Market likely to stay quiet until BOJ later today
The New Zealand trade data and Japanese CPI are now out of the way and neither has had any lasting effect on the market. I'm expecting the majors to trade in fairly tight 30 pip ranges for the next few hours.
Elsewhere in the financial markets, it' worthwhile keeping an eye on the Gold market as it should run into very heavy resistance near $1515.
Important levels to watch today
- Cable should find strong support near previous highs at 1.5410 (chart in members).
- EUR/GBP support at .8410 will attract buyers but also stops below?
- EUR/USD Sovereign buyers expected 1.2950/70.
- AUD/USD Sovereign demand 1.0220 and technical resistance at 1.0360.
- USD/JPY barrier protection at 100.00.
Definite shift in GBP sentiment
The market has been short and bearish of the GBP for some months now but yesterdays GDP number seems to have caused a shift in thinking. I wouldn't go so far as to say that an about-turn has happened yet, but I think we need to pay much closer attention to the GBP over coming weeks.
EUR/GBP is testing important technical support near .8400 and GBP/AUD is testing important resistance, as mentioned below. If both of these levels break then I think we can look at building some medium term GBP longs. For the really brave souls, GBP/CHF and GBP/NZD might be two interesting trades?
GBP/AUD: Trading at significant technical level
The 100-day MA, previous major lows, and a 61.8% retracement all come in near the same level around 1.4980 (chart in members). A clean break above here would open the way up for more serious gains.
EUR/JPY: Still operating in a wedge formation
I've posted the 2-hour chart in the members section. It's been forming a wedge pattern over the last 10 days and these formations are usually consolidative ie more gains favoured in this case alongside the dominant bull trend.
The edges currently sit near 128.80/130.40 so I'd suggest playing these with a mild bullish bias and tight stops either side. The 128.80 level is also bolstered technically by recent hourly lows.
AUD/NZD probing recent lows at 1.2100
Even though we've broken below daily support at 1.2140, bearish momentum hasn't really increased and this pair has been struggling to break below 1.2100. In fact it's trading like a pair that has some barrier protection in play, but that's a pure guess on my part.
The NZD/USD has been the leader again this morning, trading up to .8515 and dragging the AUD/USD and EUR/USD with it. USD/JPY and USD/CHF are staying static thus far.
AUD/JPY swingers: I won't be selling this rally
This pair has been good to me over the last week as I've been selling rallies towards 102.85 and covering bigger dips back towards 101.00.
The signs aren't as strong as they were earlier, (with the double-top neckline failing to hold, USD/JPY back near 100.00 and AUD/USD support beginning to form), so I will not be selling this rally preferring to look elsewhere for swing trades.
Support levels in EUR/GBP near .8500 held nicely and I'm still playing the buy-dip swing here, only looking for 60 pips if I can get them :)
CHF continues to weaken but much more yet to come
EUR/CHF saw a big increase in volumes a few days back when it broke above 1.2200 and we are now over 100 pips above that level. USD/CHF saw a similar reaction on the break above .9350.
There are massive structurally long positions in CHF assets which have been built up over the last 5 years. We saw similar build-ups in Yen and in Gold which have recently started to unwind. If a similar move happens in the Swiss financial markets, then USD/CHF and EUR/CHF will be trading at 1.10 and 1.40 respectively.
Levels to watch in this mornings trade
- USD/JPY: Obviously whatever happens at 100.00 will have a major bearing on all other pairs.
- EUR/USD: Solid orders either side of 1.2950/1.3050, more range trading likely.
- AUD/JPY: Still capped by Fibo resistance at 102.85 but double-top failed to form so bearish signals are getting weaker. Expect acceleration if 103.00 breaks.
- AUD/USD: Fairly clear edges at 1.2020 (corporate and Sovereign bids) and strong technical resistance at 1.0360 (38.2% Fibo, prior highs and a trendline).
- CHF continues to lose ground against the USD and the EUR but will run into strong technical resistance at .9570 and 1.2390 respectively.
- EUR/GBP support held again near .8500.
Happy Anzac Day!
EUR/USD: 1.2950 holding despite poor Ifo
The German data was worse than expected and the first batch of stops below 1.2970 were triggered, but support at 1.2950 is holding thus far.
I've got no overwhelmingly strong view and still believe that EUR/USD is playing a secondary role to what's happening in the crosses. My view might well change if we start getting some daily closes low on the 1.29 handle.
EUR/USD: Mixed chatter on the order boards
- Some talk of plentiful stops below 1.2970 and 1.2950.
- I'm hearing opposite chat, with talk of very solid bids exactly at 1.2970 and 1.2950 (perhaps both reports are correct, with solid bids and stops immediately below?).
- Sell orders solid at 1.3030/35.
AUD: Rate-cut sheep are lining up again
After recent Chinese data and today's CPI numbers, virtually all of the major bank analysts are lined up one after another calling a rate cut in either June or July. Wish one of them had something original or even risky to say occasionally. Probably asking for a bit much.
As you know I'm overall bearish on the AUD but if USD/JPY breaks above 100.00 then AUD/USD will be driven higher by AUD/JPY buying. Sovereign names have also been reportedly buying alongside the corporate interest around 1.0225 so a quick long trade for a test of 1.0360 might be worth considering? Just a thought.
USD/JPY: Looks like another attack set to be launched on 100.00 barrier
A couple of people who are very close to the action tell me that another test of 100.00 is inevitable and that it will break this time. Large stops are reported above the physical and psychological barrier and there are no offers of note until 100.50.
I'm leaving it alone, preferring to wait for opportunities after the event when volatility rises.
EUR/GBP: Worth buying dips towards .8500
Two crosses which have served me well over the last week in terms of swing trades have been EUR/GBP and AUD/JPY; buying dips in the former and selling rallies in the latter.
I will try buying EUR/GBP again if we see an early European spike lower to go looking for stops below .8500. I'm only looking for a quick 70/80 pip rally.
I missed my chance to sell the AUD/JPY rally earlier today (strong technical resistance at 102.85) and again there was a fairly 'easy' 60 pips there for the taking, if you could get the timing right of course.
USD/CHF: Longs looking better but still a long way to go
The charts aren't a whole lot of help to me with this trade and my reasoning has been fairly simplified; the breakdown in Gold and the sell-off in the Yen should be enough of an indicator to drive the market out of its supposedly 'safe' safe-haven trade in the CHF.
I prefer to trade this idea via the USD rather than the EUR, but I've been finding it tricky to find the correct levels to increase the position at. I'll just sit on the position for a while and hope that volatility picks up, as I find that trading swings is easier in volatile markets.
Levels to watch in early trade
- Asian Sovereigns including China reportedly buying EUR/USD near 1.2975.
- Strong corporate bids in AUD/USD at 1.0220/30 look to have formed a base in short-term; watch for strong technical resistance near 1.0360 (trendline, Fibo, and hourly highs, see members).
- AUD/JPY technical resistance at 102.85.
- USD/JPY: Same large optionality still in play at 100.00.
I'm travelling this morning but will be back in a few hours, though I'm guessing it will stay quiet.