Cable likely to lead the way in London trade
It's hard to find a weaker currency than the GBP at the moment and on the opposite side of the equation, its hard to find a stronger currency than the USD. This of course means that the GBP/USD is the weakest currency pair amongst the majors and is exhibiting the strongest trend. I have no position here at the moment apart from a tiny EUR/GBP long, so I'm not talking my book. This cable trend is likely to remain the dominant force in the market in coming weeks and whilst there will always be the inevitable short-covering rallies, those who sell them are likely to fare best.
First resistance on the cable today is previous lows at 1.5070 and support is at Friday's lows near 1.4990.
AUD/USD: Break below 1.0140 is significant; .9600 here we come!
After a period of sideways trade it would seem that the market has now an unequivocal decision and has turned bearish on the AUD/USD. This market reminds me in many ways of how cable was trading in recent months, endless sideways movement before finally turning lower.
I'd put a target of .9600 on the downside now and any rallies back towards 1.0250 initially will attract plenty of resistance. Be patient, there will always be some relief rallies to sell into rather than chasing lower and handing easy profits to the big-selling hedge funds.
AUD/USD stops triggered
No sooner said than done; market broke relatively easily below 1.0150 and triggered sizeable stops below there and below 1.0140.
With AUD/USD and cable both looking like sell rally propositions, and with USD/CHF and USD/JPY both firmly on bull trends, this USD rally looks like it still has plenty of legs.
AUD/USD: Stalling ahead of barriers and Sovereign buyers at 1.0150
Really not sure how big the amounts are but the lack of bounce so far suggests to me that the level will break fairly soon.
Cable outlook
The sell-off in sterling is showing no signs of letting up and more weak domestic data triggered breaks below option levels at 1.5050 and 1.5000 on Friday. The pound is also weak against the other majors and with real money players starting to sell heavily, more losses look likely.
Initial resistance is at prior lows near 1.5070.
Yen outlook
USD/JPY turned sharply higher on Friday during NY trade but I do not expect these gains to be easily maintained. The speculative market is very long and with US yields headed lower last year, I feel that consolidation is the likeliest outcome for both USD/JPY and EUR/JPY.
The level I've been watching on the cross is near 122.50 and I still fancy trying shorts on a test of this.
Interbank sales reports on Friday suggested some heavy sell orders above 94.00 in USD/JPY so keep an eye out for that as well.
EUR/USD outlook
I'm still of the opinion that EUR/USD is in a longer term holding pattern around 1.3000 and if we are looking for big moves then we should concentrate elsewhere. The EUR crosses remain quite well bid which provides plenty of demand into EUR/USD, but overall the resurgent USD is probably running just a little stronger.
Selling rallies in EUR/USD is the logical play but watch out periods when the markets focus is firmly on the crosses, as EUR/USD will probably rally during such periods.
I see initial support near 1.2875 (see chart in members) and resistance levels will be very firm above 1.3250, so look to play the edges of this range this week.
On an intraday perspective, I'd try selling near 1.3040 for a renewed test of 1.2970.
Quiet start to interbank trading week; my initial intraday trading thoughts
- Most of the majors are trading within 10 pips of their NY closing levels from Friday in early interbank trade.
- Cable still looks very heavy and selling rallies back to prior lows at 1.5070 makes good technical sense.
- EUR/USD broke below 1.3000 on Friday but cross demand helped it rebound.
- The CHF weakness is starting to accelerate but EUR/CHF hit short-term technical resistance at 1.2285 (see members).
- The JPY also weakened but the speculative market is still heavily short; range trading still favoured in EUR/JPY and USD/JPY.
- The AUD also remains soft but short-term technical support at 1.0180 and optionality at 1.0150 will provide support this morning.
Conclusion; selling intraday rallies in cable looks like the obvious play and look for range-edges in the JPY crosses for some trading opportunities.
AUD/JPY: Flow guy says sell-orders now cancelled
Anyone who sold yesterday alongside the sell orders at 95.10/20 will be interested to hear that the offers have now been cancelled ahead of the weekend.
EUR/GBP: Technical trade idea for bulls
One of the technical strategists I've been following has sent me a very impressive argument for being long EUR/GBP at close to current levels. His reasoning is proprietary so I won't go into that but he suggests that the current dip is close to complete.
He likes being long EUR/GBP near .8600 with a stop-loss below .8560 targeting a sharp move higher towards .8950. He got his last trade right so let's see if he can make it 2-in-a-row? At least he's given me something to talk about!
Nothing of interest to report from Asian FX market
- China official PMI slightly down at 50.1 from 50.5 last month.
- Forgettable 25 pip range in most of the majors.
- Usual political point-winning in US surrounding 'sequestration' but market remains overall bullish on USD.
- Local bank recommends selling NZD/USD for move to .8050.
AUD dips slightly on official Chinese PMI data
This months number came in at 50.1, down from 50.5 last month.
The AUD/USD dipped to 1.0210 after the number but interest is pretty low according to dealers and there are plenty of bids waiting on sub-1.0200 dips.
Local banks recommends short-term NZD/USD shorts
One of the bigger players in the Kiwi market has gone short at .8260 with a stop-loss at .8360 and a take-profit at .8050. Reading between the lines, and whilst they give plenty of reasons for the trade, stops below the market would seem to be their primary reasoning (and these guys will see a lot of orders).
I always get stopped out in the Kiwi and that's why I don't trade it anymore, so based on my experiences the best strategy is to wait until all others are stopping themselves out at .8360 and then sell!
USD bulls getting ready for big run; keep sharp eye on Gold market
Relative stability in the US, both on economic and political fronts, is getting USD bulls all revved up. USD/CAD, USD/JPY and cable have been leading the USD charge and last night there were the ominous reports of big macros buying USD/CHF. If we hear that the Middle East Sovereigns are also starting to buy USD again, then we will know that the bull train is really on track.
One really massive level to watch is $1525 in Gold. There are reports of huge trailing stops below $1515 from leveraged funds and if they go off, we could fall into a black hole. Such an event would probably see AUD/USD well back below 1.0000 and USD/CHF heading quickly towards 1.0000.
Cable: Prefer to buy intraday dips for 1.5250 test
- I still feel that last Friday's gap in late NY trade from 1.5250 is likely to be closed. I prefer the buy-intraday-dip strategy but patience needed as it will be slow in Asia.
- EUR/USD will struggle to break below 1.3000/20 unless EUR/JPY suddenly goes ballistic again.
- AUD/USD will probably be attracted towards big optionality at 1.0150 but risk-reward favours buying that dip.
- I remain short-term bullish on the Yen and perhaps selling straight USD/JPY is the best way to show this? Best wait and see how the market develops.
USD rebounds but ranges still intact
Not a lot seems to have happened overnight with the USD making modest gains across the board except against the GBP. We've had a few quiet sessions here in Asia since the big volatility on Tuesday morning and I expect today to be another quiet one.
I'm sticking with my sell-rally plan in EUR/JPY, I still fancy that cable will close last Friday afternoon's gap to 1.5250, and the AUD should stay well supported on dips.
Japanese CPI and unemployment data on the economic calendar usually don't create any ripples.