The day ahead in the FX market, Tuesday December 4th
- RBA rate decision later this afternoon, with the market pricing in a 90% chance of a 25bps rate cut:
- Yen positioning is other major factor in the market, with shorts certain to get increasingly nervous as the December 16th election beckons:
- EUR/USD now consolidating above 1.3000 and the short-term trend remains bullish:
- No talk of any large orders in the market:
- EUR/JPY has started to quieten down, and 106.50/108.00 look like the important levels to watch there.
RBA tomorrow: Futures market pricing in 90% liklihood of a 25bps cut
We should be in for a busy day tomorrow here in Asia, in fact the whole week should be busy. No reports yet of any reserve manager buying in the AUD but AUD/JPY seems to be taking up the slack, hanging tough despite poor Australian domestic data and the rate cut story.
That's it from me for today, the European open looks uninspiring so I'll take an early one (along with the Aussie cricket team :) ). Catch you tomorrow++
Still like the buy-dips play in EUR crosses
It's very early days on the long-term EUR/AUD chart but the possibility of a basing formation at multi-decade lows has me quite excited. There's a long way to go and the market must first overcome its EUR negativity and the teflon AUD must lose some of its appeal, but I can certainly visualise this pair trading back near 1.32 without much trouble (EUR/USD at 1.32 and AUD/USD at 1.0000). I believe that we are in a buy-dips phase in this pair and also in EUR/GBP, where the rise may be less rapid but consistent nonetheless back towards .8500.
GFT shutting down US trading operation
One of the biggest retail brokers in the US, GFT, is reportedly shutting down its operations over there. This is undoubtedly a direct result of increased regulation by the NFA.
EUR easing a bit into European open
EUR/USD closed on Friday in NY around 1.2995, dropped in early interbank trade to 1.2975, but since then has rallied across the board with EUR/AUD flows to the fore. Old market lore would suggest that Europe will always ignore whatever happened during Asian trade and will take the market back to the NY close before deciding on its next move. Let's see if it holds up this time.
Quick overview of Asian trade
- China official services PMI 55.6, up from 55.5 last month:
- HSBC manufacturing PMI 50.5:
- Australian retail sales flat; job ads -2.9%; company profits -2.9%:
- Market pricing in 90% chance of rate cut by RBA tomorrow:
- AUD fell across the board after poor domestic data:
- EUR rallied on improved risk sentiment after Chinese PMI:
- EUR/AUD obviously one of main movers on the day after stops triggered above 1.2500:
- USD/JPY has traded in tight range around 82.40.
Risk-on traders preferring to buy EUR ahead of AUD
Today's PMI data out of China was reasonably promising but the poor domestic data in Australia has dissuaded the 'risk-on' traders from looking at the AUD and instead its the EUR which is again benefitting. Next resistance for EUR/JPY is a prior daily high near 108.00
EUR/USD: Next resistance is trendline near 1.3065
The trendline from 1.3485 comes in near 1.3065 and that is the next technical resistance level. EUR/AUD continues to lead the way amongst the crosses.
EUR/AUD: Looks like stops triggered above 1.2500
The AUD is staying weak after the poor domestic economic data and EUR/AUD has gapped sharply higher through 1.2500 in what looks like a stop-loss run.
Next technical resistance levels are a daily high at 1.2535 and a 61.8% Fibo at 1.2570.
AUD/JPY tests first layer of bids after weak data
We are presently trading near 85.70 after weak domestic job-ads and retail sales data. AUD/USD is testing the lows from Friday near 1.0400.
The market is now pricing in an almost certain rate cut tomorrow, with futures market putting the percentage chance of a 25bps cut at almost 90%.
AUD/USD: Order books pretty bare ahead of data dump
We are probably better off keeping an eye on AUD/JPY, as that's where the most positions are being established.
- Light bids reported near 85.70 with heavier interest 85.40/45:
- Modest sell orders 86.20/25.
Day ahead in the FX market, Monday December 3rd
- EUR/JPY opens slightly lower, trading at 106.90 in early Asia after closing on Friday at 107.10:
- Weekend Chinese PMI data came in exactly on expectations:
- Latest IMM data shows a sharp increase in Yen shorts:
- Australian retail sales and more Chinese PMI data are highlights on economic calendar:
- EUR/JPY: Level to watch on downside is 106.50 from where we had impulsive moves on Friday:
- AUD/USD: Still range-bound, broadly between 1.0360/1.0510 ahead of RBA tomorrow:
AUD/USD outlook for the week ahead: Risk events looming with retail sales, RBA decision and jobs data.
This pair is due for a major move and the trifecta of local risk events allied with international risk events like the China HSBC manufacturing PMI as well as the US NFP must surely be enough to finally get this pair moving. I'm still running a small short position as we are so close to the top of the weekly wedge but I am by no means married to this trade. With reserve managers still supposedly buying dips and with AUD/JPY turning bullish, I think we have to be ready for all possibilities. The topside level to watch imho is 105.50ish, and if we break above there then watch out for impulsive bullish moves. The downside level to watch is 1.0280 and the bears really need to break below there to potentially open the floodgates. In the meantime, trade the edges of this range.
New trader funding program will launch this week
I will send an email to members and FXWW registrants shortly but just a reminder to those who are interested in the trader funding program to keep an eye on the 'funds management' category here on the site.
This program is in partnership with an emerging hedge fund who operates a multi-manager strategy. They have funds to allocate immediately and of course they hope to grow their business by finding the new bright and profitable traders who are coming through the retail space. Previous performance will be considered but traders will be monitored in a live trading environment for a period of up to 12 weeks. Demo accounts are fine for beginners trying to learn their craft but are a complete waste of time when it comes to performance evaluation.
Just in case you might miss any relevant postings through the day, click on 'funds management' under 'categories' and then you will find all related posts.
EUR/JPY outlook for the week ahead: Bullish whilst above 106.50
The market has been short EUR for some considerable time so the combination of Yen pre-election bearishness and EUR short-covering has been really compelling. There were two sharp surges on Friday in Asia, starting at around the 106.50 level, and as long as this level holds then the bulls remain in control and are targeting 111.50 again. If we break below 106.50 then I'd suggest that the severely over-bought indicators might start to turn over and put the pair in line for a clean-out of long positions. We can expect plenty of volatility with risk sentiment swinging on events like the Chinese PMI; Australian retail sales, rate decision and jobs data; European PMIs; and of course the US NFP data. Play a 106.50/108.00 early in the week and a break of this range will set up the next impulsive move.
EUR/USD: Sell orders slow momentum for now at least
USD/JPY is again starting to edge further higher after the second surge of EUR/JPY buying today took the cross 100 pips higher on the day. EUR/USD saw some huge turnover near 1.3025 when the EUR/JPY buyers ran into the EUR/USD sellers, hence the continued upward pressure on USD/JPY.
Have a great weekend and enjoy the volatility. See you Monday++