Japanese Government urging public pension fund to buy more foreign assets
More headlines running through the market grapevine. Surely they'd be better off supporting local industry? Next thing the government will be recommending that housewives fly from Tokyo to Australia or San Francisco to do the weekly supermarket shop!
Yen crosses ease back off earlier highs
EUR/JPY topped out near 118.60 during this morning's crazy period but has now settled back 117.90, still sitting above the previous weekly highs at 117.75. AUD/JPY has also settled back near 94.00 after its early morning foray to 94.50.
Orders wise, there is talk of large EUR/USD stops above 1.3325 and they might get targeted later during European or NY trade.
USD/JPY: Short-term support now at 88.60
The first break higher this morning to 88.80 only managed to pullback as far as 88.60 before rallying further to 89.35. I'd play this 88.60/89.35 range in the short-term.
Abe and the Yen: This better be more than just verbal intervention!
USD/JPY has now risen 10 big figures since Mr Abe, whilst still in opposition, signposted his intentions to spend Japan's way out of deflation. All of this chat obviously depends on the BOJ playing ball, and as yet we haven't seen any major new policies. In essence, the move from 79 to 89 has been verbal intervention. If the BOJ seems to be showing even the slightest unwillingness to join in the party, then the JPY move will be unwound very sharply.
AUD/USD: Solid sell orders near 1.0600
The barrier at 1.0600 is holding firm and there are plenty of other sell orders near there as well. Bank traders have their stops above 1.0605, a sure sign that there are heavy sell orders just below.
USD/JPY near base of monthly Ichimoku
Jim from FXCharts tells me that the base of the monthly Ichimoku cloud also comes in around 89.05 (edit 89.15 and this is first touch since January 2008 when USD/JPY broke below 111.40).
EUR/JPY consolidating in nervous trade
The barrier at 89.00 in USD/JPY proved to be fairly small and EUR/JPY has broken above 118.00. The market is overall still a little short of EUR so this pair may still have some legs left in it. I can't get bullish USD/JPY at these levels but perhaps further gains in the cross will come mainly through the EUR/USD component?
EUR/JPY: Trading above double-weekly high at 117.75; clean break targets 123+
As we saw in cable a few weeks ago, be wary of technical breaks in thin markets! Nevertheless, a clean and confirmed break above 117.75 opens up some more fresh air for a move to 123.00 (trend highs and huge Fibo, 38.2% 170/94).
USD/JPY: Time to try a risky short play
Nasty 50 pip rally in thin markets over the last 30 minutes with a barrier at 89.00 and Fibo resistance at 88.95 coming swiftly into view. My small sell order at 88.75 was triggered, let's see what happens. Looks like it might be an interesting day!
USD/JPY: Barrier breached in thin late NY trade
Recent highs and a barrier at 88.50 have all been breached and stops have been triggered above 88.60 in thin trading conditions.
There's more barriers reported at 88.75 and 89.00.
Day ahead in the FX market, Friday January 11th
- Japanese trade data at 23:50 GMT:
- Chinese CPI at 01:30 GMT:
- EUR/JPY, double-weekly high at 117.75:
- AUD/USD: Barrier reported 1.0600 with stops above 1.0605:
- EUR/USD: Targeting recent highs at 1.3310.
EUR rallies: EZ debt markets still the key
The market has been avoiding the EZ debt markets like the plague in recent years but a lot of information from the fixed income market would suggest that this tide is turning. The spot FX market remains committed to a bearish EUR stance but this flies in the face of actual real money flows and hence the short-covering rally once the ECB stayed steady.
I prefer to stay long EUR on the crosses as I'm still not sure what the USD will do in the medium term. EUR/USD had been stuck in range-trading mode for months and it will take a change in trader sentiment to move it onto a higher plane.
EUR: Market gearing up for big move in coming weeks
There are a lot of EUR traders in the market who have been sitting patiently waiting for today's ECB meeting to pass before deciding on their next play and, at least in my trader fraternity, the vast majority of traders seem to have a bearish bias.
I find this somewhat surprising given that most of the big banks are pointing to heavy pro-EUR flows but even today I read one piece from a big British bank which said that flows remain net EUR positive yet they see EUR/USD at 1.22 by the end of 2013. Something doesn't seem to add up there.
Whatever happens, I think traders will start taking more aggressive positions starting from next week.
AUD/JPY keeps on moving higher
I'm still convinced this is a silly 'start of year' move with the Yen leg driven by what is in essence verbal intervention and the AUD leg moving higher on ephemeral 'risk-on' sentiment which is well and good until it turns. Nevertheless, the market is always right, so I'll stay out of the way until the move gets ultra silly!
The levels to watch for are 88.50 in USD/JPY, where optionality is touted, and 1.0590 in AUD/USD, where stops are seen; both levels should prove magnetic. This should keep the market busy pre-ECB.
NZD/USD struggling to keep up with the AUD
Plenty of talk about Sovereign, custodial and corporate buyers in the NZD/USD as well as reports of stops above .8410, so why is it struggling to keep pace with the AUD? And why haven't those stops been triggered already? No answers, only questions!
I'm off line for a couple of hours but will be back for the European open.