AUD/JPY: Might be worth a quick short at 94.10?
The Apple crumble (pardon me, couldn't help myself :) ), the 10% fall in AAPL after the revenue forecast certainly affected risk sentiment this morning and AUD/JPY is usually a good pair to trade if you have a view on short-term sentiment swings. The pair has bounced after the Chinese data but it looks like the bears could have a good entry level at 94.10 which is certainly worth considering if you feel that more equity market weakness is around the corner?
I've posted the AUD/JPY chart in the members section which shows the 61.8% level I'm looking at.
(Edit: Looks like we missed our chance there, with 94.02 the high; money for old rope selling that silly rally!).
JPY crosses making new session highs
The market got a bit bearish on the Yen crosses after the Apple result but those who forgot to take their profit will now be kicking themselves as all of the losses have now been undone. The reason for the buying is the relatively strong Chinese PMI data but that's only a reason for intraday short-covering, not for going long.
The Yen crosses will stay range-bound for the rest of the week, of that I'm pretty sure.
Off to webinar now, catch you in a little while.
AUD/JPY pops up after Chinese data
The HSBC China manufacturing PMI came in at 51.9, slightly better than expected.
AUD/JPY is usually seen as the main risk-driven pair in Asian trade. It's up to mid-session levels near 93.25 after sliding lower earlier this morning on poor post-Apple equity market sentiment.
FX Street webinar this afternoon
I'll be doing part II of the webinar on professional opportunities in the FX market. Today I'll be dwelling more on the top end of the market, where to get jobs in FX and how to set up your own hedge fund.
Here's the link if you fancy joining in.
Yen market ignoring poor trade data
The slump in exports and the increased trade deficit is being largely ignored and the market is following risk-sentiment leads from the equity markets.
Next up in terms of risk events is the HSBC China manufacturing PMI data.
Apple shares still getting spanked; this will effect Asian FX pairs like JPY/KRW
Apple shares are 10% lower in after-hours trade and this will effect risk sentiment in Asian trade. Those who like the exotic crosses could consider buying JPY/KRW? The JPY will rally as risk sentiment turns and the Kospi could be hit hard thereby hurting the KRW?
Apple shares lower, could affect risk sentiment during Asian trade
The lower than expected revenue forecast has sent Apple shares almost 5% lower in after hours trade. This might also have an impact on tech-heavy Asian stocks which in turn will undermine risk sentiment.
The obvious trade is therefore to sell AUD/JPY but I cannot see any decent entry levels near current prices so best we wait a while and see how markets develop.
Short-term trade ideas in EUR/CHF and USD/JPY
- EUR/CHF: Play a 1.2330/1.2450 short-term range with a bullish bias. Buy deeper dips to 1.2270 looking for a continuation of the bull trend. Above all be patient and wait for the right levels. Many traders have bought in at the wrong levels above 1.24 and I expect plenty of choppiness before the next leg begins:
- USD/JPY: Risk-reward would seem to favour a sell-rally strategy with stops above the recent 90.20 highs. Support is very firm near 87.80 but I suspect we will get a proper test of this level quite soon. Selling near 89.50/60 makes a lot of sense from a risk management perspective. Remember the market is still very short of Yen and we are still missing the timeline from Abe/BOJ as to when they hope to implement their major easing programs.
I've updated the shorter-term technicals in the members section. Good luck today.
GBP/JPY: Testing recent hourly lows near 139.40
Have a look at your 2-hour charts (or if you're too lazy there's one in the members section) and you will see that 139.40 was a previous high which then turned into strong support. We are trading close to there again so we can expect bids ahead of there and stops below.
Struggling to find any rhythm now in market
It's hard to be in sync with the market all the time and I had a real good run for a couple of weeks but now I'm struggling to find any rhythm. I'm glad I've booked most of my profit and will now await the next flash of inspiration, presuming ones coming of course :)
EUR/CHF is still my favourite trade and if EUR/JPY keeps falling, then I may get to buy some close to my preferred level at 1.2270. If prices bounce off 1.2340 again then I may try buying there.
I'm sort of tempted to try buying cable but it's probably too risky at the moment so I'll hold off.
AUD: Chances of a February rate cut seen at around 40%
The market is pricing in a modest increase in the chances of a February rate cut by the RBA after this morning's CPI came in very slightly below expectations. With global sentiment definitely on the improve, I see very little chance of any cut this time around.
Cable: Hanging on grimly to the 1.58 handle
As I've said a few times recently, cable is extremely tricky to trade at the moment. There have been a lot of flows into EUR/GBP which has been the main source of bearish pressure on the pound but in recent days, there has been talk of some very large flows in straight cable.
Interestingly enough, some of these flows were reportedly cable buyers, and it would seem that there are some eager sellers hanging around and waiting for big buy orders to emerge so that they can offload what they need. This is quite a bearish sign in my view.
Would I sell here at 1.5825? No way! I've been trading cable since 1986 and it often looks it's worst just before it rallies so I'm not chasing it lower. I've booked 60% of profits on my EUR/GBP longs and will wait impatiently for a 150 pip dip so that I can reinstate for the next leg higher.
EUR/JPY: Bids reported nearby
Hearing from the interbank market that there are some bids in EUR/JPY at 117.65 which are providing a base for now.
Yen crosses likely to have a quiet session
I can't say I have done any exhaustive research on the phenomenon, but it seems to me that markets tend to go quiet for a session or two after a big build-up to a major risk event. This is what I expect to happen to the Yen crosses, that we have a few sessions of very quiet trade especially here in Asia.
The two major conflicting factors are risk sentiment, which is positive and therefore bullish on Yen crosses, and positioning, which is still heavily short of Yen and therefore should keep rallies capped in all the major Yen pairs. If they net each other out, then that strengthens the case for some fairly quiet rangey markets (famous last words :) ).
I'm away for a few hours, catch you later.
AUD: Still stuck in range-trading mode
The market is not expecting a rate cut from the RBA next month, largely ignoring poor domestic economic data and concentrating on strong Chinese performance and rising commodity prices. This expectation will only change if today's CPI numbers come in a long way below expectations.
AUD/USD is capped by heavy sell orders near 1.0600 but there are still plenty of stop directly above 1.0605, and both real money and Sovereign bids are expected below 1.0500. AUD/JPY is consolidating below 95.00 and should find support at 92.50. EUR/AUD failed again to utilise its recent bullish momentum for a move above 1.2800 and has settled back near familiar levels. AUD/NZD is also stuck near 1.2550 and its hard to see that cross moving too far.
In other words, mild bullish bias remains overall for the AUD in line with positive global sentiment but progress is very slow indeed.
Short-term technical outlook updated
I've updated the outlooks for EUR/JPY, USD/JPY, EUR/CHF and EUR/USD in the members section.
In short, looks like bullish consolidation in all 4 pairs so staying in buy-dip mode.