Trader sentiment still solidly USD-bullish
USD/JPY has threatened on a few occasions recently to break below its consolidation range but after all attempts failed, it's now trying to break upwards and re-invigorate the bull trend. It doesn't feel to have enough momentum, especially with risk-sentiment a bit soft, and I will try selling rallies towards 120 with tight-ish strategy stops.
The EUR keeps getting hit on all sides by bearish news, be it out of Greece or the Ukraine. The EUR/USD market is short but certainly seems happy to stay that way.
AUD/USD needs to break below .7720 to break the potential basing formation and only a break above .7860 will ease the downward pressure.
Overall market sentiment remains solidly USD bullish and seems likely to stay that way, barring any stray black swans.
AUD/USD touches .7860 after SoMP
The really heavy trailing stops must be a bit higher but the weaker ones have been triggered after the RBA's quarterly Statement of Monetary Policy came out slightly less-dovish than expected.
EUR/USD: Cheap trade for the EUR/USD bears
I'm still bearish on the EUR crosses, EUR/AUD and EUR/NZD in particular, so it makes sense to look for intraday trading opportunities in EUR/USD.
Overnight reports suggest that there is decent sized sell interest near 1.1500 and with a recent spike high at 1.1530 just above there, we know where to put our stop!
On the other hand, if you're bullish EUR/USD, there will be plenty of trailing stops now above 1.1530 and a break above there should see a momentum spike.
AUD/USD: More range trading expected today, retail sales data due
The AUD/USD consolidated over the last 24 hours in a 100 pip range and we can expect more of the same today. Retail sales data is unlikely to have a big impact as the RBA's monetary policy looks pretty much set in stone.
The big levels to watch are at .7725/.7850 and a break of either of these will set the tone for short-term momentum.
On the crosses, EUR/AUD looks to be in a 'sell-zone' but on the other hand, AUD/NZD continues to feel very heavy. Maybe its EUR/NZD we should be trading :)
Good luck today.
AUD/USD: Looking to play .7725/.7850 intraday range
Spot AUD/USD is back to where we were yesterday pre-RBA but of course the AUD has lost significant ground against the EUR and CAD in particular. Reports in the market had suggested that some very big short positions have been built up, although the price action post-RBA did not seem to confirm this.
There is short-term technical resistance at .7850, which should attract some selling interest, and the previous lows around .7725 will likely become relevant again as a magnet for profit takers.
The RBNZ speech in a little under 3 hours is the main risk event for the Aussie this morning.
Oil price reversal sends USD longs scurrying
USD/CAD was the main mover for very obvious reasons closely followed by EUR/USD, which triggered trailing stops at various levels. This smells like a typical consolidative reversal of a strong trend and it now becomes a matter of picking the ranges.
The main risk event this morning will be in the NZD, with RBNZ Governor Wheeler giving a speech which includes a journalist lock-down (unusual for a speech like this).
Prime brokers re-considering pricing in spot HKD and DKK
Interesting piece yesterday on Reuters regarding the on-going fall-out of the recent SNB-inspired debacle. Other markets are coming under scrutiny, most notably the fixed plays in HKD and DKK, and Prime Brokers are making early decisions to defend themselves from another CHF-like event.
One unnamed Prime Broker has supposedly already stopped pricing in spot HKD and DKK. If this is true, then more will undoubtedly follow with obvious ramifications for market liquidity.
Local journalists seem pretty sure that RBA will cut rates
Central banks often like to smooth the way to any policy change by giving subtle hints to financial journalists. Two of Australia's leading newspapers seem 95% convinced that we will get a 25 bps cut this afternoon. Perhaps they've been given a subtle nod?
AUD: Market still comfortable staying short ahead of the RBA
One thing we can be pretty sure of is that the RBA will release a more dovish statement this afternoon and the market is betting heavily on this, with shorts at quite extreme levels already according to most interbank reports. There is certainly a possibility that they will cut rates today but I'm of the opinion that last weeks CPI number will ensure that they wait at least another month.
Local dealers report decent two-way interest with buyers between .7780/90 and sellers between .7835/50, which should keep us range-bound pre-RBA decision at 2:30 pm Sydney time.
Australian PM under increasing pressure
Tony Abbott will present a major speech to the Press Club later this evening and many expert analysts are predicting that his immediate political future will depend on his performance. His ruling Liberal Party suffered a humiliating defeat in weekend state elections and Mr Abbott has fallen out of favour with his own party after some recent 'gaffes'.
This will add to short-term volatility for the AUD as no-one likes uncertainty.
Tomorrow's RBA decision will of course also add to the uncertainty and whilst all the weekend papers seem convinced that the RBA will cut rates, I personally don't think they absolutely need to and therefore won't (although the statement will undoubtedly be more dovish).
USD/JPY breaks lower in early interbank trade
USD/JPY has broken below its previous consolidation channel between 117.20/119.00 trading thus far to lows below 116.70.
EUR: Short-covering picked up pace overnight
The EUR has made significant gains against the GBP, CAD, and AUD over the last 24 hours with excessive positioning taking its toll. These moves are seen as retracements in a mature trend, rather than any sudden desire to be long EUR in a QE environment.
The next approximate resistance levels of note in these crosses are .7600 in EUR/GBP, 1.4700 in EUR/AUD and 1.4400 in EUR/CAD.
AUD/USD: Long and wrong (for now) yet again
Such is the contrarians life, constantly getting burned while probing for the turn. Since Wednesday's higher-than-expected CPI the market has fallen almost 300 pips which illustrates what the market's sentiment is. Even EUR/AUD has made a sharp recovery, which shows exactly in what low terms the traders are thinking about the Aussie!
But I stick by my view that this move is a load of rubbish. The RBA will not cut rates next week. The local Australian economy remains quite robust despite plummeting commodity prices. As soon as the current AUD move against the EUR and JPY settles down then I will look to start trading the view again.
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Bank analysts uniform in their expectations for RBA rate cuts
Well actually is would be much more of a surprise if they actually differed from each other. The logic being I suppose that if you get it wrong, at least everyone else got it wrong also!
The consensus remains that February is probably a bit early for an actual cut and we will probably get a shift in bias next Tuesday with March firming as solid favourite for the initial 25 bps cut and the next one to come in June/July.
AUD/USD is holding solid at .8000. Chatter around the market is that the first big batch of trailing stops is above .8040. If that level breaks I wouldn't pay any attention to rate cut chat, it will be the extreme positioning in the market that will be the number 1 factor at play.
AUD: Weighted mean CPI +2.3% YoY, slightly above expectations
I'm looking to add to AUD/USD longs on dips as this result should ensure that any rate cuts are delayed and could cause AUD/USD short-covering.
USD longs getting close to ridiculous levels
There were a lot of people burned by the 'one-way-bet' in EUR/CHF but it seems the market always wants to play with fire.
Speculative USD longs are at record highs according to most measures with these positions spread across the board. EUR is obviously still the number 1 sell, followed by JPY, AUD, CAD and GBP.
This position building will not continue and will end badly for many over-leveraged speculators. Like I said yesterday, once it turns, liquidity will evaporate and no-one will be able to exit where they would ideally like.
USD longs getting close to ridiculous levels
There were a lot of people burned by the 'one-way-bet' in EUR/CHF but it seems the market always wants to play with fire.
Speculative USD longs are at record highs according to most measures with these positions spread across the board. EUR is obviously still the number 1 sell, followed by JPY, AUD, CAD and GBP.
This position building will not continue and will end badly for many over-leveraged speculators. Like I said yesterday, once it turns, liquidity will evaporate and no-one will be able to exit where they would ideally like.