Winners and losers in institutional flows
I'm just reading some very thorough interbank research on who the likely winners and losers are likely to be over the next few weeks, providing nothing significant changes in the market.
- Yen selling is likely to remain dominant, led by $5 billion worth of Toshins and aided by Japanese institutions unwinding long-term hedges. An increasingly bearish retail community also has the potential to add to Yen selling.
- CAD selling in recent weeks has been led by hedge funds and real money funds, and this selling is expected to continue for at least 2 more weeks.
- GBP selling is likely to increase as the exodus out of UK Gilts increases.
- USD, EUR, NOK, and AUD are likely to benefit from inflows.
- Latam to outperform in emerging markets.
Sounds like we should still be buying dips in the Yen crosses.
CHF, USD edging higher after reports of North Korean nuclear test
The usual safe haven currencies, the CHF and the USD, have been edging slowly higher over the last 2 hours as reports of a North Korean nuclear test hit the wires.
AUD/USD is settling below 1.0250 and inching lower pip-by-pip, and EUR/CHF has backed off session highs at 1.2345.
AUD barrier breached at 1.0250
Local banks are reporting another barrier at 1.0200 as well as some substantial bids from a variety of directions. I still think it goes lower but it will be slow going.
USD/CHF: Finally back to entry my levels
I went long at 0.9210 only to watch the market fall another 150 pips before finally returning to my entry level. After USD/JPY broke new highs, EUR/CHF held support, and comments from the SNB, I'm feeling quietly confident that I will do ok on this trade (famous last words!).
Cable looking ominously soft
The GBP certainly has a soft feel to it and the strong rebound in EUR/GBP has given more momentum to the sterling bears. If the USD starts to get some bullish momentum then I feel that the cable could be one of the prime movers. Timing is everything of course but levels below 1.50 are starting to look realistic. Keep an eye on the weekly trend support as a break below there could send the market tumbling.
Japanese standing orders still huge in USD/JPY
Massive selling of USD/JPY by leveraged funds ahead of the G20 on Friday was easily soaked up by Japanese institutions as they try to unwind huge hedge positions.
It seems that we now know what the G20 is likely or unlikely to say so the danger is now back to the topside.
We might still get some 200 pip dips but any such dips will meet with huge bids.
USD/JPY: Should be heavy on approach to 95.00
Dealers are reporting decent sized corporate sell orders starting at 94.65 and don't be surprised if some ACB offers appear ahead of 95.00.
I'm not quite sure what to make of the comments from the US Treasury, seems a bit strange given recent comments from Schaueble et al. Best to sit back and see which comments can actually be relied upon.
AUD/USD: Barrier protection at 1.0250 and 1.0200
Even if the first one gets breached during Asian trade, there is another barrier and asset manager bids near 1.0200, so the grind lower is likely to be slow.
Asian market open
You can click through here and read my full opening comments on FX Street.
Unfortunately many of my Yen levels have been made redundant by the rally post-Treasury comments.
US Treasury comments boost USD/JPY
On one hand we have EZ officials complaining publicly about Japanese policy and now an under-secretary from the US Treasury is reported as saying the exact opposite. He claims that the US fully supports Japanese efforts to boost growth and beat deflation and that they are in regular contact.
USD/JPY has of course accelerated on these comments, taking out recent highs above 94.10.
USD/JPY: Testing recent highs at 94.10
So much for the cheap trade in USD/JPY; minor resistance at 93.70 has been taken out in the usual late-NY stop-loss squeeze and the market is approaching recent highs at 94.10. We can expect more stops above there so unless you're already long, I'd leave this pair alone.
Short-term technicals updated
I've updated the following pairs in the members section and you can also follow via Twitter on Sean_lee_forex. If you need a password to the members, just let me know and I'll send you one.
- USD/JPY: Could be worth a contrarian short ahead of 93.70 with a tight stop.
- EUR/USD: Needs to break 1.3350/1.3430 range for next bias.
- EUR/CHF: Fibo support at 1.2255 looking stronger.
- EUR/GBP: Choppy noise as overbought bull trend retraces and reignites.
- EUR/JPY: Short-term parameters at 124.50/125.50.
EUR: It generally pays to go with the flow
Even though there were plenty of details missing, all of the big Prime Brokers had the same message in early European trade namely that the EUR would strengthen. EUR/USD support held firm and the crosses had a very strong early part of the session led by EUR/GBP but with EUR/JPY and EUR/AUD not far behind.
Oh to have an open window into those books all the time!
Have a good day/evening and I'll catch you tomorrow.
Cable should find some support as EUR/GBP sellers appear
The cross is up 50 pips already today and cable has been hammered down 100 pips but we should see some support start to emerge in the cable if the reported sellers in EUR/GBP ahead of .8530 eventuate.
USD/JPY: Expect plenty of hedge fund offers above 93.35
From what I can gather on the grapevine, hedge funds are looking to sell into this USD/JPY rally and a quick look at the charts suggests that 93.35/50 is the area that might attract some selling interest. There is of course an obvious stop-loss level above 94.25.
Flows and orders updated
- AUD/USD: Barrier protection at 1.0250.
- EUR/CHF: Stop-loss sell orders below 1.2250.
- USD/CAD: Bids .9965/80.
- EUR/GBP: Sell orders .8520/30.
EUR/USD: Might be worth an intraday punt on long side
Not hearing any specifics from the European Prime Broking houses but the general sense I'm getting from the early morning chatter is that the intraday risk is to the topside. I'll let you know if/when I hear anything more exact.
Short-term technical support is pretty clear at 1.3350.
Very little to report from Asian session
- Chinese New Year holiday, with all major financial centres closed except for Sydney.
- Yen gained some ground primarily on back of AUD/JPY selling.
- Market suspects that Japanese officials will ease back on Yen-bearish rhetoric as G20 approaches.
- One of candidates for BOJ Governorship says that easing policy is justified (obviously not listening to market).
- Yen moved back to opening levels and EUR/AUD has been main session mover, up around 50 pips on the day.
- Japan returns tomorrow, Singapore on Wednesday, HK on Thursday and China is closed all week.