JPY: Look for volatility to increase ahead of BOJ
The BOJ's two day meeting starts today and we can expect volatility in the Yen to increase as large flows hit a nervous market. USD/JPY was well held yesterday by large bids between 92.50/70 but the market is still long (albeit much reduced) and rallies are likely to meet with plenty of resistance.
I'm looking for a 92.70/93.70 range in USD/JPY and a 119.20/120.20 range in EUR/JPY, but will not be at all surprised if these levels are easily broken. I'm still running a short EUR/JPY trade but have locked in a healthy profit with a trailing stop now above 120.40 and a target at 117.50.
Cable: Happy to book profits at current levels
A nice 150 pip profit to start the day, even on a small position, is not to be sneezed at so I've taken back my shorts from yesterday and will sit and wait patiently for other trading opportunities.
GBP/NZD big mover overnight on reinsurance flows
Cable has fallen 150 pips overnight and NZD/USD has risen by up to 50 pips after a big reinsurance flow hit the market. European corporate demand for EUR/GBP also added to the downward pressure on the pound. Some market players like the big banks and hedge funds get advance knowledge of these flows and it certainly makes trading a bit easier if you have big technical levels and big flows all pointed in the same direction.
Cable resistance looking stronger now
The prior weekly lows at 1.5250 have been tested twice now and held both times. It makes plenty of sense to be short with a tight stop above 1.5280 and an open downside.
Being right or wrong is irrelevant at the end of the day, it's all about picking good risk-reward trade opportunities.
See you tomorrow.
USD/JPY: Bids hold firm
Very solid bids between 92.50/70 have held firm on the first test and this level cold prove to be important. Resistance levels start at 93.50 previous lows but will get stronger near 94.00. I think we maybe in for a short period of range trading.
EUR/JPY: Trailing stop now in play above 120.40
I'm locking in a healthy profit on the balance of my short position with a trailing stop now above 120.40. My profit target is at 117.50 still.
I've also sold very small cable at the pivotal 1.5250 level with a tight stop above 1.5305; I'll look to increase if the market starts to trade with more bearish momentum.
USD/JPY: More bids layered toward 92.50
Plenty of selling today across the board in the USD and USD/JPY has filled good sized bids at 92.70 and there are more at regular 5 pip intervals near 92.50.
Cable is testing 1.5250 again and the EUR/USD is nearing its short-term technical resistance levels near 1.2885.
AUD/USD testing 1.0500 on slightly neutral statement
The RBA has maintained its easing bias but it looks like the market is caught a little short with highs so far in AUD/USD near 1.0480.
I still fancy selling any silly rallies if stops above 1.0500 go off.
USD/JPY buyers reportedly heavy 92.70
USD/JPY is maintaining its heavy tone but further losses are expected to be hard-fought, with plentiful bids building near 92.70. Rallies back towards the previous spike low at 93.50 are likely to now attract selling interest.
RBA to keep rates steady, maintain easing bias
There is universal agreement (a dangerous thing in the FX market!) that the RBA will stay on hold and maintain it's easing bias. Any chance of a less dovish tone disappeared with the Cypriot banking crisis.
The AUD has edged higher this morning but nobody seems to be showing much intent just yet.
AUD/JPY and cable worth watching in early trade
- The break below 97.50 in AUD/JPY has changed the bias considerable in my view; sell any intraday rallies for move to 95.50.
- Cable resistance at 1.5250, the prior weekly lows-come-resistance, should be important with sellers ahead of there and stops above.
- EUR/JPY close below 120.00 changes the landscape and my target at 117.25/50 is looking more achievable.
- AUD/USD to range trade ahead of RBA.
- USD/JPY favours selling any rallies back towards 94.00.
AUD/JPY: Back near 97.50 yet again
The lower than expected Chinese PMI have led to some modest risk-aversion in the markets and the stronger than expected Japanese Tankan have given the Yen a boost; add all of this up and we have increased pressure on AUD/JPY.
The pair has been stuck steadily between previous highs at 97.50ish and psychological/physical barrier at 100.00 for the last few weeks and we are currently witnessing another downside test. I'd expect there to be some significant stops now below 97.25.
Cable: Risk-reward favours sell-rally strategy
Previous weekly lows at 1.5250 proved to be solid resistance last week, despite the usual Monday morning stop-loss run up to 1.5280. The USD remains in demand across all markets so selling any rallies back to 1.5250 with a stop-loss above 1.5300 makes good trading sense.
On the other side of the coin, interbank reports suggest that the market is still quite short of GBP so be patient, wait for the right entry levels, and keep stops tight if selling rallies.
EUR/USD: Still favour test of 1.2665/80
EUR bearishness has eased a notch or two since last week but general sentiment towards the USD remains strong. This has me favouring a test lower in EUR/USD later this week towards strong technical support at 1.2665 (previous daily lows)/1.2680 (61.8% retracement of 1.2030/1.3710).
We may see a modest recovery in the EUR crosses if the headlines remain free of bad news but any rallies in EUR/USD back towards 1.2950 are sure to meet with plenty of grateful sellers.
AUD should stay quiet ahead of RBA tomorrow
There is also today's Japanese Tankan report and the HSBC China PMI data to add some volatility to the market, but I'm presuming that with many financial centres closed for the long weekend we will not see a whole lot of movement. There are no reports of any major stop-loss orders close to the market.
Initial technical support is at 1.0395/00 with stronger levels near 1.0360. Resistance is also clear at 1.0500.
Yen positioning reports suggest consolidation phase may soon end
Some interesting reports coming out of the interbank market suggest that overall Yen short-positioning has been reduced by more than 60% over the last few weeks. This backs up the reports of heavy USD/JPY and EUR/JPY selling by some of the big hedge funds.
The market is still short of Yen, but at very reasonable levels, and a small percentage of the market has even turned long. This will give the Yen bears some heart that the downtrend will soon begin again.
I'm still short of EUR/JPY but will re-assess if we break back above 122.75. I am still hopeful of a test back towards 117.25 and these are my main levels for the week.
EUR/JPY back below 120.00
No doubt that EUR/JPY is the lead pair in the market at the moment and what happens there influences everything else. You know my views well by now, I think we are headed for 112 with an initial stop at 117.50.
Have a great weekend and I'll look back in on Monday to see if I'm richer or poorer :)