Cable: Risk-reward favours buying intraday dips
The Yen crosses have had a reasonably strong session and with USD/JPY nearing a 'sell-zone' above 102.00, I'm thinking that pairs like EUR/USD and cable might be in for a modest spike?
I like the risk-reward associated with buying near 1.5070 with a stop below 1.5040, targeting 1.5210.
Yen crosses again the main focus
USD/JPY is consolidating its earlier gains and with the Nikkei now almost 1.5% higher, the Yen crosses have turned bullish on the day. AUD/JPY has made an impressive reversal off strong daily support at 96.90 and bears will now need to re-assess their commitment to this cross.
USD bid-tone returns in early Asian trade
The dollar is stronger across the board in early Asian trade but has yet to break through any significant levels. AUD/USD has again had a look below .9600 but has again bounced, USD/JPY has moved back above 101.50 and cable is below 1.5100.
I'm not reading too much into any of these moves, just the usual market noise as it presses to find the weak side.
EUR/USD: Sorry no ideas, too hard!
- The EUR crosses remain quite well bid although some like EUR/AUD and EUR/CAD are showing signs of short-term 'tiredness'.
- The market is still slightly short of EUR but positions are at quite low levels.
- Technical support is strong near 1.2750 and Sovereign buyers are reported on dips.
- Sovereign sellers are also seen near 1.3000, strengthening the case for further range trading.
I haven't traded EUR/USD for a while and that's not likely to change; more clarity elsewhere.
USD/JPY: Plenty of buyers, stop-loss sellers, and option levels
It will not be one-way traffic in the USD/JPY in either direction, with very large interest seen both sides of the market.
- Bids are reportedly large and at regular intervals on the approach to 100.00.
- Stop-loss sell orders below 99.80 are even bigger, according to Prime Brokerage reports.
- Option interest at 100.00 and at 104.00 remains very significant.
Sounds like a perfect recipe for some volatile range trading.
AUD/USD: Look to trade .9580/.9670 technical levels
The short-term bearish trendline has been an accurate indicator in recent weeks and it presently comes in near .9665. Last year's lows at .9585 (and last week's lows at .9590) provide the obvious support levels. One side will break pretty soon but play the range edges in the meantime.
- EUR/AUD; short-term severely overbought momentum indicators are starting to level out.
- AUD/JPY; daily lows at 96.90 survived the first attempt.
- Sovereign buyers are reported in AUD/USD between .9600 and .9550.
Conclusion; seems like a decent risk-reward play to buy near .9585 with a stop-loss below .9550.
Crosses likely to provide highlights during European trade
EUR/AUD has continued its march higher today, the Yen crosses have remained quite heavy and I even saw GBP/CAD get a mention today; traders are obviously desperate to find something that's moving. USD/CHF is still hanging around .9600 and I'm looking to re-buy on any big dips and EUR/CHF should find very solid support near 1.2350. I'd expect this session to fizzle out within the next couple of hours and then we can start the week all over again tomorrow morning.
Quiet session grinds to a close; Europe can expect the same
The Nikkei has rebounded a little to be -2.25% but the FX market has seen little or no action. Both the UK and US are closed today in the financial markets sector and that should ensure a quiet session in the rest of Europe. Levels to watch during European trade include the following:
- AUD/JPY: Daily lows at 96.90.
- AUD/USD: Important daily support levels near 96.00.
- EUR/GBP: Resistance forming at .8590/00.
- EUR/USD: Sovereigns noted selling near 1.3000 on last visit.
Based on the last 8 hours, none of these levels will be tested!
Nikkei nearly 3% lower, AUD/JPY below 97.50
Next support in AUD/JPY is at 96.90 and with AUD/USD support at 96.00 also looming, I wouldn't be chasing this move lower, preferring to wait and sell intraday rallies.
USD/CHF: Much depends on what happens to USD/JPY
- USD/CHF is unlikely to get much of a lead from the EUR/USD, which is in sideways trading mode.
- USD/JPY is likely to provide a more solid lead and the risk there is to the downside, especially with very large trailing stops from macro-type players reported below 99.80.
- On the other hand, USD sentiment remains reasonably strong which together with SNB efforts in EUR/CHF, should support USD/CHF on any big dips.
- Technically, support doesn't get very strong until .9450.
I sold 1/2 my long position last Friday at .9710 as I anticipated some .95/.98 range trading and so far it looks like I might be right. I will look to increase my position near .95 and reduce again near .98.
EUR/AUD: No sign of bull trend to rest any-time soon
Local dealers report the hedge funds are still buying this pair and we've seen a quick 40 pip spike in the last few minutes of trade. The obvious medium-term topside target remains 1.3800 and dips are likely to be limited to 1.3250.
AUD/NZD: Support levels broken, selling rallies now favoured
Support levels at 1.1950 have finally broken and this pair could easily fall back toward 1.1500 given current sentiment toward both currencies. Selling rallies back toward the breakdown level at 1.1950 is the obvious play here.
USD/JPY still the main intraday focus
The early interbank market was quiet today which means there are no major stop-loss levels close by. USD/JPY will remain the main intraday focus and will be very sensitive to moves on the Nikkei. Dealers say that there are large trailing stops on the downside from positions built up over the last few months so the immediate risk would still seem to lie to the downside. The AUD/USD remains soft but still needs to break below strong technical support near .9600 whilst the EUR and GBP remain relatively calm.
Good luck today.
USD to stay bid, but not perhaps against the Yen
We saw some very interesting markets near the end of last week, particularly here in Asia where some major risk aversion resurfaced. It would probably be more accurate to say that we have encountered a period of profit taking in certain markets after some massive moves over the last 7 months, like in the JGBs and the Nikkei.
Mr Bernanke said much but not a lot, leaving us none the wiser on Fed tapering. This puts us back to where we were earlier last week, ie bullish USD. I think the market has decided that it wants to be bullish on the USD and when it takes such a decision it should be good for 20% moves.
- USD/JPY has already made it's 20%+ move, from sub-80 to 103.50, and I suspect that it may struggle to make any more impulsive gains. The profit-taking moves in the Nikkei are another indication that there is two-way risk for USD/JPY.
- USD/CHF remains my trade of choice on which to be bullish dollars but if we see a prolonged period of risk aversion, then this pair will also struggle to rise. I sold 1/2 my long position on Friday and will now sit back and try to react to any big moves either way.
- AUD/USD is now the pundits choice to be the big faller but I'm reading this from the same guys who were bullish at 1.04! The big difference between the AUD and most of the other major currencies is QE; Australia isn't and all others are! This means that over time the AUD will rise against all of the other majors. I was bearish at 1.04 for .92 and I still think I'm right; and I think that the low .90's will be the low.
- The CAD and the NZD are in similar situations to the AUD.
- Cable could be a surprise loser if market sentiment gets it's way. The market wants to sell I feel and if this pair turns south then we could see prices back near 1.40.
- EUR/USD is not the main story and the big banks continue to say that structural demand remains very solid. Pick a 10 big figure range for the next 12 months is my best guess here.
Looks like lots of volatility ahead, and maybe a few sweaty-palm days like Thursday.
EUR/AUD on the march higher again
I'm not sure if its the same player or not who hoovered this pair up earlier in the week but once again we are seeing a sharp rise early in the London session. Technical target is still 1.3800 for this pair and dips should be limited to 1.3100 barring some catastrophic EZ developments.
Pretty hard to pick any 'easy' trades but risk-off dominant sentiment
Risk off sentiment has definitely been the predominant factor in Asia trade over the last two days. The Nikkei had risen by 80% since early November so I guess its no surprise to see it starting to ease off a bit. If the Nikkei eases, then the Yen crosses should follow, and the AUD/JPY recovery stalled this morning at its 99.50 break-down level; another little sign to take heed of.
I've cut my cable long for a gladly-accepted 50 pip loss and I've cut 50% of my USD/CHF longs just is case the risk-off trades really pick up steam. I don't think it's a good market to have a large position in; stay small and then take advantage of the swings.