AUD/USD: Selling rallies preferred intraday
The short-term downtrend is in control for now and with the overall market reportedly still long at significant levels, selling any intraday rallies looks like the sensible play. Gold remains under pressure as well and this also affects AUD sentiment.
Ideally I would suggest selling into a previous consolidation band between 1.0460/90 but the steepness of the downtrend suggests that these levels might be difficult to achieve. 1.0435/40 is the first resistance level below there, so maybe bears can dip their paws in the honey there!
Sovereign reserve manager buying interest is expected from 1.0300 through 1.0260.
Sounds like we should be playing the edges of 1.0260/1.0460 over coming sessions.
USD/JPY holding firm above 85.50
It will be interesting to see what the market does today in USD/JPY; the pair has broken marginally above a previous daily high at 85.55 and if it can consolidate these gains, then the next major technical target is a 61.8% retracement (95.00/75.50) which comes in at 87.55.
The professional market is extremely long of USD/JPY but as yet there seems to be no hurry to try and book profits so unless something happens to rattle their cage, the bulls are likely to hang on for a very profitable ride.
AUD/USD: All about stop-loss orders over holiday period
As I mentioned just before the holiday period began, dealers had been eyeing size-able stops below 1.0380 and it was really only a matter of time before they were to get done. The AUD is likely to remain dominated by order-levels until news starts flowing again early next week (although the fiscal cliff still remains the big risk event).
The latest interbank reports show buying levels are solid 1.0300 through 1.0260 and they should hold over the next week, barring of course any massive risk aversion.
It should also be mentioned that the market is still long of the AUD, especially according to Prime Broker reports, so for now at least the risk remains to the downside.
EUR looking sprightly on the crosses
The more time I've spent thinking about the EUR over the last few days, the more convinced I've become that the EUR crosses are set for some serious gains early in 2013. I'll share my fundamental, technical and market analysis over the next few days and it's definitely the latter (market analysis) which is shaping my opinion the most. I'm still running a long EUR/GBP trade (through the legs) and I'm also long of EUR/CHF (mainly as Gold is weakening). I unfortunately got stopped out of the AUD side of my EUR/AUD trade when I allowed myself to be distracted by an irrational EUR/JPY trade but let's forget about that stupid decision :(
EUR/USD still looks prone to deeper short-term dips, and much as always will depend on what happens in EUR/JPY, but I think any dips towards 1.3000 in coming days would be a welcome New Year present.
USD/JPY: Technical target reached and bulls need to be careful
As we know, the professional market is very long of this pair and was able to make more easy gains today after the new Japanese PM was sworn in and the latest BOJ minutes were released. The door can often be very wide going in but very narrow coming out, so bulls need to be careful now that a long-term technical target at 85.50 has just been reached. With year-end looming, we may see some profit taking start to emerge if this technical resistance level holds.
Congrats to all those cable bears
There were plenty of you I know who were selling cable on the approach to 1.6300 in expectation that resistance levels would hold and I hope you were all able to maintain your patience. From a technical perspective, the range-traders are completely in control here and a move lower to test base levels at 1.5250 looks possible in the medium-term. The risk-reward trade for bears certainly looks compelling.
Fairly quiet Monday morning as holiday period begins
- AUD/USD is back below 1.0400, with dealers still reporting stops below 1.0380 in thin trade:
- EUR/USD is reacting to fiscal cliff headlines and progress (or lack thereof):
- EUR/USD buyers still reported towards 1.3120:
- Italian PM Monti confirms he will not seek re-election:
- Japanese PM elect Abe was extensively quoted in weekend press upping the pressure on the BOJ:
- Abe's comments re USD/JPY, that rates 85+ would greatly help exporters, are unlikely to get bulls too fired up seeing as we are trading at 84.40:
- Shortened session today in many centres due to holidays but Japan will be open.
Order info updated
The delay in fiscal cliff negotiations has obviously affected risk sentiment over the last few hours, with equity markets getting particularly targeted. Stops in AUD/USD below 1.0450 were relatively easy pickings and there are more heavy stops reported below 1.0380. I'd expect some solid technical support near 1.0395/1.0410 to emerge as long as no further negative headlines emerge from Washington.
With thin markets now the norm for the next two weeks, sharp 100 pip moves in either direction would not surprise at all, so big levels like 109.80/90 in EUR/JPY could also be targeted. There are major stops expected below there.
Post-mortem of 2012 trading year; there is no substitute for hard work
Last Christmas I took off with my family up to the farm for 3 quiet weeks, where I spent all of my time either hitting golf balls or studying the FX market. I looked at charts, fundamentals, flows, positioning, and basically anything else I could get my hands on. I formulated trading strategies based on these 3 weeks worth of 'work'. The result of this was that I had very strong convictions about directions and ranges ensuring that I had confidence to take on reasonable risk when my levels were reached. This meant that I had an excellent trading period Jan-Apr (and my handicap fell to 1).
Then I took 6 weeks off for a holiday to Europe, spending time travelling and visiting friends and family, and I did not study the market at all during this period. The result of this was that since then I have really struggled to find any rhythm in my trading (and my conviction and confidence levels have been low). I've done well I think to be only facing a very small loss for the last 5 months.
Conclusion: For me at least there is no substitute for hard work. I need to figure out my own theories and strategies based on solid evidence and then implement my trading based on this work. The stupid thing is that its really not work at all, I love doing it, so it will be back to basics for me over the next two weeks.
I will be on-line occasionally over the next fortnight, certainly I will update the site when anything happens in the market, and it will be back to normal on January 7th.
Gold continues to fall; might the CHF follow soon?
The one big mover overnight in other markets was Gold, which crashed through technical support at $1660 before settling near $1635. I've felt a strong correlation between the Gold price and the CHF, particularly over the last decade or so. I know a quick look at the weekly chart should turn you completely off EUR/CHF but with an automatic stop-loss level 100 pips lower, I've taken a small long holiday trade just in case.
Day ahead in the FX market, Friday December 21st
- Market starting to wind down for holiday period so should be very quiet in Asia:
- Yen shorts are remaining resilient:
- UK consumer confidence and Chinese business sentiment on the economic calendar:
- AUD/USD stop-loss orders below 1.0450 may still attract attention:
- Cable resistance at 1.6310 also worth watching:
- Other major pairs back at mid-range levels on short-term charts.
Quick overview of Asian FX trade
- BOJ expanded its easing program by Yen10 trillion and kept rates unchanged:
- Statement was dovish, leaving way open for a possible policy change in January:
- JPY has strengthened nonetheless as the market is short at extreme levels:
- Greek FinMin was reported as saying that Greece could still leave EZ:
- EUR/JPY fell from 111.80 to 111.00 before recovering to 111.50:
- Australian Treasurer announces that budget surplus now unlikely:
- New Zealand GDP +0.2% QoQ; business confidence drops to 22.7 from 26.4:
- China's leading economic indicator index falls to 1.1 from 1.5 last month.
USD/JPY: Talk of real money buying interest 83.60/70
I'm not sure if I place a whole lot of faith in these reports as in my experience, most of the asset managers have already given up by now. Nevertheless, initial dips towards that level will probably attract some day-trader interest and I'd expect 84.20/25 to provide some resistance.
If Europe has a quiet session today then I think we can well and truly start shutting up shop until 2013.
Oh, and I nearly forgot, my next big contrarian call. I'm forecasting that the Mayan calendar has made a tiny mistake and that the world will not end tomorrow. If I'm wrong, everyone gets a Rolls Royce :)
USD/JPY: Bit of a worry when commentators start talking about "one-way bets"
These one-way bets are hard to find and are usually referred to as such, after the race has been run! Just reading a few comments referring to USD/JPY as a one-way bet now, ie it can only go up. That's a worrying sign in my contrarian opinion!
Buy the rumour sell the fact
One of the oldest sayings in the market but also one of the truest. The market is very short of Yen, particularly the professional market, and the big question is whether they have the patience to stay short for another month. The other question is where will any fresh Yen selling come from? If 111.50 continues to cap then we may see some profit taking begin to emerge? The BOJ were certainly dovish but now its all about positioning.
BOJ: Expands asset buying program by Yen10 trillion
EUR/JPY popped up on first reaction but with no mention so far of inflation targets it fell back pretty quickly; 111.00/50 still containing prices.
No change in interest rates but the statement does say that long-term stability will be reviewed in January. The Yen bears will not be disheartened I feel.
Event-driven trading strategy
This is an interesting concept from a small group of traders who have studied the market price action directly preceding 700 risk events over the last 7 years. They try to get a sense of what market expectations and positioning is based on what happens in the 60 minutes leading up to a risk event and they then look for trading opportunities directly after the event. They tell me that they will trade after 16% of risk events, the others they leave alone. I'm keen to see their strategy returns!
I'll let you know if any trade ideas emerge but it never ceases to amaze me the lengths people will go to, to try and gain a competitive advantage. Good on them.
Yen crosses steady as BOJ decision time approaches
The rate announcement could come at any time but its the subsequent statement which is the most awaited, with the market looking for any change in wording regarding the inflation target.
The EUR/JPY bounce from this morning's 111.00 lows was indeed capped at 111.50 but it's now in waiting mode ahead of the BOJ.