EUR/JPY: Retracement or reversal
On Monday I was 95% certain that we were due for a retracement, yesterday morning I was 100% sure that a major reversal was underway, and this morning I'm not so sure. In the short-term I still definitely favour the sell-rally strategy but I want to be careful about getting caught in the trap of selling (what turn out to be) dips.
I'm looking to trade a volatile 117.25/122.50 range with one proviso, if EUR/USD breaks clearly below 1.3000 then I think we will turn all-out bearish in EUR/JPY, targeting levels around 112.
EUR/USD: Sovereign buyers noted around 1.3020
I don't have any further information on size or type of buyer.
My EUR/CHF trendline at 1.2125 (see members) has held firm on two occasions so that is making me feel a bit easier. They say a market always looks most bearish at the bottom, let's hope they are right.
I'm leaving EUR/JPY alone for tonight, I need a good rest! Catch you tomorrow.
Cable: Still looking for gap to 1.5250 to be closed
Cable gapped lower on Friday afternoon in NY on the Moody's UK debt downgrade, news which was already expected anyway. I'd expect this gap to be closed pretty soon with levels around 1.5150/60 offering initial support.
Quick overview of Asian FX trade
- AUD dipped on comments from RBA Debelle that interest rates could be used to offset the strong AUD, but once again the AUD played second fiddle.
- EUR/JPY fell from 121.50 to 118.80 in late NY trade and then rebounded to 121.30 in early Tokyo when the fall in the Nikkei wasn't as bad as feared.
- Nikkei -2.25%, HK -1%, Gold $1592/oz.
- EUR fell in afternoon trade on heavy end-of-month flows according to investment banks.
- EUR/CHF and EUR/GBP both broke overnight lows and EUR/JPY fell back below 120.00 before steadying.
- Hedge funds and CTAs still sitting on large EUR/JPY positions so danger remains to downside for now.
Large end-of-month flows behind EUR selling
Thanks to JL for the heads-up that a few of the large investment banks are reporting very large end-of-month flows which are basically all in the same direction, EUR negative.
EUR/CHF: Bid filled but not sure I want them now
I had a bid in the market to reinstate my long EUR/CHF position at 1.2130 and it's just been filled. I'm not overly worried as we are only 130 pips away from the SNB but I must say the EUR crosses are looking terrible. Hopefully I'll get a chance to hedge my risk by selling EUR/JPY sometime during London trade.
EUR/GBP, EUR/CHF turn lower
The trading Gods were waiting for me to say something about the lack of movement before unleashing their next thunderbolt. :) EUR/GBP and EUR/CHF have turned lower on what can only be a delayed reaction to the final Italian election tally, and EUR/JPY has fallen 100 pips from earlier session highs.
The risk in European trade will also be to the downside but we still need to pick our entry levels carefully in these volatile markets.
Staying disappointingly quiet in Asian FX market
The Nikkei has proven itself to be very resilient, now only 1.7% lower, quite a strong performance considering what happened to the Yen in early morning trade. I think we will have to wait for the big-hitting Europeans to come in and get the market moving.
Not hearing anything at all interesting on the order or flow front. Everyone seems to have retreated into wait-and-see mode.
AUD/USD: Bullish trade idea targeting 1.1200
I've just read a trade idea from a professional trader which is certainly very different to the way I've been thinking. He thinks that the AUD/USD is in a consolidation phase which is soon to break out to the topside and his target is 1.12. He makes the following contentions:
- AUD will continue to benefit as other currencies like USD, JPY, GBP etc keep printing.
- Reserve managers and asset managers still need to buy AUD.
- Large inflow of cash from China seems to be gathering pace after recent law amendments.
- Hedge funds and CTAs are short.
- Interest rate cutting cycle has come to an end.
His technical indicators are proprietary so I won't elaborate there but overall he expects the AUD/USD to trade near 1.12 in 2013.
I found this very interesting as I have been ueber-bearish on the AUD for quite a while but his arguments have certainly given me some food for thought.
EUR/JPY: Eyeing previous hourly lows as potential entry point
EUR/JPY has returned to 121.30 as the wild volatility continues and I'm looking to previous hourly lows starting near 122.25 as a possible entry level for my next short play. There is also a 50% retracement (125.30/118.70) at 122.00 which also bears consideration (pardon the pun :) ).
EUR/JPY: Last night's price action screams lower
I'm seriously reassessing my medium term bullish EUR outlook after the price action overnight and this morning in EUR/JPY. The market, particularly hedge funds and CTAs, are massively long of this pair and last night's move might only have been the first of many big sell-offs?
If we can regain 123.00 and stabilise around there for a few sessions then I could be persuaded to buy some but until then, I will sell rallies in expectation of more downside cleanouts. (One good source estimated that less than 5% of open long positions were trimmed this morning!).
USD/JPY: Back above 92.25
I think we can ignore this level now as a support/resistance pivot as it was breached by 100 pips on downside and now has been easily re-taken. Technicals can often be thrown out the window when panic trading is present.
EUR/JPY continues to recover and we need to keep a close eye on the Nikkei open for the next signal.
EUR/JPY: Looking to sell rallies
I'm not sure where those rallies might be, but anything now around 122.50 must be considered a good entry level for bears? I know 200 pips sounds like a long way away but in the last 2 hours it's fallen from 121.30 to 119.00 and back to 120.50; so we certainly can't complain about volatility!
I think the big factor now at play here is the hedge fund positioning, and if they all start off-loading their massive long positions then we will probably see 115.00 before too long.
AUD falls on RBA's Debelle comments
Guy Debelle, assistant Governor of the RBA, said in a speech this morning that there is scope for more rate cuts to offset the strong AUD.
AUD/USD fell from 1.0280 to 1.0250 on the comments.
EUR/CHF: Looking to buy at trendline near 1.2125
I was fortunate on three fronts yesterday; I was short EUR/JPY due to the ridiculous market reaction to the BOJ Governor reports, I didn't have a take-profit order in place, and I had reduced my EUR/CHF longs due to the well-reported stops below 1.2250.
Now its time to re-assess and try not to make any hasty stupid decisions. I see a trendline in the EUR/CHF near 1.2125 and I hope to fully re-instate my long position at that level. I think EUR/JPY is overdone so I've booked my profit from yesterday.
If I was clever then I'd simply take some time off after a good day but I guess I'm just not wired that way.
EUR/USD: Breaches Fibo support at 1.3070
This sell-off in EUR/JPY is also having major technical consequences for EUR/USD, which has just fallen below the 38.2% retracement of the entire up-move from 1.2040/1.3705. Looks like the bulls might get better entry levels.
USD/JPY: Likely to be toppish in short-term 92.00/25
Previous support was very strong near 92.00/25 and this level has now been categorically breached. I'd expect this level to now provide initial resistance.