GBP looks like a decent risk-reward long play
- Cable has formed a double-bottom with a neckline at 1.5150; reasonably good risk-reward in being long with stop-loss below 1.5130.
- EUR/GBP has failed on 4 separate occasions near .8590 and a clean break below .8530 could lead to a sharp 100 pip sell-off?
(Talking my position as usual).
AUD: Plenty of risk events today
- New Zealand holiday today.
- Minor Australian inflation data and of course retail sales (+0.3% expected after -0.4% last time).
- HSBC China manufacturing PMI and also official non-manufacturing PMI.
- AUD/NZD has broken higher and its technical target is an important level at 1.2145; support at previous pivot near 1.1950.
- AUD/USD expected to trade .9560/.9660 today according to local dealers.
AUD/JPY: Look to play 95.50/97.00 range
This pair is in full retracement mode with an obvious target at a 38.2% retracement level near 95.50 (chart in members). Friday's breakdown level at 96.90 provides an obvious resistance level so this pair might be worth a session or two of range trading?
Time to re-group after Friday's heavy flows
It's pointless looking for logic once big asset manager month-end flows hit the market; they deal regardless of price or trend and once the dust settles then the market can get back to normal.
- Pairs like NZD/JPY were harshly treated towards the end of the week and now we must see whether the market can reverse those 2.5% losses.
- The AUD has already started a mini recovery after stronger-than-expected China manufacturing PMI data was released over the weekend and the big levels to watch in the AUD/USD are .9525/.9700.
- Cable tested and held the neckline of it's double-bottom and I have increased my long position there with an obvious stop-loss level now below 1.5130.
- EUR/CHF looked quite soft at times towards the end of the week but strong bids at 1.2370 are holding this pair for now.
Good luck this week.
AUD/JPY still falling hard
These end-of-month flows must be very large indeed as the cross continues to fall hard and AUD/USD has taken out support near .9580, which I thought would put up a stronger fight.
Other crosses are also on the move and EUR/CHF has taken out support at 1.2400 but one of the big Swiss banks is on the message boards reporting solid buying interest at 1.2370.
Cable is staying relatively stable near 1.5200 whilst all this mayhem is going on.
AUD/USD: Strong support expected near .9580
The AUD has fallen hard in early Europe as stops below 96.90 were triggered in AUD/JPY. I'd expect any further weakness in the cross to come primarily from the USD/JPY leg and support in AUD/USD near .9580 should be very solid.
Cable: Small longs at 1.5210
I just bought small longs in the cable at 1.5210 as I feel the need to have an interest in this market. That makes me concentrate a lot harder. No strong views or levels, lets just see what happens.
USD/JPY expected to gravitate towards 100.00
There are some large option expiries at 10am NY cut and this will be followed 1 hour later by the asset manager rebalancing. Most dealers expect these events to weigh on USD/JPY as the session develops in Europe. I don't see much value in chasing it lower with the market already short, preferring to sell near 101.20.
Staying fairly quiet in early Asia; always happens when I predict volatility!
We did get that early flurry in AUD/JPY but since then its been reasonably quiet. USD/JPY topped out near 101.25 and any rallies are expected to run into plenty of sellers ahead of big option expiries later tonight.
AUD stops above the market
- AUD/USD: Trailing stops are reportedly heavy above .9720
- AUD/JPY: Stops now being reported above 98.00.
AUD/JPY buying emerges in early Asia
Some very decent AUD/JPY buying has emerged in the last 30 minutes or so; I hear there might be more to come.
There is short-term technical resistance at 98.00 but there will be stops above there.
EUR/USD: Still the trade most likely to stuff the most people
As we know, the FX market will usually go where it can cause the most people the most pain. To me, that would mean EUR/USD back at 1.3700. I just mentioned that level to someone and he laughed but it's really not that silly at all.
Can you imagine AUD/USD back at 1.00 and EUR/AUD at 1.3700? Can you imagine EUR/CHF at 1.26 and USD/CHF at .92? In those terms it doesn't seem outrageous at all, just normal market noise really.
We seem to be entering a phase of USD weakness so keep your minds open to all possibilities.
AUD/USD: Expect plenty of intraday volatility, possibly a 200-pip day
The USD has turned bearish in the short-term, the AUD remains bearish on the crosses, and we are expecting heavy end-of-month flows; sounds like a perfect recipe for volatility.
I think we may see both sides of the .9580/.9700 range but my short-term bias is turning slightly bullish given the turn against the USD overnight. I've posted the short-term chart in the members but it would not surprise me if we saw a 200 pip range in the AUD/USD today (wishful thinking perhaps).
I will buy any big intraday dips to .9580/90, but I won't try selling at .9700, preferring to wait for intraday spikes to .9775 before considering a short-term short trade.
FX market still in cross-movement phase
I'm still of the opinion that we are in a cross-movement phase of the FX market with the AUD looking like the main loser and the EUR likely to emerge as the main winner. It's not that the EZ suddenly has outstanding prospects or anything, more that the market is structurally short and most of the big banks report a net-net demand for the EUR from its customer base on a month-to-month basis.
EUR/AUD is headed to 1.38 and possibly higher; whether this means that the EUR/USD is at 1.38 and AUD/USD at 1.00? Or whether the EUR/USD is at 1.27 and AUD/USD at 0.92? That remains to be seen but its probably a mix of both.
USD/JPY is in a consolidation phase of a strong up-trend, USD/CHF is overall bullish but has lost momentum in the short-term and is retracing, and the GBP doesn't seem to have any momentum of its own and relies on the other majors for leads.
EUR/USD: Sovereign sellers slowing progress
As usual the market looks bullish on it's session highs! Sovereign sellers near 1.3000 are slowing progress, stops are reported in the AUD/USD above .9720.
Thanks to my hedge fund contact for the info. I'm on Sydney harbour enjoying the "Vivid" light festival and enjoying my first night since January 11th without a position.
Month-end flows will drive markets today and tomorrow
Like I mentioned earlier today, most of the market is focussing on expected heavy end-of-month flows from the big institutional asset managers who will be rebalancing after big moves on stock and debt markets worldwide.
Most expect these flows to be USD-negative but the AUD is also expected to come in for some heavy selling. Quite a few hedge funds are already positioned short AUD/JPY to benefit from these flows so if they don't materialise then we could see a sharp short-covering rally.
For now at least, this is what's driving movements in the market.