AUD/JPY getting smashed below 90.00
The classic risk-aversion trade AUD/JPY is in full flow and its down by 1.75% already today. This is all about big positional liquidation by major hedge funds so be careful out there.
USD/JPY: Bulls should be patient and wait for 93.50
Bearish momentum is very strong at the moment but bulls shouldn't give up hope as they have the strong long-term trend in their favour.
If you can remember back to the extreme volatility we had after the BOJ April meeting? I remember it well because I was short going in to it and managed to buy those back at 93.40 just after the statement was announced. Clever move indeed, but not clever enough to go long as it rallied 1000 pips from there :(
I think that 93.00/50 level should be very important again and long-term bulls can consider sticking in a small 'speculator' somewhere near those levels.
I can't see any obvious trades at current levels
- AUD/USD: Looking to play .9325/.9560 range and as we are near the middle, best left alone for now.
- AUD/JPY: Strong support at 90.00 so buying any dips with tight stop makes good risk-reward sense but the down-trend is very strong so care certainly warranted there.
- USD/CHF: Cost me 40 pips yesterday so I'll leave it alone.
- USD/JPY: I'd prefer to be short but not at 96.00, could go 200 pips either way so I will wait for some opportunities.
- EUR/USD: Fuhget about it :)
- Cable: Heading higher but I'm not buying at these levels.
USD/JPY still looking very heavy
I think the big factor at play here is the positional liquidation by one or more of the huge macro funds. They were running positions in the tens of billions and of course once they start selling, panic usually ensues. We've seen unusual markets across all the major currencies which have been totally driven by big flows and this looks likely to continue. Remember that many big professional traders started buying USD/JPY when it was near 80.00 and they are booking profits by selling above 95.00.
For now I remain in the sell rally camp and levels below 90.00 still look achievable to me, if the heavy liquidation continues.
95.00/97.00 are the levels to watch on an intraday basis.
AUD: Should be busy today with plenty of conflicting forces at play
- Risk aversion is quite heavy across all financial markets with big hedge funds dumping positions across multiple asset classes (see yesterday's post). This is generally AUD bearish.
- The big EUR/AUD buy order looks to be complete, this should ease the downside pressure on the Aussie.
- Today's unemployment data will add to volatility, 5.6% unemployment rate expected after 5.5% last time.
- AUD/NZD is trying to return to its downtrend, another bearish sign overall for the AUD.
- There is major support at 90.00 in AUD/JPY, which is the 50% retracement of 74.50/105.50 up-move.
As you can see, there are plenty of conflicting forces at play which should guarantee us volatility and a range-trading bias. I'm looking to play .9325/.9560 in the AUD/USD.
Risk and USD off: USD/JPY leading the way but USD/CHF now joining in
My cheap intraday USD/CHF trade got neutralised overnight and both it and USD/JPY continue to look very soft indeed. I'm still thinking that we will see 93.50 minimum in USD/JPY as big positions unwind across multiple markets and cause a general state of risk aversion. EUR/USD and cable are edging slowly higher but both are dependent on moves in the crosses.
Focus will be back on the AUD today and another big level to watch will be 90.00 in AUD/JPY. Looks like we might have another busy one!
EUR/AUD: Once the buy order dries up the retracement begins
I think we were all pretty sure that this was going to happen but as with all things in the FX market, it's only the timing that counts. After trading above 1.4200 yesterday (when I had my rant) its now back towards 1.3950. I don't expect any huge capitulation, after all there have been huge amounts taken out of this market, but a broad 500 pip consolidation range would definitely not surprise.
It's in markets like we've seen over the last few weeks that I'm really glad that I concentrate so heavily on cross pairs.
AUD/USD: I really hope that wasn't the bottom yesterday
I listened to people I shouldn't have yesterday when I wanted to buy below .9350. I really should know better, take the trades I like and ignore what others say. Too late now, but hopefully there will be other dip-buying opportunities in coming weeks. I suspect that we will have a broad 300 pip consolidation between .9350/.9650 in the next few sessions.
I'm almost sure that the EUR/AUD buying is finished and with Japanese semi-officials reportedly buying dips in AUD/JPY, it looks like the AUD flows are being reversed in the short-term at least.
USD/CHF: Looking to book profits on any intraday rallies and then re-buy on dips
I'm not expecting any massive moves higher in USD/CHF but the set-up on the 2-hr chart looks moderately promising and this morning's long position looks like a reasonable risk-reward play. I'm hoping for 80/100 pip rallies to sell into and then re-buy on 50/60 pip dips.
Big hedge fund bailing out of positions across all financial markets
Many thanks to our hedge fund insider for this latest tasty morsel of information. One of the ultra-huge hedge funds started dumping positions yesterday in cash, bonds and equities. Part of this position adjustment was almost certainly in USD/JPY but the 300 pip fall there was also partly caused by the risk-averse sentiment out of other markets.
Risk-reward favours the risk averse play in my view and I'm looking to sell any intraday rallies in EUR/JPY.
Finally a very quiet Asian session; the EUR/AUD order might finally be done!
It was very quiet in Asia today and there was no sign of the local bank who's recently been buying EUR/AUD in size, maybe he's finally done or maybe he read my 'dummy spit' from yesterday :) He's probably finished! China was closed today as was half the regional Asian markets and that will have helped to keep things quiet.
- AUD/USD took out short-term resistance at .9480 after improved consumer sentiment data but the bulls are reticent about going for more after recent beatings. I'm staying in the buy-big-dip camp.
- USD/JPY edged higher after closing in NY near 96.20.
Now back to the 1500 emails........
Not seeing any obvious trades at moment except perhaps USD/CHF
- USD/CHF: 2-hour chart showing a possible double bottom set-up, favouring longs with tight stop below .9210 (ok, I'm convinced, I'm in :) )
- AUD/USD took out minor resistance at .9490 but the down-trend is very dominant here. I prefer to buy any big dips but cannot see anything here on an intraday basis to excite me.
- USD/JPY is edging higher after yesterday's big fall and I'm in sell-rally camp here but again cannot see any good-value trades at present.
- EUR/USD: Fuhget about it :)
EUR/USD: Sovereign sellers reported towards 1.3350
Dealers report decent sized Sovereign and corporate selling interest near 1.3350.
USD/JPY: Still looks to have the potential to cause a lot of pain
If markets are comfortable then you will seldom see massive volatility so obviously the USD/JPY market is far from comfortable. The logical explanation for this is that it's positioning is extreme and unstable and recent moves suggest strongly that the market is very long and thinking it might be wrong.
I'm pretty sure that we will see 93.50 in coming days in USD/JPY and I would not be at all surprised if it were trading below 90.00 again sometime soon. I'm in the sell rally camp and I think we need to look to sell now near 98.00.
GBP/CHF: Exiting at break-even; think timing is wrong
I think these are perfect markets for intraday swingers with 200 pips readily available on almost a daily basis if you can pick the right pairs and wait patiently for the correct opportunities. EUR/JPY looks to me like a classic 'sell-rally' proposition and if it's going to turn lower then I'm best to stay out of GBP/CHF and in fact avoid 'position trading' completely and become a hit-and-run expert all over again.
AUD/USD: Wait and see if local sellers turn up again
The AUD selling during Asia has emerged every day for about the last 8 trading days and contrarians will need to keep their powder dry for the moment, and wait and see if it happens again today. I'd look to see if .9480 breaks on the topside and if it does, then perhaps try a buy-dip strategy looking for a correction back towards .9650/.9700. The bear trend is still in control so pick entry levels carefully if looking to buy dips, and keep stops fairly tight.