AUD/USD set to test barrier protection as Chinese financial stocks crash
We had a few strong attempts at breaking above technical resistance in the AUD/USD at .9250 earlier today but the focus is now back on the downside after earlier comments from the Australian PM, and now a sharp fall in the Chinese financials index, down by over 7% amid the on-going credit squeeze.
The next big test for the AUD/USD is whether the option protection at .9150 can hold or not. I'm still long with a stop below .9120.
NZD/CHF: Looks like a bullish technical set-up
Definitely not a pair that I pay a lot of attention to but my brief analysis below on the Yen crosses concluded that AUD/JPY looks bullish but CHF/JPY looks toppy, ergo we should be buying AUD/CHF! But, AUD/NZD is in a fairly solid medium term down-trend and our earlier look at EUR/NZD showed a bearish set-up; so why not look at NZD/CHF instead?
The weekly technicals show that the big multi-wave move from .5730 to .8080 has now retraced 38.2% (see chart), so if you are a long term bull on this pair and are looking for value trades, this could well be one?
JPY crosses still likely to provide most market leads
I'm presuming that we don't get any major economic or political statements out of the EZ, and if we don't then the Yen crosses look like the most likely causes of volatility. The move higher in USD yields have given the USD/JPY a bid tone and this could move over to the crosses as well.
- AUD/JPY has broken up out of a consolidation phase (see chart) and could quite easily now enter a retracement phase which would take it back towards 95. The fact that the Chinese credit crunch seems to be a managed event by the PBOC should reduce panic and cause an oversold market to start short-covering.
- EUR/JPY is less of a clear case (see chart) with both currencies likely to suffer in the short term, but we could easily see a move back towards 131.00 in the short-term.
- CHF/JPY is not a pair I look at very often but if you really want to buy the Yen, this looks like the best risk-reward play (see chart)?
Obvious conclusion is that I should be buying AUD/CHF; best I go have a look!
Cable: Decent bids reported nearby, 1.5360/65
I'm hearing through the grapevine that there are some decent bids at 1.5360/65, which was roughly the low on Friday so that makes sense. I'm still in the process of building a long position and am watching levels such as these for signs of strong support, so that I can add to my position. Let's wait and see how it develops.
USD/JPY: Making new session highs, target 99.25/40
Now the bulls have regained short-term control of the USD/JPY market and any dips back towards 98.00 should meet with plenty of dip-buying interest. In fact now that new session highs are being made, previous highs at 98.25 should be the first support point. The clear target is hourly highs near 99.30 (see chart).
AUD/USD easing lower after PM Gillard comments
Australian PM is being quoted on Twitter as saying that a drop in the AUD is a very good thing for the Australian economy. AUD/USD fell from .9235 to .9215 after the remarks.
It may be a good thing for the Australian economy but it's a bad thing at the moment for my economy :(
USD/JPY: Trying to stuff-up as many traders as possible
I thought about using some different language, but perhaps not :) I haven't traded this pair for a few days now as it seems to me that it will try and stop people out, topside and bottom, and that we will see plenty of false breaks in coming days. The short-term trend seems to be bullish again and the market sentiment is definitely turning that way, BUT the market is long and as we saw in the week prior to the FOMC, when the big hedge funds start liquidating assets then USD/JPY will fall.
I'm leaving it alone for now and will only enter for quick swing trades after 'silly' session moves.
EUR/NZD: Bearish trade idea
Thanks very much to Jack for pointing out the nice set-up here and this is a trade worth considering, more for the medium-term trader though rather than the intraday guys.
- The short-term chart (see chart) is showing a potential double-top at 1.7100 and resistance levels are now at 1.6950 (prior lows), 1.7000 (short-term bearish trend-line) and 1.7050 (hourly highs).
- The EZ situation is looking rocky again with spreads in the bond markets starting to widen again.
- The NZD has been dragged lower alongside the AUD but underlying real demand particularly from Chinese interests remains strong.
I don't trade the NZD so I will not be trading this idea but it certainly does seem to have some merit. The downside targets are 1.6400 and possibly 1.5900 so the risk-reward outlook is excellent.
AUD/JPY: China credit crunch and US yields paint bullish picture
- The traditional correlation between US yields and USD/JPY has broken down somewhat in recent months but it does remain relevant. The sharp rise in US 10-year yields could be very bullish for USD/JPY.
- The credit crunch in China is increasingly looking like a well-orchestrated move by the PBOC to force a slowdown in risky lending and deflate any asset bubbles. This development will ease any panic and could be bullish for the AUD in the short-term, particularly in such an oversold market.
Ergo, double-whammy for AUD/JPY and the retracement could be underway (see chart).
AUD/JPY: First mover of the day, breaks short-term resistance
Short-term highs at 90.50 have been broken in AUD/JPY but I do not see this as an important level. The cross has been in sideways mode for a while now but if it can start re-establishing bases above 90.00 then that could be an important event.
AUD/USD resistance at .9250/60 is the more important level to watch with prior lows at .9325 just behind there.
EUR/USD: Market turning bearish again but we've read this book before!
The market loves to be bearish EUR/USD but recent history suggests that the bears will struggle to maintain momentum for any length of time. There were times in recent months when the reports out of the EZ were much worse than is currently the case and yet the EUR/USD is still trading above 1.30. The daily technical outlook (see chart) is still showing a modest up-trend and the interbank market reports that the sellers are mainly leveraged speculators whilst the buyers are more structural, real-money or Sovereign.
I prefer to play the bearish EUR card through the crosses such as EUR/GBP, or even EUR/JPY if you can find the right entry levels.
AUD/USD: Play .9150/.9250 in short-term
There is a barrier reported at .9150 which is likely to be heavily defended and there is last week's low just ahead of there to provide some technical support. Hedge funds continue to sell on any rallies towards .9250 and prices have stalled near there on a number of occasions.
I'd play the edges of this range and a clean break either way should be good for an 80/100 pip move.
AUD/USD: Short-term support forming but resistance line also clear
The short-term levels to watch in the AUD/USD are pretty clear (see chart) with support now forming near .9220 and resistance lines clear at .9260. A clean break either side should be good for a quick 40/50 pip move.
EUR/USD: Interbank market turning bearish
It seems to me that the market always wants to be bearish EUR/USD, perhaps with very good reason, and everyone I spoke with today in the interbank/hedge fund space was bearish. Heavy sell orders are reported towards 1.3280 and 1 dealer even went so far as to say that he could see Zero possibility of the pair trading above 1.3300 any-time today! Big call, must be going up :)
Sorry, I've got no strong ideas but my default position would be to buy any big dips of around 150/200 pips.
AUD/USD: .9250/60 should be important short-term pivot
This is the level where the big hedge funds were selling though Goldman Sachs yesterday afternoon. If the bears can hold this level then we could get a short-term top and another tilt lower at .9165. If we break above .9270 say, then I'd expect to see more trailing stops going off and we get a new support level forming.
Modest rebound in AUD and risk sentiment during Asian trade
- Macro funds were noted buyers of AUD/USD below .9200 earlier this morning.
- ACBs intervened heavily again, selling USD/AXY, and they are expected to sell EUR/USD during course of day to keep reserves balanced.
- USD/JPY rallied initially on back of EconMin comments that corporate taxes should be cut; later triggered trailing stops above 97.60.
That's about all of note there is to report but a definite lessening in risk aversion should be favourable for Gold and AUD as we head towards the weekend. Let's see if the Europeans have any big positions built up.
EUR/USD: Heavy sell orders above market
3 investment banks are reporting the same heavy sell orders between 1.3260/80. So either they are all lying or there are indeed interested sellers. FXWW888 reported earlier that ACBs are reported to be selling EUR/USD (diversification of reserves after selling USD/AXY).
By the way Guru, great call on AUD!