AUD/USD: Still prefer to sell rallies towards 1.0250
Not much action in anything overnight and the market should stay very quiet until Chinese trade data later today. Dealers say that order books are relatively free of close-by stop-loss orders, another sign that volatility will stay low.
Obviously there will be plenty of speculators looking to sell any rallies back towards previous 1.0220 lows but the fact that the market hasn't really fallen heavily (plus the big bounce in AUD/NZD) leads me to think that we bears should be a bit more careful in picking our entry levels. Corporate offers are expected to be lowered to around 1.0250 so I would look to sell near there initially.
Bulls have an obvious support level at the March lows near 1.0115 and Sovereign bids are also expected near there.
AUD/NZD breaks below 1.2000
Some of the big crosses are also on the move with AUD/NZD breaking below 1.2000, AUD/JPY taking out 101.00 again and EUR/AUD re-testing 1.2850.
The only reason to buy AUD at the moment is to take profit on existing shorts and I see no reason to consider going long the AUD against any of the other majors. I'm sticking with my long EUR/AUD trade and hope that we will see 1.30+ in coming sessions.
AUD/USD: Sell rallies back towards 1.0225/30
The rate cut has pushed the AUD/USD back below 1.0200 and I'd expect any rallies to be capped by 1.0230. I'm hearing the initial batch of professional bids are at 1.0165/70.
Always pays to bet against the economists!
What to expect after the RBA meeting
- If they cut by 25bps: I would expect to see a sharp drop below 1.0200 and any subsequent rallies to be capped at 1.0230. If they also issue a dovish statement we can expect important lows at 1.0115 to be tested later this session.
- If they leave rates unchanged: I'd then expect a pretty sharp rally towards 1.0300 and some consolidation then between 1.0270/1.0330. If the statement is less-than-dovish, then we will see sell orders at 1.0330 seriously tested.
Futures market 50:50 on rate cut
The futures market is split right down the middle on today's rate decision whilst the majority of bank economists (22 out of 28 polled) expect the RBA to stay on hold.
AUD staying steady, Yen crosses easing slightly
USD/JPY is holding steady near 99.00 and the AUD/USD hasn't managed to test the important 1.0220 level, although neither pair looks particularly bouncy. Dealers aren't reporting any particularly interesting flows at the moment so looks like it will stay quiet until the RBA in a little under 2 hours.
AUD/NZD sitting above important psychological level
Looks like it will only be about the AUD today and there are plenty of big levels to watch. Obviously there is the important support in the AUD/USD at 1.0220 and then there is the big psychological level at 1.2000 in AUD/NZD. Prices have bounced off there twice now in the short term so there may be some barrier protection happening there.
EUR/JPY intraday: Still prefer the buy-dip strategy
- I was watching this pair closely on Friday night and it felt to me as if it had turned a corner and exited its consolidation phase.
- Sovereigns have been buying EUR/USD below 1.3000 and dealers report buying interest now 1.3030/50.
- USD/JPY looks set to test 100.00 again.
- Depending on what happens later with RBA, we may see some volatility in all of the Yen crosses and I prefer to use any EUR/JPY dips as intraday buying opportunities.
- Or as another trader suggested, if 100.00 breaks in USD/JPY and EUR/USD is still near 1.3050-ish, then buy the cross with a trailing stop.
Technical analysis intraday report updated
You can view today's edition of Kyle's excellent technical analysis report in the members section.
AUD: Big hedge funds selling again in overnight trade
This in itself is no surprise because some of the big macro funds have been consistently selling AUD/USD over the last few months. What is somewhat surprising is that they are increasing risk ahead of a major risk event (my sources tell me that these are increased short positions and not reduced longs). Looks like they are getting more confident that a rate cut is coming!
The RBA announcement is at 04:30 GMT with trade data 3 hours earlier.
Cable: Still struggling to break above 1.5600
I tried shorting this pair on Friday evening but gave up and thankfully booked only a tiny loss. I'm not inclined to get involved again at the moment even though its struggling to break above 1.5600; whilst it may be struggling to break higher its certainly not dipping very far! I think its a wait and see proposition with the cable but if I had to take a position, I think I'd try trading this European session with a mild bullish bias? Anyone else got any strong views?
AUD/USD: First layer of support noted near 1.0260
Local dealers say that order boards are still pretty light but that the first layer of support comes in near 1.0260 with some solid bids seen mainly from regional players.
The latest HSBC China services PMI came in below expectations and this is weighing on AUD sentiment.
RBA: Case gets stronger for a 25bps cut tomorrow
I think it should be a foregone conclusion that the RBA cuts tomorrow, given what's happening at the Fed, ECB, BOJ etc and the fall in commodity prices but as we know Mr Stevens is a careful hawk. In fact I think he should probably consider a quick-start 50bps cut to get the AUD back below parity against the USD, but that's another story.
Today's retail sales and internet jobs data should strengthen the 'easing' case, with both coming in well below expectations.
EUR/JPY: Friday night's price action suggests bull trend back on track
Anyone who traded through the NFP data on Friday probably has the same sense that I have, namely that the bull trend is very close to re-asserting itself. Firstly USD/JPY gapped higher and then EUR/USD rebounded after a nasty spike lower. All of this left EUR/JPY 200 pips higher on the day and this is one market which seems to be screaming its bias to us in a very loud voice. Entry levels remain very important, especially for the short-term trader, but I for one will be buying dips for the next few days.
Technical support/resistance levels updated
Those who wish to access the new technical analysis support/resistance tables plus some recommendations can do so in the members section. (I'm sure the new site will be ready sometime this decade and make life easier for us all).
Cutting short-term trades ahead of the weekend
I'm taking my 5 pip loss in the cable and my 85 pip profit in USD/JPY and heading into the weekend with only my core long USD/CHF and long EUR/AUD trades in place. Obviously there will be some choppy trade around the NFP but they can do so without me. Any 150/200 pip moves will offer good counter-trade opportunities, as this market simply has no appetite for momentum in any direction.
Have a great weekend and catch you on Monday++