Risk pairs slightly higher in steady start to FX trading week
- EUR/JPY is trading at 115.35 in early interbank trade:
- Yen weakness remains the stand-out factor at play in the FX market:
- Japanese weekend press again full of articles/reports on how new PM Abe will weaken Yen and beat deflation:
- Other major pairs still range-bound overall:
- Nothing of note today on economic calendar:
AUD/USD: Still like buy-dips trade with stop below 1.0350
Last Wednesdays move off the 1.0380 lows looks like it might get fully retraced but I still like the idea of buying that dip with a stop below 1.0340. Risk sentiment remains positive so the AUD should benefit overall.
I'm finishing early for the week and will be back in Sydney (and back to normal) from Monday.
Have a great weekend and good luck to those playing the NFP lottery.
China services PMI falls slightly
The latest HSBC China services PMI fell slightly to 51.7 from 52.1 last month. Risk trades aren't paying much attention with the market focussing more on the ability of USD/JPY to maintain today's gains.
EUR/USD not showing much inclination to bounce
EUR/USD is hanging around 1.3030 and not showing much inclination to bounce. I think we've become so acclimatized to range trading markets over the last 6 months that it has become difficult to get onto trends if when they start.
Overall I still like the EUR especially on the crosses and if EUR CHF can follow the example of EUR/JPY then we should be looking for buying opportunities in EUR/USD.
Switzerlands oldest private bank forced to close
The news that Wegelin and Co has been forced to close due to problems with their treatment of US clients. This might have some implications for CHF sentiment. I'm still running a long EUR/CHF trade since before Christmas with an obvious stop-loss level below 1.2000.
Nikkei +3%, USD/JPY makes new highs
The USD remains pretty well bid in Asia though I'm still not quite sure why the market is so bulled up on the greenback. USD/JPY has breached technical resistance at 87.60 but as we saw with cable on Wednesday, there can be plenty of false breaks at this time of year.
USD/JPY: Getting close to resistance level at 87.60
The 61.8% retracement of 94.90/75.60 comes in at 87.60 and if this level holds then bears can consider a contrarian short play or bulls will start booking profit ahead of tonight's NFP.
China and Japan back today
Regional sharemarkets should get another boost today as China and Japan return and start playing catch-up. Most of the economic news and forecasts surrounding Asia has been quite positive so perhaps 2013 could be Asia's year (again).
HSBC China services PMI comes out at 01:45 PMI and the market will be looking for a slight improvement from 52.1 last time.
By the way, hope you all bought iron ore on September 5th last year as the price rose to almost $150 last night, a mere 73% rise in 4 months!
Friday January 4th: No obvious trends yet to emerge
Since the temporary fiscal cliff solution was agreed upon, EUR/USD has gone from 1.3175 to 1.3300 and back to 1.3050, cable has had a similar rollercoaster making new trend highs at 1.6380 before crashing back to 1.6100, USD/JPY has been fairly steady just above 87.00 and the AUD/USD has rallied from 1.0380 to 1.0520 and held onto most of these gains.
What to make of all of this? Nothing yet, it's the first week of January and trends are unlikely to start now. Risk is likely to stay 'on' for a few weeks more so that should benefit the AUD overall; the necessity of buying EUR as a safe haven has passed for now so it may stay softish; the JPY market is still very short so the MOF and BOJ will need to make some aggressive moves very soon in order to keep the bearish Yen momentum on track.
Last day of the holidays today, and back to normal from Monday.
Updates on important levels and ranges
- EUR/JPY: Looks like a broad 113/116 range in coming sessions so patience required:
- USD/JPY: Technical resistance at 87.60 (61.8% 94.90/75.60):
- Cable: Short-term technical support near 1.6190/00 (61.8% retracement and prior highs):
- AUD/USD; bids and offers at 1.0455/60 and 1.0540/45 respectively:
- EUR/USD, no reports of any significant Sovereign activity.
EUR/JPY longs booking profits ahead of NFP tomorrow
EUR remains under pressure in fairly illiquid conditions and there have as yet been no reports of any Sovereign buyers in EUR/USD. EUR/JPY profit taking is being given as the main reason behind the EUR selling.
Cable support near 1.6200 has held so far and I think this might be an important level to watch.
All quiet in Asian markets
Should stay pretty quiet from now until the European open, and in fact we may have a few quiet sessions from now until the NFP tomorrow evening.
I'm not hearing anything of interest on the grapevine and the next event risk is EU employment data in early European trade.
China official non-manufacturing PMI improves slightly to 56.1
Recent economic data out of Asia has been reasonably promising which would explain the seeming bias from hedge funds to buy into Asian stocks for 2013.
Risk trades are nonetheless a little lower in early Asia, which is perhaps a reaction to the over-exuberance in the opposite direction yesterday. EUR/JPY is 30 pips lower from the NY close which is no great surprise as risk-reward would seem to favour being short on the 115 handle (113/116 range?).
Cable: Prefer to buy dips after bullish break yesterday
We do need to be careful as we often get false breaks in thin holiday markets but for now I'm presuming that the move above 1.6310 was a portent of things to come. I'm thinking that previous hourly highs at 1.6200 are now the retracement levels to watch and if they can hold, then I will likely turn from small short to small long in cable.
That would leave me running a decent-sized long EUR/USD position rather than a variety of smaller long EUR cross trades. Once more its a matter of probing and probing until hopefully at some stage ending up with a good trade.
USD/JPY: Still no sign of a top forming
Very little pullback from yesterday's highs in USD/JPY and option players are still noted buyers as they undergo major restructures. Technical resistance at 87.55/60 (61.8% of 94.90/75.60) should encourage some profit taking but overall the bull-trend seems to be in complete control.
(If an hourly high forms near 87.60 then I will try a quick contrarian short with a tight 40 pip stop).
EUR session outlook
EUR/USD rose sharply yesterday in Asia on at times 'silly' EUR/JPY price action and then fell back after rather poor PMI data out of Europe. If we've learned anything over the course of the EZ debt crisis, it's that we cannot trade EUR off fundamentals!
EUR/JPY will again be the key and I would not be surprised to see a wide 113/116 range over the next two days. Risk-reward would therefore seem to suggest that selling rallies from current levels at 115.10 may prove to be a more profitable play?
In EUR/USD, Sovereign players are reportedly on the bid below 1.3150 but we know neither the levels nor the amounts so I wouldn't base any strategies off this information. What we can say is that the recent 1.3150/1.3300 range has been very solid so best we continue to play this until something changes.
AUD/USD session outlook: Play edges of 1.0460/1.0540
The main factor to watch for here in coming weeks is the influx of US cash into the Australian share-market, with hedge funds already declaring quite aggressive strategies in this regard for 2013. This should give the AUD a bid tone, for this month at least, but with the AUD market sitting quite long already at just below 'extreme' levels, we need to pick our entry levels carefully.
Sell orders were reported yesterday at 1.0535/45 so I'd use this level as my topside pivot and I'm guessing that support should start to emerge at 1.0455/65.
Of course much will depend on what happens in AUD/JPY and if it goes on another big tear in either direction then it will drag AUD/USD along with it.
Liquidity to stay poor for next two days
We can expect more choppy illiquid trade for the next two days although the market is returning to almost full-strength today (Japan still closed).
My New Year's resolutions are firstly, to try not slumping in my chair all the time, and secondly to try and exhibit some patience and wait for my levels to be reached; both of which are much harder than they sound :(
The trades I favour today are buying dips in cable (anything near 1.6200) and/or trying to pick a top in USD/JPY if 87.60 is tested and holds again but I'll go into these in more details in next few hours.