Cable orders: Stops noted topside
There is buying interest reported both sides of the cable market, with buyers seen 1.6160/65 and option-related stops above 1.6250 and again above 1.6300. Various rumors still about possible China interest topside but I will believe it when I see it!
Quick overview of Asian FX market
Negotiations around the US fiscal cliff seem to have made some progress and this has resulted in improved risk sentiment. Equity markets are moderately higher, US yields are higher, all of which have helped USD/JPY to rally. The RBA minutes have cast a bit of doubt on when the next cut might be due and the chances of a 25 bps rate cut in February will have dropped. Chinese FDI fell by over 5% YoY but no-one paid any attention to that number. Flows were light all day but real-money bids were noted in USD/JPY near 83.60 overnight. JPY crosses have edged slowly higher through the session.
EUR/USD still feels cautiously bullish
EUR/USD has been consolidating in a tight range since yesterday, now in what looks like a flag formation on the 1 hour chart, and further gains do look likely. A clean break above this level (1.3170 was a recent daily high) should open the way for a full re-test of a weekly high at 1.3485 in coming weeks.
USD/JPY flows: Real money buyers noted near overnight lows
The amounts were quite small and it's surprising that these sort of players are spied at all near illiquid holiday time markets, but its nonetheless interesting to see this buying emerging. If USD/JPY is trading still around 84.00 come the second week of January, then I would not be surprised to see a big rally if/when real money starts to chase it.
EUR/JPY edging higher as risk sentiment improves
The Chinese FDI data was down on last year but no-one is paying any attention and risk sentiment is positive on the back of supposed progress in the fiscal cliff negotiations. EUR/JPY is near session highs at 110.60 and we may well get a test of yesterday's highs later during the European session.
AUD unchanged after RBA minutes
No major change in the AUD after the minutes. It will stay quiet from here by the looks of this market.
USD/JPY getting small lift from fiscal cliff press reports
I don't see anything new in this (and I think this whole fiscal cliff saga is a non-event) but nonetheless some people are paying attention it would seem. A report in the Washington Post suggesting that a deal is now much closer has given US equities a lift and seen Treasury yields rise. This is of course bullish for USD/JPY on many fronts, its risk positive, USD positive, and of course there is the traditional correlation between USD/JPY and US yields.
Fairly cheap risk reward trade for bulls to buy USD/JPY with a stop below the 'gap' level at 83.45.
Day ahead in the FX market
- Should be quiet in Asia as holiday period gets closer:
- EUR/JPY closed gap to 109.90; this is now important support and expect large trailing stops below there:
- AUD/USD is holding firm above 1.0510, buoyed by sharply rising iron-ore prices:
- RBA meeting minutes may provide some life in late morning trade:
- EUR/USD is consolidating in very tight 30 pip range, look to EUR/JPY for leads:
- Corporate and real-money flows starting to dry up and Sovereigns can also be quiet at this time of year.
EUR/JPY closes yesterday's opening gap, another bullish sign
The gap from Friday's NY close to yesterday's opening level was perfectly closed overnight, which is quite a bullish sign and may signify that the totally dominant bull trend is simply resting before re-launching. This 109.80 level looks like it will be pivotal in the short-term and bulls can buy dips with relatively tight stops below there (and there are now likely to be plentiful trailing stops below). I still feel that 111.50/112.00 will be 'toppy' but contrarians like myself need to be careful when trends continue to show strength.
FX market steady in early European trade
There is the usual jockeying for positions in early European trade but very little happening overall and the majors are trading in 15/20 pip ranges. Corporate orders have really dried up now and flows are expected to be light for the next 3 weeks. Many of the big Sovereign and real money players will also be quiet over the holiday period so market moves are more likely to be driven by speculator flows.
Late December is traditionally one of the most profitable periods for the pure market makers as they take advantage of wider spreads and increased volatility.
USD/CAD buyers aplenty towards .9800
It's a reflection on how few orders are in the market if USD/CAD is getting an early mention! Buy orders reportedly solid .9790/.9800.
Downside stops in EUR/USD and AUD/USD
Stop-loss sell orders getting mentioned on the early European grapevine with 1.3115 in EUR/USD and 1.0495 in AUD/USD the two levels mentioned.
Dealers are also watching the 'gap' levels in USD/JPY at 83.55 and in EUR/JPY at 109.90.
AUD/USD: 2012 has been a very tight year
Thanks to David at Arab Bank for pointing out that the AUD/USD will only have a 10 big figure range this year, when over the last decade we have become used to ranges of between 15 and 20 big figures. This is even worse in percentage terms when we consider that the AUD/USD is trading at multi-decade highs. A bit more volatility would be nice in 2013, thanks very much.
Quick overview of Asian market
It was all about the Yen today after the Japanese general election. USD/JPY opened near 84.25 in early interbank trade and topped out near 84.40 before falling back on profit taking. EUR/USD triggered stops above 1.3175 but fell back on EUR/JPY selling.
The Nikkei rose on the prospect of more government easing measures and other regional Bourses were slightly lower.
The AUD was steady, unaffected by 3 separate bank-analyst reports which all had dovish overtones for Australian interest rates in 2013.
EUR/JPY: Looking to close opening gap to 109.90
There hasn't been much bounce in EUR/JPY over the last few hours so a move lower to close the opening gap still seems quite feasible. Early Europe may have another try above 111.00 but I fancy there will be plenty of profit-takers now waiting up there.
AUD interest rates: Bank analysts turn more dovish
- Goldman Sachs have revised their expectations to 75 bps of rate cuts in 2013, from their previous forecast of 50 bps:
- ANZ are now calling for 100 bps of rate cuts in 2013, after previously forecasting 75 bps worth of cuts.
EUR/JPY: Probably a bit early to start calling a 'top' but looking soft..
The bull trend is obviously very strong but the market is reportedly very long already so its a difficult call, whether to be in dip-buying mode alongside the trend or whether to sell into exhaustive rallies. I'm definitely in the latter camp but I would like to see the opening gap closed and that level broken cleanly before I can confidently start calling a top.
I've sold a bit more EUR/JPY earlier this morning and I'm reducing my EUR/USD longs, after the break above 1.3170 failed to sustain itself.