EUR/USD: Hasn't been able to consolidate below 1.2870
The bulls will be slightly more optimistic after prices failed to consolidate the bearish break below 1.2870. Trailing stops are reported above 1.2925 which is not a surprise really, as many will have sold the break in the hope of a big move lower. I'm more bearish than I was yesterday but as always we need to wait for the optimum entry level (when all the stops are done!).
The main event overnight was the big move out of EZ by asset managers and if this continues then the EUR will be unable to maintain current levels. I'd suggest bears should wait and sell rallies back to 1.2950ish.
EUR/JPY: Looking to sell intraday rallies
I've booked most of the profits on my short position from yesterday afternoon and am looking to re-instate on any 100 pip rallies. I'm not at all sure that we do go lower, but I really like the potential risk-reward about being short above 123.50 with a stop through 124.25 or so. If this pair turns sour then we will be back below 120 in a heartbeat.
Thankfully quiet in Asia
Apologies for the IT disaster today, but hopefully the new site and server will be in place next week.
Here's the Asian open from this morning for those who like to read it.
Didn't hear much on the flow front today, with the market staying very quiet with Tokyo closed.
AUD: Torn between AUD/JPY and EUR/AUD flows
- AUD/JPY fell last night as the market reverted to risk-aversion mode, but this pair is still trading between important technical levels at 97.50 (previous high now support) and 100.00 (physical and psychological barrier).
- EUR/AUD fell on heavy selling from global asset managers.
- AUD/USD is totally range bound but I prefer the risk-reward in selling near 1.0400/10 with a stop above 1.0440 looking for a return to 1.0290.
USD/JPY: Japanese holiday may increase downside risk
If interbank reports are to be believed, most of the USD/JPY selling in recent days has been from big hedge funds booking profits, whilst most of the buying has come from Japanese corporates and institutions. With Japanese markets closed today, that may take away some of the support. This could of course also mean that the hedge funds stay away until liquidity improves again but if something happens to spook the market, the main risk will be to the downside (in my very biased opinion :) ).
EUR: Heavy sales seen from asset managers
In January and February we saw a big rally in the EUR crosses as asset managers bought back into high-yielding peripheral EZ assets in the hope that much of the EZ crisis was behind us. This move is now being sharply reversed and it could spell big trouble for the EUR.
- One of the big Swiss banks reported heavy interest from asset managers to sell EUR/CHF.
- EUR/JPY fell sharply again although much of this can also be attributed to very heavy USD/JPY sales by big hedge funds, booking profits after a big move.
- EUR/GBP also fell again but as with EUR/JPY, there are other factors at play in a market already very short of sterling.
- EUR/USD broke below important technical support (see members) at 1.2870 but the failure to close below might lessen the bear's enthusiasm. I remain bearish for a move to 1.2680.
Cable bids reported near 1.5060
The London interbank market is reporting solid bids near 1.5060.
I'm done for another day, good luck tonight and catch you tomorrow++
EUR/JPY: Should find decent support at 122.70
That was yesterday's intraday high during Asian trade and I will look to cover part of my short position there if it looks like holding. The base of the previous holding range near 124.00 has been confirmed as a resistance level after earlier highs at 124.10.
EUR/GBP: Flow guy reckons we should see good two-way flows
His GBP info in recent weeks has been criminally good and hopefully it stays that way for EUR/GBP. He says that any big dips will walk straight into very large bids between .8450/85 and that similarly any big rallies will run into a wall of selling above .8650.
We are pretty much in the middle of this now so don't be getting too aggressive mid-range. There have been no reports that I've seen of any big flows or orders near current levels.
EUR/USD: Very important support at 1.2870/80 and gap target at 1.3050
The EUR market was very very bearish yesterday and took out a well-defended barrier at 1.2900, but it was unable to break below technical support at 1.2870. Now we have the choice of either closing the opening gap from yesterday morning back to 1.3050 or reversing lower to retest the major support level.
Bit of a coin toss really as to which one happens, and much will depend on the German data, but whatever happens in the short-term to this pair could very well have an important influence on which way the next 10 big figures go; 1.19 or 1.39. With USD sentiment improving and EUR sentiment headed the other way, I'm clearly in the 1.19 camp but I've been wrong on the odd occasion before :)
Reports suggest that Cyprus unlikely to approve bank levy in current form
I'm not sure that they really have much choice at the end of the day, as the obvious alternative is no bail-out and a 40% haircut. Perhaps they are ready to play a game of Chicken with the IMF and the EU. I know that Cyprus is only a minuscule player, but it would set a precedent if they were to leave the EUR bloc, and they could wager on the fact that nobody in Brussels or Berlin wants them to set that precedent.
The EUR has rallied slightly, not sure why, so I've re-installed my EUR/JPY shorts from yesterday just below 124.00; I'll have another go.
Little or no change expected from FOMC statement tomorrow
Most of the big banks are agreed that Mr Bernanke won't be making any major changes this time, although recent improved economic data will probably see economic projections raised slightly.
This meeting could be an important one in that QE programs are likely to be re-assessed, but we won't know the outcome of this debate for another 3 weeks.
Asian FX market is staying quiet, and those USD/JPY sell orders at 95.75 managed to cap the intraday rally for now.
Rio Tinto sees slowing demand for iron ore
The other big Australian miner sees demand slowing and prices falling in the iron ore market in H2. The AUD has dipped ever so slightly on the headlines.
AUD/USD: Local hedge fund sells above 1.0390
One of the big Asian banks put out a bearish piece on the AUD in the last few hours and one of our local hedge funds has just sold it above 1.0390. He tells me that he will look to cover half his position a little lower and then see how it develops.
USD/JPY takes out overnight highs but more sell orders reported
Quite heavy turnover today in USD/JPY with Japanese buyers working through hedge fund offers. There are more sell orders reported right here at 95.70/75 but they are being systematically worked through as Tokyo lunchtime beckons.
Next technical resistance above here is at hourly highs near 96.20.
JPY interbank flow reports
- Hedge funds are currently buying back Yen short positions, mainly against the EUR and the USD.
- Real money and bond traders continue to buy USD/JPY dips.
- Retail accounts still net sellers of Yen.
- Overall USD/JPY long positioning among big speculative players remains at 'quite extreme' levels.
Early morning snippets
- USD/JPY: So-called 'clever money' seen selling at 95.00 and 95.50 overnight.
- BOJ changing of guard today with Shirakawa's last day in charge.
- RBA meeting minutes to be released today but no surprises expected.
- AUD/JPY still trapped in 97.50/100.00 range.
- EUR/CHF spiked higher on Moser comments re negative interest rates.
- EUR/USD still looking to close gap to 1.3050; heavy offers reported overnight near 1.3000.