Is this market long USD to it's neck
Like I said this morning, I have a feeling that something big is about to happen and that we have a lot of vol headed our way. I'm not sure which direction, but I closed my medium-term positions in EUR/CHF, EUR/GBP and EUR/CHF.
Now I'm getting the sense that the market is possibly long of the USD up to its neck and that we may be about to see a reversal?
- USD/CHF seems to be turning lower;
- cable rallied after poor UK data;
- USD/JPY options market is screaming at us;
- AUD/USD looks to have put in a base;
- and USD/CAD is reportedly very heavy above 1.0300.
That's a lot of signals seemingly telling us that the USD is topping out, in short-term at least?
USD/CHF again taking the lead in early European trade; testing hourly trendline
Short-term trendline support comes in near .9440 and USD/CHF has fallen 20 pips immediately in European trade to test this level.
If it breaks clearly, look to sell rallies back to .9470 with a stop/loss above .9505.
Edit: That didn't take long and the trendline is clearly broken in my opinion. Even though its not necessarily my preferred side, technically I'd suggest now selling any 40 pip rallies back to .9470 with a stop-loss above .9505.
USD/JPY: Very large expiry this week at 95.20
I'm not 100% sure when it rolls off, but Friday NY cut is usually a popular time. The spot rate will tend to gravitate towards the strike price, if its in range and the amount is big enough.
Cable: Should be interesting to see what London makes of current levels
Yesterday saw the cable fall during London trade to a new medium term low near 1.4835 after some horrendous economic data. They will walk in today and see that the GBP has rallied 100 pips from those lows and it will be interesting to see what they make of that. What was also interesting yesterday was that our inside man, the flow guy, was able to tell us that the big players were lined up ready to buy dips (haven't heard from him today, might have been on the Moutai last night! :) ). Perhaps the fact that prices rallied after poor data is an indication that the market has fallen far enough for now? The contrarian in me will look for an exhaustive sell-off to 1.4800ish and then a chance to hop on?
FX market staying very quiet in Asia; USD/JPY still main focal point
Just going through the interbank reports from 3 of the big banks and the striking thing is that two of them are warning very loudly that something is happening in the USD/JPY options market, with 1yr risk reversals suggesting another downside move may soon eventuate.
Cable continues with its recovery from fresh lows formed after shocking economic data; if a currency bounces after poor data, it often signifies that a base is nearby?
EUR/USD is stuck at 1.3030 (because I took a position in it yesterday at exactly this level! :) ) and AUD/USD is consolidating quietly above 1.0300, easing slightly on AUD/JPY selling flows.
Something's brewing and I'm headed to the sidelines
There is something about the present market which is making me feel quite uneasy and I feel that some major volatility is about to enter the market. In very volatile times I prefer to have no major positions or views, and simply use the swings for good trading opportunities. I've decided to close out most of my core positions and have booked some very nice profits in EUR/CHF, USD/CHF and EUR/GBP. I'll hang onto my small EUR/USD intraday longs from yesterday, because when I have a position of any sort I tend to pay much closer attention to what's happening in the market.
Yen crosses: Could it be buy-the-rumour-sell-the-fact
A significant component in the big Yen fall of recent months has been the expectation that a new BOJ governor would be installed and that he would introduce significant easing measures. In other words, much of the Yen weakening has happened because of policies which are yet to be implemented, a matter of 'jumping the gun' which we traders are well renowned for.
Mr Kuroda starts work next week and the Nikkei reported yesterday that he may introduce some new measures straight away, rather than waiting for the April meeting.
Interestingly also, for the past 48 hours the options market has been reporting a significant increase in the purchasing of downside protection in all of the Yen crosses, but most particularly in USD/JPY.
Now that the fact is about to catch up with the rumour, may we be about to see another significant correction? I don't know but yesterday's sharp pull-back in EUR/JPY did again demonstrate that the market is always a two-way beast.
GBP falling again after poor data
The beleaguered pound has fallen again after a raft of poor data. Next buy orders reported 1.4785/1.4800 in the cable.
EUR/JPY: Falling heavily, sorry didn't see this coming
This pair looked so bullish this morning and interbank dealers were talking about the total lack of sellers, it seemed the only way was up. Once again the FX market bites back when you least expect it and EUR/JPY has fallen 130 pips from this mornings highs.
There's not much in the way of technical support until 123.80 and with a possible double-top now on the short-term charts, bulls will be treading a bit more carefully.
EUR/CHF: Looks like some profit taking finally kicking in
Hourly lows at 1.2345 have been breached and I'll make an educated guess and say that trailing stops have been triggered.
Technically the pair could easily retrace to 1.2285, which is the 38.2% retracement of 1.2120/1.2390 and also a minor chart high.
EUR/USD: Not over-enthused with my long position right now
I bought EUR/USD earlier today at 1.3030 but I must admit that I'm not feeling particular hopeful about my chances of turning this one into a 'retirement trade' :) and I'm also not feeling inclined to add to the position in order to improve my average entry level.
I will wait and see what happens at 1.2985 before making any major decisions.
GBP: Flow guy reckons that a bottom isn't far away
After all my bearish pieces on GBP/AUD today, my friend the flow guy out of HK reckons that some sort of a base for the GBP isn't too far away. He isn't committing to one line in the sand, but he says that some big buyers are lining up to start buying dips, particularly in the cable. I'd be watching market commentary sites for any mention of China or Middle East Sovereigns!
GBP/AUD flows hurting the GBP
I suspect that some of the big macros might be selling after the close below previous record lows although normally they wait until liquidity improves during European trade. Cable is back below 1.4900 and is friendless, pretty much exactly like the Yen.
EUR/USD: Looks like a reasonable entry level near 1.3030 for bulls
I'm taking a small long here at 1.3030 with a stop 90 pips lower. I'm only running a small position for now and will increase if these levels hold through the London open. My target is 1.3250.
USD/JPY isn't backing off at all and the next target is another option barrier at 97.00.
EUR/AUD: Major bank recommends short-term short position
One of the big US banks has just sent out a short-term sell recommendation to their customers on EUR/AUD (which they prefer to play through the option market).
Their reasoning is based on the resurgence of the carry trade, the lack of AUD longs in the market, and the risks still associated with the Italian political situation.
I must say I think GBP/AUD or AUD/JPY are better ways to express the majority of their views but I guess that's what makes a market!
Kuroda may start easing measures sooner than expected
There is a report in today's Nikkei which is driving Yen weakness this morning. In it they report that the new BOJ governor Kuroda may launch new easing measures early next week rather than waiting for the bank's first regular policy board meeting on April 3/4.
Yen crosses: You gotta be quick
USD/JPY is back above 96.50 and all of the Yen crosses are higher in the last 30 minutes of trade. Dealers tell me that it's not absolute weight of buyers which is driving the market, more like a complete absence of sellers.