EUR/CHF: Option players main buyers today
The break above 1.2190 saw increased demand for EUR/CHF from option players and it gapped quickly to 1.2230 in the usual illiquid Asian Swissy market.
Swiss players will often undo whatever happened during Asian trade, treating movements here like an anomaly, but I wouldn't be overly confident that this will happen today as the entire market has turned a few degrees on the EUR. To say the market is very bullish would be an exaggeration, but it's not bearish anymore that's for sure. Plus, positioning is at best flat on the EUR so there's a long way to go until long positions start showing up in any size.
Buying dips here definitely my preferred play.
Brief overview of Asian trade
- Yen weakened again after comments from Japanese PM Abe that BOJ must attain 2% inflation target:
- EUR/JPY opened slightly above its 119.00 closing level, gapped quickly from 119.20 to 119.70, and slowly moved to test 120.00:
- AUD triggered trailing stops below 1.0525 after more poor domestic economic data, this time job ads and house financing:
- Chinese stocks rise by over 2.5% after a down-day on Friday, Nikkei closed for public holiday:
- Fed's Evans comfortable with current policy, should create more jobs, will exit QE if successful:
- China FX regulator looking at other ways of using FX reserves.
EUR/JPY: Decent-sized selling interest on interbank platforms
We talked this morning about 120 acting like a magnet and that's exactly what has happened, with highs so far at 119.98. Interbank dealers say that there are plenty of sellers parked near 120.00 on the interbank platforms but the amounts are relatively 'normal'.
EUR/USD: Consolidating session gains just below 1.3400
Fed's Evans is on the newswires at the moment, is comfortable with current policy, feels employment could improve substantially, could start winding down QE if jobs growth is strong.
Where's the USD going to go if EUR crosses take off higher?
The EUR looks very bid on the crosses but what I haven't quite figured out is whether pairs like EUR/GBP will benefit most from a higher EUR/USD or a lower GBP/USD? Or will be be the classic 'scissors' cross move with one going up and the other going down? I'm certainly not discounting the latter, as that's what normally happens when we see big moves in the cross pairs.
If EUR/GBP reaches .9000 again in coming months, will it be a) EUR/USD mid-range at 1.3000 and cable much lower at 1.45? b) Cable mid-range at 1.60 and EUR/USD much higher at 1.45? or c) EUR/USD at upper end of range near 1.38 and cable at lower end of range near 1.53?
As for EUR/CHF, if it reaches 1.30 again will it be a) EUR/USD at 1.30 and USD/CHF at 1.00? b) EUR/USD 1.45 and USD/CHF at .90 or c) EUR/USD 1.38 and USD/CHF .94?
I believe the EUR crosses will rise towards the said levels but I'm really not sure how they will get there.
AUD/USD: Stops triggered below 1.0525
Pretty hard to be very confident about being long AUD in the face of poor domestic economic data and trailing stops have been triggered below 1.0525 in AUD/USD.
Corporate bids are reported between 1.0480/90, but nothing substantial, just the usual market demand.
Australian job ads -3.8% MoM, housing finance -0.5% MoM
Another round of very poor domestic economic data out of Australia, coming on the back of last weeks retail sales and trade data. Sooner or later this will start to have an impact on the AUD, at least on the crosses.
TD-MI Australian inflation gauge +0.4% MoM, +2.4% YoY
Quite a significant rise in this private measure of Australian inflation and the prospects of a February rate cut are quickly receding.
The AUD/USD market just failed in its attempts to trigger stops just below 1.0525 but there's been little or no bounce so the stops are by no means safe yet.
Liquidity very poor in early FX market trade
Dealers aren't too enthusiastic this morning, complaining to anyone who will listen (only their mother's! :) ) about the poor liquidity and the constant gaps, both big and small. EUR/JPY is the main culprit but be careful also in the AUD, with stops reported close-by below 1.0525.
EUR/JPY: Here we go again with another gap higher
We are getting used to these gaps now, and the market has just gapped from 119.20 to 119.70 in a very short space of time. Some talk that a barrier at 89.50 in USD/JPY was knocked out but no confirmation there at the moment.
EUR/CHF: More gains look likely, target 1.2650
I'm biased on this pair, already long with the 'no-brainer' trade of the year (stop-loss below the SNB intervention level). The fundamental driver here is the change in sentiment towards the EUR and the EZ debt market in particular. The messengers of doom for the single currency would seem to have gotten their timing wrong and now we are seeing the EUR even being mentioned as a 'safe-haven' during Abemonics and the fiscal cliff.
The 38.2% retracement of the entire collapse from 1.68 to 1.00 comes in near 1.2650 and that should be the obvious technical target once the pair gets moving again after 12 months of stagnation.
EUR slightly higher in early interbank trade
- Fairly quiet start to the interbank trading week with EUR/JPY up at 119.15 from a close on Friday at 119.00:
- Japanese markets are closed today which will reduce volatility during the Asian session:
- Economic calendar is quite bare, with only minor Australian inflation data:
- Volatility likely to come from flows as market contemplates a stronger EUR to start 2013.
Bullish EUR party starting to pick up steam
EUR/GBP, EUR/CHF and EUR/AUD have started to join EUR/JPY on the bull run and whilst the latter has already come a long way, the other crosses look like they have a lot of catching up to do.
I'm still running long positions in the EUR against the GBP and the CHF but unfortunately I got stopped out of EUR/AUD last week right near the base. It's hard to get them all right.
On the day, we can expect 120 in EUR/JPY to act like a magnet and in the other crosses we need to watch out and see if the speculative FX market now starts turning bullish. If it does, we could be in for 3 or 4 weeks of gains as positions start to build.
EUR/USD pops in early Europe as dealers worry about stops higher up
European dealers undoubtedly sat down and looked at their order boards, to see a sea of stops above 1.3325 in particular; the natural reaction of course being to get long first and then start thinking about it. I think that's what happened with EUR/USD 20 pips higher in early European trade.
Quick overview of Asian trade
- USD/JPY triggered stops above the 88.50 barrier in very thin, late NY trade:
- Further gains in twilight trade took it to 89.35 before profit-taking emerged in early Tokyo:
- EUR/JPY broke above a twice-weekly high at 117.75 and has consolidated these gains:
- Japan's PM Abe again vociferous about spending big to beat deflation:
- AUD/USD was unable to break through a barrier at 1.0600 but hasn't fallen far either:
- Nikkei gained 1.5% on weaker Yen but other Asian indices were slightly lower:
- Gold $1675/oz:
- EUR/USD was surprisingly quiet in a 30 pip range:
- Chinese CPI higher than expected at 2.5% YoY:
- No change to South Korean interest rate policy.
EUR/GBP technical up-date
You can see my longer-term technical analysis in the members section, and I remain bullish here for a minimum move to .8500 and possibly .8800. Moves into EZ debt out of UK Gilts are likely to be the main long-term flow driver. Based on recent history, the current rally may struggle to get over .8275 whilst the orderly upward swings take it slowly higher, but the 55-day MA now seems to be the obvious entry level.
I will only add to existing longs when bullish momentum starts intensifying.
Yen steady in quiet after lunch trade
Japanese traders are back at their desks after a badly needed 90 minute lunch break and trade is staying fairly quiet. USD/JPY is quiet near 89.00, back below the monthly Ichimoku base at 89.15 but remaining well-bid nonetheless. AUD/USD has been well capped at 1.0600 but the dips has been shallow, and the EUR/USD has had a surprisingly quiet 30 pip range so far for the session.