GBP/USD trade idea still relevant
I'm still hoping to establish the same cable trade idea I talked about yesterday, buying smalls at 1.5870 hoping to jag a 200 pip rally from where I could instigate a decent sized short for the run to Christmas. Let's see what happens.
Quick overview of the Asian market:
- EZ FinMin meeting broke up without agreement and will reconvene next Monday:
- Meeting ran late into night and market anticipating bad news of some sort:
- EUR/USD gapped 60 pips lower from 1.2810 after the statements:
- Yen weakened again after LDP again raised prospect of funds to buy foreign assets:
- Chinese shares weakened again before probable 'plunge patrol' activity near 2000 on the SHComp:
- AUD fell on risk aversion brought on by equities and EZ lack of progress:
- EUR/JPY breached important technical resistance at 104.80 but was unable to consolidate.
EUR/USD: Short trade strategy
Chifbaw, one of the strategists that I've started monitoring, has gone short EUR/USD near 1.2750 with a very tight stop at 1.2770 and profit targets at 1.2715, 1.2690, 1.2650 and 1.2580. I like the side just not sure about the timing but the risk-reward is outstanding.
" This morning the EURUSD is bearish because of a lack of decision on Greece, and may be more because of the very long night of discussions that the European ecofin ministers had (suggesting troubles). We expect the EURUSD to at least go test its hourly support trend line that now comes at 1.2715. There is a chance that this trend line does not hold and an acceleration to the downside might bring us to 1.2655 today. We therefore recommend shorting the EURUSD at its current levels, and if we indeed reach 1.2655, to buy the EURUSD for some short term rebound and possibly more. "
AUD sliding lower as risk sentiment sours
The Shanghai composite index has fallen below 2000 (edit) again briefly and is nearing 3 1/2 year lows; the AUD is falling in line with the souring sentiment. Uncertainty out of the EZ isn't helping matters either.
- AUD/JPY has fallen back below prior resistance at 84.80 with next support at 84.35:
- AUD/USD should find initial support near 1.0335:
EUR: Reaction to EZ FinMin headlines way overdone
The market hadn't categorically expected any developments from the FinMin meeting but I guess the fact that it went on for so long has the market now expecting bad news. The postponement until Monday is usual EZ fare so I think this sell-off is a bit overdone. Nevertheless, we might be able to buy EUR/USD a bit cheaper in early Europe and the risk-reward for an entry near 1.2700 looks very compelling.
EUR/USD orders: No bids until 1.2700
You gotta be very quick in this game and EUR/USD gave us all a very brief opportunity before collapsing 60 pips. No major bids reported until 1.2700 and I think I've missed my chance :(
EZ FinMins to meet again on Monday
Schaeuble says FinMins could not reach agreement on Greece and will meet again next week. The EUR is lower on these headlines and there isn't much technical support on EUR/USD until recent lows at 1.2690.
EUR/JPY pulling back after failing to hold gains
USD /JPY has managed toehold above previous resistance at 81.50 so the fact that EUR/JPY hasn't managed to hold above 104.80 could be more of a pointer at the EUR leg rather than the JPY leg. Maybe trying short EUR/USD into the European open might be the correct trade?
EUR/JPY edging through resistance levels
No major volatility in spite of the fact that resistance levels are being broken.
EUR/USD session outlook
- Obviously EUR/JPY will be the main driving influence and what happens at 104.80:
- The market seems to be slightly short EUR across the board and the lack of any headlines from Greece or Spain will be causing the bears some angst:
- The EU group meeting today will not make any decisions on when the next tranche of Greek aid should be paid:
- There are reportedly several batches of stops at regular intervals in EUR/USD above 1.2835 with sell orders light until 1.2895/00:
- Looks like a 1.2770/1.2870 range to me in the short-term and it will get its bias off EUR/JPY during Asian trade.
JPY session outlook
- USD/JPY should now find support at 81.50:
- EUR/JPY technical resistance near 104.80:
- GBP/JPY channel tops come in near 130.35:
- CAD/JPY looks to have made a decisive bullish break above 81.50:
- AUD/JPY is stalling near prior highs at 84.70 and sell orders are mentioned at 85.30/40:
EUR/JPY technicals: Important resistance close by at 104.80
The 61.8% retracement of the 5-wave down-move from 111.40 to 94.10 comes in at 104.80. The upper end of parallel channel resistance comes in just above there. These levels should be respected.
The day ahead in the FX market, Wednesday November 21st
- Japanese balance of trade data might have more impact now that volatility has returned to the spot market:
- AUD and CNY leading index indicators should not have a major impact:
- US stocks fell by 0.5% after relatively sober comments from Fed Chairman Ben Bernanke and may lead regional Asian markets lower:
- Nikkei should buck the trend with the weaker Yen giving encouragement:
- French 10-year yields rose after the Moody's downgrade and both US and Australian 10-year yields edged higher; higher US yields will boost USD/JPY bullish sentiment (as if that was needed):
- The EU group meeting will not be making a decision on the date for the next Greek aid payment.
USD/JPY technicals: Targeting 200-week MA at 85.20, last breached 5 years ago.
The clean break above technical resistance at 81.50 is yet another bullish indicator and the way is being opened for a move towards the 200-week MA at 85.20; it's been 5 years since the USD/JPY market last saw the 200-week MA!. There are daily lows near 79.25 and the convergence of the 21-week, 55-week and 100-week MAs just below there giving this bull move a very solid base indeed. There were trailing stops reported yesterday below 81.10 and although we got within 5 pips of that level, the bears were unable to trigger them, yet another sign that the bulls are in charge. Small longs are the way to go here and add on dips for a potential 400 pips on the topside.
Markets to stay range-bound until Bernanke speaks
Very hard to come to any conclusions about this market at the moment and I'm guessing that we will stay in range trading mode until Bernanke speaks in late afternoon US time.
USD/JPY remains fairly well bid but is still struggling to break cleanly above 81.50; EUR/USD is at the mercy of the crosses inside a broad 100 pip range; cable is underpinned by some hefty option plays; and both the AUD and CAD have seen sentiment improve on the back of 'reserve currency' chatter.
Famous last words perhaps, but I can't see much happening before Mr Bernanke speaks later today. Catch you tomorrow++
USD/JPY orders: Light trailing stops below 81.10
Comments in today's Japanese newspapers seemed to throw some doubt on whether opposition president Abe would or could implement his 'unlimited easing' plans. These headlines didn't help the Yen to strengthen during Tokyo trade but trailing stops are starting to creep up, now reported below 81.10.
EUR/USD: Order books looking a bit thin
Dealers say that bids are relatively scarce until we get near 1.2700/10 and offers start at 1.2825/30 but are not huge either. This suggests that we could get some gappy, whippy trade inside the usual ranges.