AUD/USD: Prefer to sell-rallies intraday
AUD/USD has popped above yesterday's highs near 1.0360 but with hedge fund selling interest (they seldom leave firm orders preferring to see how the market trades when it reaches their level) reported ahead of 1.0400, I prefer to sell into strength looking for a re-test of the 1.0225 lows from earlier in the week.
AUD/CHF technicals: Inverted H&S on 4-hour chart
Many thanks to Jordan for pointing out the inverted H&S on the AUD/CHF 4-hour chart. Not quite perfect as you can see and I would prefer to see a re-test of the right shoulder at .9375, but still worth considering a buy on a bullish break above .9525 (keeping trailing stops tight of course).
EUR/JPY, EUR/CHF short-term technicals updated
- EUR/JPY looks to be consolidating in a pennant formation between 123.00/126.50.
- EUR/CHF should now find short-term support at 1.2325.
The charts have been updated in the members section.
EUR/CHF: Market targeting stops above 1.2370
One of the bigger Swiss banks is reporting that there are stops above 1.2370 in EUR/CHF and it looks like they are currently being targeted.
I remain long of this pair and am happy to stay that way for the present.
EUR/JPY staying volatile and true to form
Yesterday this pair did a total of over 900 pips up and down throughout the day only to finish back near the same level. Today might not be so volatile but we've already seen an 80 pip dip and a 50 pip rally so things are certainly on the move. I don't have any strong intraday view except be patient and keep trade sizes manageable.
USD/JPY order book: Looks like a 91.80/94.00 range
This could be a decent range trade for the next few pre-G7 sessions; decent buying interest is reported starting at 92.00/20 and getting heavier from 91.80 through 91.50 whilst offers are said to be reasonably heavy starting at 94.00. With volatility almost a given, I might look to put my day-trading hat back on and trade the edges of this range.
AUD/USD: More trailing stops going off above 1.0350
I think this is the last of those trailing stops I mentioned earlier and further gains are going to be hard fought with hedge funds sitting on the offer towards 1.0400.
Asian accounts selling USD/JPY
Perhaps some of the bigger Singapore-based traders are back after a 4-day weekend and have decided to book profits ahead of the G7 and G20 meetings, regardless of what the US Treasury under-secretary has to say.
USD/JPY is back below 93.00 and bank dealers are saying that selling by Asia-based players is the primary factor at play today.
Bids are expected to be solid 92.00/20 from Japanese corporates unwinding hedges.
What to expect from the State of the Union address
Well I'm sort of hoping that President Obama will say that he likes EUR/CHF higher :) but maybe that's hoping for a bit much. There is usually a bit of feel-good in the US equity markets on the following day so we can expect risk trades and the USD to be mildly underpinned.
USD outlook: Still fancy a higher USD in shortish term
- USD/JPY is leading the way and with the Japanese corporate community significantly over-hedged, the path of least resistance still seems to be higher.
- Cable has also broken lower but needs to take out weekly lows at 1.5250 in order to really gather some momentum.
- USD/CAD could well be one of the next big movers if Prime Broker reports can be trusted with long-term positions being evaluated.
- AUD/USD positioning is reportedly extremely lopsided and despite the presence of reserve manager bids, a break below 1.0150 could really set off some positional adjustment.
- USD/CHF is probably wishful thinking on my part but I think the long-term USD/CHF down-trend is just set to retrace.
- EUR/USD is probably less likely to make any big moves lower with EUR demand on the crosses likely to keep it range-bound.
EUR: Overall market sentiment has improved dramatically
The EUR is moderately higher across the board today and based on recent surveys in the professional investment community, this strength is likely to stay with us for some time yet. A Bank of America survey showed that the investor sentiment index on the EUR has improved from an appalling -49 in May last year to its present reading around 11.
In other words, sentiment is really only back to very neutral levels and were it to improve dramatically, then the EUR could still appreciate significantly.
RBA: Rate cut chances put at 41% for next month
Cash rate futures are putting the chances of a rate cut next month at 41%. The AUD is drifting higher with trailing stops the main target for the interbank market.
AUD/USD: Trailing stops targeted
Some weak trailing stops are being targeted above 1.0335 and there are more above 1.0350 but hedge funds are waiting with their offers above 1.0385/1.0400 so I would prefer to stay in sell-rally mode.
AUD/NZD: Exodus of longs continues
The pace of selling has slowed down in recent times but Prime Brokers still report that the big Macros are exiting longer-term AUD/NZD longs in droves. Recent lows at 1.2220 are likely to attract stops just below.
EUR/JPY: Almost 1000 pips of movement yesterday
That's a fair bit of volatility by anybody's reckoning. This volatility is being created by uncertainty surrounding the upcoming G20 and G7 meetings, and whether any comment will be made regarding Japan's attempts to weaken the Yen. The US Treasury under-secretary seemed to be quite clear that the US was giving full support to Japanese efforts but we have heard a different story from an unnamed G7 official who said they were concerned by excessive Yen moves.
This is a dream market for a trader; put all bias and views out of your head and wait for 'silly' moves in either direction before entering the market. I think that official comments from now through Friday are likely to be talking the Yen up but Toshin and hedging flows are overwhelmingly Yen-negative. This should mean that rallies are well met as indeed dips will be.
USD/CHF strategy
I'm long and hoping to build a decent sized position for an eventual move back above parity. For now I'm presuming that a base will form above .9025 and I'm keeping my strategy stop below this level (see USD/CHF chart in medium-term techs in members section).
I will play a .9025/.9380 range with a bullish bias and try to build a strong core long position. If I'm lucky, it will trade up and down a few times inside of this range giving me the chance to build a decent sized position.