EUR/CHF: Stop in place below 1.2240
I reinstated my long trade yesterday at the 61.8% retracement level and I have now placed a trailing stop below 1.2240. The China/Japan tensions might lead to some risk-aversion and CHF buying, that's why I'm using the stop-loss strategy here.
Dangerous escalation in tension between China/Japan
This is one story which might have an increasing impact on the financial markets. Tensions in the East-China Sea escalated overnight with Chinese warships reportedly pointing missile radars at Japanese military targets, and Japanese officials describing the situation as dangerous.
What to trade? Be short risk trades but preferably not buying Yen is logical in my opinion. So selling AUD/USD or AUD/CHF would be the logical trade if these geo-political rumblings get louder.
USD/JPY: Modest corporate offers seen 93.60/65
USD/JPY has had another mild spike higher but its presently stalling ahead of corporate sell orders at 93.60/65.
The next big technical target is a pair of weekly highs near 94.90.
USD/JPY: Break and close above previous highs yet another bullish sign
Yesterday's dip was very short-lived indeed, definitely the sign of an ultra-strong trend. Add that to the break (and likely close) above previous highs at 93.15 and you have plenty of reasons to be bullish.
I've missed most of this move so I'm leaving it alone.
EUR/GBP: Has scope for another 600 pips rise
EUR/USD is trading bullishly and buying any deep dips seems like a very logical play. It's certainly possible that we could get dips back to 1.3350 but a move to 1.4200 in coming weeks/months is starting to feel inevitable.
Cable on the other hand is trading bearishly and another support level was taken out overnight. It's still in an overall sideways trend on the weekly chart but certainly has scope for a fall towards 1.5200.
If both of these events were to happen simultaneously, which seems reasonably likely given the current trend, then the EUR/GBP will be trading near .9350. It might well be the 'trade of the year' to sell at that level, but it does look like we will get there.
EUR crosses recover all of previous day's losses
EUR/JPY is re-testing recent highs at 127.00 and EUR/CHF has confirmed technical support at 1.2260 (charts updated in members). I still think the events of two nights ago show that the EUR bull move is running out of steam and that we will get some prolonged periods of consolidation. Nevertheless, all EUR dips are currently buying opportunities as long as the bulls are in overall control.
EUR/JPY will likely attract the bears and contrarians today as we near recent highs but on the flip side of that, there will undoubtedly be stops waiting above 127.10. EUR/AUD will be the other pair to watch out for later during Asian trade.
Australian retail sales is the only notable release on the economic calendar.
EUR/USD survives first push lower in European trade
EUR/USD got to a low around 1.3460 but is starting to feel a bit overstretched and the dip-buyers have jumped in. We still are in an overall EUR bull trend so be careful about selling too low.
EUR/CHF sitting on Fibo support
EUR/CHF is currently sitting at 1.2270, which is the 61.8% retracement of the 1.2070/1.2565 up-move. We can expect stops to be sitting somewhere just below these levels but I have no exact info of such.
RBA: Chances of March rate cut seen at around 55%
Looks like the RBA isn't done yet with its easing cycle and the next question is when will they cut. The market is putting it at close to 50:50 for a March cut.
The FX market has been pretty uninspiring today so we will have to wait a couple of hours and see what Europe thinks about the EUR fall in late NY trade.
AUD starting to get hit as flows intensify
AUD/USD steadied around 1.0420 for a few minutes after the RBA but the selling pressure is now intensifying and the squawk boxes getting louder. Fresh lows have just been seen near 1.0400 and the danger is to the downside with the market sitting quite long.
AUD dips after slightly more dovish RBA statement
No surprise to see rates stay unchanged but expectations of a more hawkish tone were misplaced. AUD/USD has dipped back to 1.0420.
EUR/JPY back to opening levels after promising Chinese data
Thankfully nobody ever questions the tenuous links between the EUR/JPY and Chinese economic data. We all just accept that good data means "risk on" and therefore we should be buying the Yen crosses.
The latest HSBC China services PMI showed a solid improvement from last month, 54.0 from 51.7, and this has helped EUR/JPY back to opening levels at 124.70.
AUD/USD stops taken out above 1.0450
Dealers will use economic data as the excuse but no-one will remember the name or number tomorrow. The stops we mentioned above 1.0450 are now done.
All eyes on the RBA in 3 hours. The market almost universally expects "no change" with focus on the statement for perhaps a less dovish tone.
Short-term risk is to the topside according to most interbank dealers but watch out for those Hedge Fund offers to appear (no set levels at moment).
NZD/USD: And speaking of exhaustive moves!
If the move over 1.3700 on Friday was symptomatic of an exhaustive move in the EUR/USD, then how likely is it that yesterday's move to .8500 in NZD/USD was of a similar ilk?
It's now against my religion to trade the NZD so I will leave that to braver souls, but surely risk-reward would suggest a small short position with a stop above .8500 might just bear fruit?
Or am I stupidly applying logic to the Kiwi? :)
AUD market sitting on very long speculative positions
I don't know what will eventually turn the tide against the AUD but I strongly believe that this present range trade in AUD/USD will eventually break lower and that we will see levels near 95 cents again very soon.
I'm just reading a report from a major bank that has analysed overall speculative positioning in the AUD and they suggest that the recent hedge fund selling is merely a drip in the ocean as they try to exit longs taken over the last 4-6 months. With real-money players also sitting on stockpiles of AUD, the fall could be very hard if they are forced into selling. Reserve managers and Sovereigns have been consistent buyers but if something happens to make them pull their bids, and force the others into stop-loss selling, then the AUD will fall 7 or 8 big figures in a week.
As we know, timing is everything in the FX market and I'm still grumpy about being stopped out of my EUR/AUD 20 pips from the bottom and immediately preceding an 800 pip rally :( But I think this is one trade staring us in the face with all information pointing firmly in one direction.
How to trade this? Play the 1.03/1.06 range with a bearish bias, hopefully building a strong position, and if the free-fall begins, shut your eyes and jump on for the ride.
EUR/JPY: Another 60 pips lower in early Asian trade
The low this morning has been around 124.20 and there would seem to be scope for a much deeper retracement. I see initial support at 123.15 but really strong support levels don't come in until 121. The one thing that seems guaranteed is volatility.
I've updated most of the short-term technicals in the members section.