EUR/JPY: Not much in way of technical support
Freefall continues in EUR/JPY and a quick look at the daily chart shows that there isn't much technical support until the 55-day MA at 118.25 and a 38.2% retracement (100.30/127.70) which is at 117.25.
Prime brokers are reporting panic selling by hedge funds and CTAs who had built up massive long positions.
EUR crosses: Looking bit oversold
- EUR/JPY had a 'smell' about it all day yesterday and whilst I didn't expect such a big sell-off, I'm certainly not surprised. The Pennant formation I've been following has broken to the downside to I think I can now disregard this. Overall the trend remains bullish so wait for the panic selling to pass and then look to start re-building longs.
- EUR/CHF had been itching to trigger those stops below 1.2250 and now that they are done I think the way is open for the up-trend to re-commence.
- EUR/GBP was overbought on the back of news which had been expected anyway, so its little surprise to see a decent sized pullback there.
If EUR/USD can hold above 1.3050/60 and if USD/JPY support near 92.00 is confirmed, then we may see an excellent bullish entry level in the cross. (Edit: Forget about that idea, USD/JPY support has been blown away).
Good luck today.
Looks like staying range-bound until election results start rolling
All of the fun-and-games happened in early Asia and its been pretty much sideways trading since then inside of 50 pip ranges. Cable has rallied back towards prior lows near 1.5160 but has stalled there and the Yen crosses tried to rally in early Europe but are back at mid-range levels. Next up, Italian election results starting around 15:00 GMT I believe.
Good luck and catch you tomorrow++
Whatever happened to Greece?
It doesn't seem that long ago when every second headline had something to do with Greece, and it's ups-and-downs were driving every currency pair from JPY/KRW to NZD/CAD. Now we don't seem to ever hear it mentioned. Good to hear that all those nasty problems have miraculously disappeared. Probably gone to the same resting place as the Fiscal cliff, the Baltic dry index and the North Korean nuclear program.
Wonder what tomorrow's incredibly important issues will be?
EUR/JPY: Still like the sell short-term rally play
- I still like the Pennant formation in EUR/JPY (updated in Members) and this suggests that we should see a 121.50/125.50 maximum range.
- The reaction to Kuroda story is ridiculously overdone.
- The Italian election has plenty of scope for bad news for the EUR.
- I sold this morning above 125.00 and bought back in low 124's. I'm now looking to re-sell at 124.80 and invest this morning's profits in an 80 pip stop-loss trade. If my entry level proves solid, then I'll look to add to the trade a little later, but as always it's best to bet only with the bank's money :)
Quick overview of Asian FX market trade
- All of the action happened in the first few hours with the GBP and JPY falling heavily.
- Cable was sitting at 1.5250 on Friday when news of the Moody's downgrade broke. It fell to 1.5170 in late NY and fell heavily in early Asia bottoming at 1.5075.
- Many see this as an overreaction as the news was expected; we could see a gap closure back to 1.5250.
- GBP bear trend is very strong and real-money selling is likely to intensify so be careful if picking bottoms.
- EUR/JPY closed in NY at 123.15 and traded to 125.30 in early interbank trade in a ridiculous overreaction to news that the dovish Kuroda is likely to take over at the BOJ. The pair dipped back to 123.90 in early Tokyo.
- HSBC China manufacturing PMI was down to 50.4 from 52.3 last time.
- The AUD slipped lower on the day, driven by risk-aversion surrounding the UK downgrade and the China number, and also weighed on by AUD/JPY profit taking.
- Somebody won an Oscar.
EUR focus: Elections, real money and Moody's
- The results of the Italian election will start emerging around 15:00 GMT and volatility will probably pick up in the EUR after that.
- EUR/GBP and EUR/JPY real money flows are expected to be EUR positive in the wake of the UK downgrade and the presumed anointment of the new BOJ Governor. Not sure I completely buy into this argument one way or the other but that's what the market is chattering about.
- Comments from Moody's that the EC lowering growth forecasts is credit negative.
(I still can't believe that these ratings agencies have so much power after they showed their true colours during the GFC!).
HSBC China manufacturing PMI falls to 50.4 from 52.3
AUD/USD has fallen 20 pips on the news but I don't expect any really big moves on the back of this.
If we would only wait for the 'silly' trading opportunities
There were 2 no-brainer trades this morning:
- The GBP was way oversold after the UK downgrade and cable traded at 1.5075, allowing for a cheap trade with a stop below protected barriers at 1.5050.
- The JPY was similarly ridiculously oversold after news that a well-known Dove was likely to be come the next BOJ Governor. The market knew this already, Abe was hardly likely to look for someone with hawkish credentials?
These types of opportunities aren't very frequent and you really only get one quick bite at the cherry, but for those who wait patiently for the 6 or 8 no-brainer trades a month, life is much easier than for those who try to be right all the time.
EUR/JPY: Now looking to re-sell on rallies
I'm starting to feel 20 years younger with my day-trading hat on. I still firmly believe that this morning's Yen sell-off is a load of nonsense; yes the Yen might be headed lower but this BOJ Governor news certainly won't be the catalyst for the next move.
I've booked a handy 90 pips and will look to re-sell at 124.80.
Cable: Good risk-reward for bulls buying at 1.5100
We've been down as far as 1.5075 from 1.5250 since the news of the downgrade was released in NY trade, on reaction to news which was already 100% written into the market!
Is that a good reason to buy GBP? I'm not 100% convinced as when it starts falling it does tend to continue but if you feel bullish, buying here at 1.5100 with a stop below supposed barriers at 1.5050 and a target at 1.5250 does make excellent risk-reward sense.
AUD slips on risk-aversion as retail market opens
The AUD is being affected by some risk-aversion post UK downgrade and I suspect that the Japanese retail market sold AUD/JPY hard on their open, at least that's what the price action seems to suggest.
Retail market smashes EUR/JPY back down on open
Looks like the retail market agrees with me and we've seen a big dip in EUR/JPY right on the opening with the cross down now near 124.40.
I'll look to cover on any dips from here and hopefully re-sell rallies back towards 125.00.
EUR/JPY: Small short position in play
Prices have reached the top of the Pennant formation which I've been tracking (see members) and I've taken a small short position with a stop above 126.00.
I think this reaction to news that Kuroda may be the new BOJ Governor is ridiculously overdone and with a risk event looming for the EUR in the form of the Italian election, I think this is an excellent risk-reward trade.
USD/JPY still surging, highs so far around 94.75
Dealers are too busy to talk to me and I remember well how hectic it can be on a Monday morning in often non-existent markets. I think this move is way overdone but no point in fighting against this panic buying.
EUR/JPY: Now almost 200 pips higher than the NY close
Both EUR/JPY and EUR/GBP have made big moves higher and as I surmised last night, it's likely to be asset managers chasing after both moves.
EUR/JPY closed in NY around 123.15 and has traded near 125.00 this morning and EUR/GBP is trading at .8750. EUR/USD is currently quoted around 1.3220.
Cable: Barriers expected 1.5050 and 1.5000
Reports last week suggested that there will be solid barrier protection ahead of 1.5050 and 1.5000 in cable which presumably will be strong enough to support the pair at least during early Asian trade.