Levels to watch for today during Asian FX trade
- USD/JPY: 61.8% retracement of 95.00/75.60 comes in near 87.60 which was the approximate high overnight:
- EUR/USD: Sovereign buyers reported below 1.3140:
- EUR/JPY: Expect more volatility inside broad 113/116 range :
- Cable: Now back below 1.6310 again and bulls will need to reclaim this level:
- AUD/USD: US asset managers reportedly looking to buy dips, no set levels.
EUR/USD: Capped for now below 1.3300 but more gains favoured
Real money and Sovereign players aren't really busy at the moment but from what I'm hearing, both of these important market sectors are net buyers of EUR/USD and are likely to remain so for the near-term at least.
We may be in for some further range trading between 1.3150/1.3300 but I still favour a bullish break sometime soon which will likely target trend highs at 1.3485.
USD steadies but set to remain under pressure
We've seen some decent sized moves today in USD/AXY with USD/KRW down at 16-month lows and the big buck generally slipping across the board with the obvious exception of the Yen. Amongst the significant moves in the majors, cable broke above 1.6300 and AUD looks to have confirmed a short-term base at 1.0350.
I've read an analyst piece from UBS which opines that the USD is set for some decent gains now that the latest funding deadline has been passed but most of the chatter I'm hearing from the hedge fund world seems to be of the opposite tack. The big punters seem more of the view that Asian equities will have a really good year and that being short the USD is a safer play.
Short-term I'm certainly of the view that the USD will struggle but whether this period lasts for a day, a week, or a month, I'm not really sure yet. Hopefully we at least get some badly needed volatility.
USD/JPY technicals: Next resistance at 87.55
The 61.8% retracement of the fall from 94.95 to 75.60 comes in at 87.55 and this level should be respected.
Sorry that I cannot post a chart at the moment due to some technical problems. I'm off-line for the next two hours but will be back for the European opening, which should be fun!
AUD/USD: Book intraday profits and re-load on dips
Unfortunately I didn't take my own advice and buy the dips this morning towards 1.0380, but at least I wasn't short (which has been my tendency in recent months).
If you were clever enough to buy this morning, then I'd be very tempted to book some profit up here near 1.0500. If you can make 100 pips profit every day for the year then you should have a reasonably good year :) I'd suggest buying dips now back towards 1.0400/10.
Cable: Should now find support below 1.6300
Europe will probably walk in and say 'what the hell was the Asian market thinking?'. Then again they are used to trading in deep liquid markets and they should have a go at trading Asian 'holiday' markets sometime.
One of two things will happen. Either the Europeans see today's move in the Yen crosses as an exhaustive spike and they will undo all the move, and then some. Or, they see this as a corroboration of the bull trend in the Yen crosses and they pile in to buy some more.
Technically speaking, the most important move has been the bullish break in cable so risk-reward would suggest buying dips back below 1.6300, with reasonably tight stops below the day's low, looking for a move towards 1.6500 in coming sessions.
GBP/JPY goes crazy as cable stops triggered
The entire planet has known forever that political grandstanding would continue up until the last possible minute and then a deal would get done.
Despite this we are seeing some super-silly moves in very illiquid markets with GBP/JPY now top-of-the-pops. Cable tripped stops above 1.6315 and has finally halted near 1.6385 and USD/JPY is also higher, trading up to 87.20.
This move reeks of panic buying in illiquid markets but there's no point trying to get involved just yet.
NZD/JPY leading the way, up almost 1.5% today
I don't have any access today to interbank NZD dealers but I think its safe to say that liquidity is almost non-existent. NZD/JPY is up over 1.5% from earlier session lows. Congrats to those brave souls who are riding this pair higher but best left alone for the rest of us I think.
US House of Reps to vote on fiscal-cliff bill in 15 minutes
The Senate already passed the bill and it looks like the House will do the same when it votes shortly.
Risk trades are still moving higher in thin trade. You've missed your chance on the AUD/USD, now 85 pips above earlier lows, EUR/JPY has gapped 20/30 pips higher on at least 2 occasions and is now 100 pips above the earlier lows near 114.20, and cable is trading just below the aforementioned resistance.
Buy-the-rumour-sell-the-fact seems like a reasonable play so bears can try fading this rally as soon as the vote is over.
Cable closing in on important resistance level above 1.6300
Cable has topped out near 1.6300/10 on three separate occasions in recent months and we are closing in again on the same level. The Yen crosses are driving movement today in very illiquid markets (Japan and China closed) and fiscal cliff developments are of course the main factor behind sentiment swings. GBP/JPY has gained added momentum after the break above 140.00 and is currently almost 100 pips above earlier session lows.
Asian economic indicators on the improve
- Singapore Q4 GDP +1.8% QoQ, better than the -1.0% expected:
- HSBC South Korean PMI 50.1 in December, up from 48.2 in November.
EUR/JPY chopping around on fiscal cliff headlines
Not many traders playing today and markets usually stay quiet until the start of the second week in January. Japan and China are closed today which obviously takes a lot of potential liquidity out of the market.
EUR/JPY has had a 50 pip range, 114.28/78, with sentiment being purely driven by fiscal cliff headlines.
I'd suggest that a wide 112.50/116.70 range should cover most eventualities for the next few days.
Useful AUD facts (or not so useful!): AUD/USD headed for 1.07 in January!
Many thanks to the mine of information, David Scutt at Arab Bank, for some useful A$ facts to open proceedings for 2013:
- The AUD has risen 43% of the time in January since it floated in 1983, for an average monthly gain of 3.17%:
- When it's fallen in January, the average loss has been 2.24%:
- Australian stocks have enjoyed a positive January on 71.4% of times following on from a Santa rally:
- Over the last 20 January's, stocks have risen on 12 occasions by an average of 2.56%:
- Side-note; the market is still pricing in a 63% chance of a rate cut next month.
Statistics would therefore suggest that we get a risk-on move this month and we may see the AUD/USD rise by over 3% which would take us close to 1.0700.
AUD/USD session outlook: Risk-reward favours buying dips
With Japan and China closed today, it should be relatively quiet in Asia, with only potential fiscal-cliff headlines to create volatility.
AUD/USD looks to have formed a short-term base near 1.0350 so risk-reward would suggest buying dips towards there with a tight stop below 1.0340 as a sensible strategy. This pair is in range-trading mode so don't be too optimistic on the topside, an 80-100 pip profit target seems reasonable.
Welcome to 2013: Yen weak but other majors in familiar ranges
The fiscal cliff has been scaled, sort of, but unfortunately the only solution to every problem is to increase debt to some degree. The Japanese have been out-played in recent years in the 'race to the bottom' but they are now making a fighting comeback and its becoming increasingly difficult to pick the best out of a bad lot when it comes to the major currencies.
Best then to settle back into trading mode and take what the market gives us. Look for short-term emerging trends, buy dips and sell rallies, only increase risk when you are well 'in the money', and have some fun doing so.
Trade of the Year for me: Don't have one yet I'm afraid.
Good luck for 2013 and may it be a healthy and prosperous one for you all.
AUD/USD: Mild short-covering takes it back above 1.0400
The failure to post fresh short-term lows below 1.0350 is forcing the bears' hand and we are seeing some mild short-covering emerge, with AUD/USD now back above 1.0400. Further range trading is anticipated here in coming sessions, so maybe the best risk-reward trade is to buy dips with a stop below 1.0340, in anticipation of another try above 1.0500?
JPY crosses slightly higher as fiscal cliff decision delayed
There is still reportedly some significant distance between the two main US political parties and we won't be getting any decisions today. Talks will recommence tomorrow morning US time.
Looks like the intraday interbank market was positioned slightly short of the Yen crosses and we've seen a modest jump over the last 20 minutes.
I'm guessing it will be quiet from here.
EUR/USD: 1.3150/1.3300 range still in control
The market tried the lower end of this range on Friday when heavy EUR/JPY profit taking emerged only for Sovereign buyers to emerge below 1.3175. I'd expect more of the same for today, although a lot will depend on what emanates from Washington. I would try to avoid buying or selling breaks in these markets, rather waiting for a break to occur and then trading retracements.
A 'no deal' decision from the US would likely lead to some heavy EUR/JPY selling but conversely will also lead to heavy EUR demand particularly from fixed income players.