr Rudd did in fact take over from Ms Gillard, but any impact on the AUD is likely to be fleeting; its the markets positioning which is the big factor.
Sovereign bids are reported in the EUR/USD 1.2980/1.3000 and of course there was Bundesbank buying of EUR/GBP to report.
State of origin about to kick off, mate against mate etc, so I'll catch you tomorrow and hopefully any late night trading tonight will be of the profit-taking variety :)
Cable under pressure as Buba buys EUR/GBP
The clever guys (well done FXWW888) were long EUR/GBP just above .8470 in anticipation of the usual end-of-month Buba buying and that's exactly what happened. Cable is back below 1.5400 and I've still got hopeful bids in place at 1.5290/70.
AUD/USD: Bit more on where the big orders are sitting; heavy stops reported from PB source
- Our friend Milan over at OrderFlowTrading is reporting US investment house offers at .9330 (remember that .9325 is prior lows and now technical resistance).
- FXWW888 reports quite heavy stops from hedge fund community starting at .9310 (done already) through .9340.
- FXWW303 says that Asian interbank order books were relatively light on stop-loss front.
- But interestingly, a good source at a big prime broker tells me that trailing stops are extremely heavy at .9340, .9375 and .9400.
Recent history over last few sessions would suggest that we get another 100 pip day between .9230/.9330 but you never know.
AUD/USD: Stops triggered above .9310
Obviously there is still plenty of selling interest around as well, with stops triggered above .9310 in decent size getting easily swallowed by the market. I've reduced my long position ever so slightly near current levels. I'd expect support to now form at 0.9250/60.
Australia could have a new PM in a few hours; change likely to be AUD positive
- Firstly, Kevin Rudd is challenging Julia Gillard for leadership of ruling Labor Party.
- Vote is set for 7pm and Rudd is expected to win.
- BUT, there is no guarantee that the independents who had been supporting Gillard will also support Rudd.
- That means that we possibly could have a change of leadership party with Tony Abbot as new PM.
Logically any change shouldn't really have any impact on the AUD but with the market already very short, the removal of a very unpopular PM might well initiate a mad scramble to cover shorts?
EUR/JPY: Testing recent lows, selling rallies preferred
I think the bearish strategy is the correct one for EUR/JPY but we still need to pick our levels. Short-term support at 127.30 has been breached but I don't think this pair is simply going to collapse, more likely we see some orderly swing trading with a bearish bias.
Sell now near 128.25/40 in my opinion.
AUD/USD: Edging towards upper end of recent ranges
The majors have stayed fairly quiet today in Asia and I haven't really gained any valuable insights from today's listless session.
The AUD/USD remains of most interest to me as I'm in bottom-picking mode and am finally back in profit after a few long nights. I'm sure the macro bears out there are still comfortable with their positions but I think that will change if we start getting daily closes above .9325.
EUR/GBP might see some action during European trade with plenty of bids and stops nearby and the market anticipating the usual end-of-month demand.
USD/JPY will remain very choppy and is too hard for me at the moment; waiting for the lights to come on there.
Pencil in a date for Sydney get-together
I will confirm closer to the time but for now we are pencilling in Thursday evening, July 18th, for a few drinks either in the city or in North Sydney. Let me know if you're coming as I'm sick and tired of my own company and don't fancy sitting there on my own :)
When do you know that a trend has finally stopped
I'm sure there are plenty of opinions on this, but for mine the most obvious one is when a currency doesn't react at all to important news which could/should keep moving it.
Let's take USD/JPY for instance. It's been on a solid bull run since November last year but this trend has run out of momentum which coincided with a drying-up of expansionist rhetoric from PM Abe and his new BOJ Governor. Is this trend over? Way too early to say and the real test will be when the BOJ add some more stimulus. If USD/JPY doesn't rise then, we will know that the trend is over.
What about the AUD/USD bear trend of the moment? This has been driven by a perfect storm of falling Australian rates, rising US rates, rising risk aversion, and increasing problems in China on a number of fronts. The pair has fallen by almost 15% but even though I've been trying to pick the bottom here, I may be way too early. As yet, we have seen no sign of the market not reacting to bearish news and until that happens then the downside risk remains.
Some years back when the markets were in the grip of the Global financial crisis, EUR/JPY was getting pummelled every day and had fallen from 165 to 115. I remember the session very well when some more drastic news was announced, EUR/JPY fell from something like 118.50 to 118.35 and immediately rallied 50 pips. We immediately knew that the market was saturated and had to start its retracement phase, which it did by rallying 20 big figures in the following weeks.
EUR/GBP: Approaching important support levels
There was talk last week of large stops below .8460/65 and we are back near this level again. A daily low has formed near .8465 so it could be a case of a large-ish bid nearby and stops immediately below but that's just guess-work on my part.
I'm bearish on EUR/GBP but I prefer to trade this view through a long cable position rather than going short on the cross.
AUD edging higher as PBOC eases credit squeeze
Those in the know also suggest that the 'plunge patrol' was busy in the Shanghai share market yesterday afternoon, entering the market when losses hit exactly 20% from the absolute highs.
The AUD/USD has been used by the hedge fund and CTA communities as a proxy trade for the Chinese credit crunch and the easing of the cash squeeze is likely to trigger some modest profit taking (and also to increase the size and proximity of trailing stops).
I'm still running a large-ish long position but am looking to start booking some profits and reduce my risk on intraday rallies. I have a small sell order in the market at .9315, just ahead of prior lows, and just in case the bears manage to hold on. (Edited, sorry wasn't too clear the first time :( )
EUR/USD: Mixed bag but I'm still in range-trading camp
- Short-term momentum is bearish and with the EUR crosses also looking soft, the path of least resistance is the down-side.
- Some looking at Fibo support on 4-hourly (see chart) at 1.3030 but retracements don't work in non-trending markets.
- But bids are reported 1.3030/45 and trailing stops are also noted above 1.3150.
- We had a look at this daily channel (see chart) last week and it still seems to be working nicely, with medium-term edges at 1.29/1.3450 now.
Buy big dips or sell big rallies but otherwise it's a bit of a lottery imho.
AUD/USD technicals: Looking very indecisive on the 2-hour chart
I'm sure we have plenty of candlestick experts out there who can interpret this much better than I (see chart), but the 2-hour chart has been forming a lot of indecisive candles and I'm sure this is about to change sometime soon? I'm hoping that we go higher but another few sessions of .9200/.9325 range trading would certainly not surprise me.
AUD: Also looking to the crosses for leads today
- EUR/AUD (see chart) is trying to form a cap below important weekly resistance near 1.4400. It tried the same recently and failed!
- AUD/NZD (see chart) should run into some very solid resistance near 1.2000.
- AUD/JPY (see chart) is trying to form a launching pad at important technical support near 89.25/50.
- AUD/USD is still in a downtrend and needs to break back above previous lows at .9325 in order to generate further bullish momentum. Support levels are at .9200 and .9150. I'm sticking with my bottom-picking long trade with a stop now below .9120 but I will need to reduce quickly if .9325 resistance looks like holding.