AUD/USD session outlook: Choppy sideways trade but selling rallies preferred
USD sentiment seems to be improving and despite all the alarmist headlines relating to the fiscal cliff, nobody really believes that a deal will not be reached (probably later rather than sooner as the major parties try to gain political points). Therefore I expect the USD to strengthen across the board as we near the end of the year and the overall AUD performance against other majors will depend on general risk sentiment.
The daily chart is in a containment phase between 1.0150/1.0600 and we are sitting currently near the middle of this range. Short-term moves will depend on where the stops are, and if AUD/JPY starts breaking higher then we could see the topside targeted first.
In the short-term I would look to buy near 1.0230, sell near 1.0430 and avoid trading in the middle of this range. Medium-term I will stay short and add to position near 1.0550.
USD/JPY session outlook: Bulls firmly in control
This pair looks and feels very bullish and as I said below in my weekly preview, there is plenty of time before the general election for the market to build some big positions so fighting this trend could be a dangerous occupation. That said, there is very solid technical resistance at 81.50 and also barrier protection ahead of the same level, and this might slow bullish momentum today. I'd wait and see what happens at 81.50.
BOJ minutes from the last meeting will be released a little later today and otherwise the market will rely on swings in sentiment.
Levels to watch today in the FX market, Monday November 19th
- USD/JPY: Barrier at 81.50 and major Fibo technical resistance near the same level:
- CAD/JPY: Important technical resistance and range highs near 81.50:
- EUR/JPY: Important technical resistance at 104.80:
- EUR/USD: Sovereigns noted buying below 1.2700 on Friday last:
- AUD/USD: Reserve managers noted buying below 1.0300 on Friday:
- Cable: Option barrier at 1.5800:
EUR/USD: Weekly outlook November 19th
Technical analysis is best avoided here for the moment whilst big cross plays are at work. EUR/JPY is the flavour of the moment and the market may try to breach technical resistance at 104.80, but EUR/CHF has turned very soft again and is drifting towards the lower end of its recent ranges (and nearing SNB support levels again). EUR/GBP and EUR/AUD have been choppy so much will depend on short-term sentiment across all the crosses.
There are still plenty of hurdles for the Spanish and Greeks to overcome so whilst this is the case, USD sentiment is likely to remain better than EUR sentiment. My strategy here is to wait for short-term bullishness on the crosses to ease and sell into EUR/USD strength.
USD/JPY: Weekly outlook November 19th
USD/JPY has a very formidable bullish feel to it and the market has been itching to buy this pair for months (if not years). We are sitting close to historic lows in USD/JPY and the upcoming general election (December 16th) has the Yen bears very excited. If the LDP were to win an overall majority (unlikely) they would probably instigate a period of unlimited easing in order to get out of the current deflationary spiral.
This could be a case of buy-the-rumour-sell-the-fact for the next 4 weeks but the market can move a long way in 4 weeks! The attached daily chart shows that bulls should be cautious near current levels, with a 61.8% retracement currently capping, but when the market gets excited you can start throwing the technical analysis handbook out the window. The economic calendar will also be interesting with BOJ minutes from the last meeting on Monday and the two-day policy meeting ends on Tuesday. If they are clever, the BOJ will add some fuel to the bearish-Yen fire and achieve their weaker-Yen objective without intervention. Buy dips here and add on bullish breaks is my bias.
In EUR/JPY, the big level to watch this week will be 104.80, which is the 61.8% retracement of the 5-wave down-move from 111.40 to 94.10.
Webinar "Market Structure" notes now available
I've posted my "Market Structure" notes from the latest FX Street webinar in the members section. Let me know if you don't have a password and I'll send you one.
USD/JPY orders updated
Bit of a mixed bag both sides of the market but bids take over the ascendency and are quite heavy now 80.10/25. I'm presuming there will be plenty of selling interest near Fibo resistance at 81.50 but no confirmation as of yet. As always, if I hear any changes I'll update the members section.
That's me done for what was a less than successful week but luckily no major damage was done. Up and at 'em again next week. Have a great weekend 'und tschuess'.
EUR crosses giving up recent gains
I don't suppose anybody feels overly comfortable being long EUR over a weekend so its no surprise to see the EUR crosses start to give back some of the gains from the last few days. EUR/AUD, and EUR/CAD are following the EUR/GBP early lead. EUR/JPY is still one of the main drivers but its been reasonably sedate today for a change.
GBP looking well bid in early London
The pound had a good chance to break lower yesterday after very poor retail sales data and talk of further easing, yet cable managed to rally despite these negative factors. If a currency can't fall on bad news then its probably not going to fall much at all. Cable has a modest bid tone in early European trade and EUR/GBP is 20 pips below its Asian session prices.
EUR/USD orders updated: Looks like 1.2730/1.2830 range
A bit more colour now emerging on who's doing what in the EUR/USD. Bids are reportedly very solid starting at 1.2730 and down through 1.2715. Stops are reported above 1.2805 and sell orders again prominent 1.2835/40.
CAD/JPY: Looks set for big breakout move
This is definitely a pair worth watching. Any escalation in Middle East violence has the possibility to greatly increase oil prices, which is of course bullish CAD, and the prospect of an LDP election win in Japan with subsequent 'unlimited' easing has the Yen in full-on bearish mode. The technical picture shows the 4 main MAs sitting very close together which often happens before a big move (up or down). Recent prices have traded in a 78.50/81.50 consolidation and a break out of this could increase momentum significantly. Of course the bears will have an excellent risk-reward trade by selling at the range highs with a tight stop.
Quick overview of Asian market
- Fed's Plosser: Operation Twist didn't have much impact:
- Stocks rose again with Nikkei +2% on weaker Yen and HK +0.3%:
- USD/JPY showed some mild fatigue with quick sell-off below 81.00 over Tokyo lunch:
- EUR/USD traded sideways in tight range although dealers are eyeing stops above 1.2805:
- Singapore revised Q3 GDP +0.3% YoY:
USD/JPY starting to show first signs of fatigue
For the first time since this powerhouse move began at 79.20, USD/JPY is showing some mild signs of fatigue. The quick dip below 81.00, even though it has now recovered and was during thin Tokyo-lunch trade, does show that there is more than one direction to the current USD/JPY move. Bears can try selling a failure at 81.50 technical resistance with a fairly tight stop.
USD/CAD trade idea
The same guy who told me to buy some weeks ago at .9785 is currently short and he expects the pair to fall sharply over the next few days. He says there are large stops below .9950 which will probably get triggered and he sees the pair falling to .9800 before the uptrend resumes. He's short at slightly above current levels and has a stop above 1.0050, so I guess the risk-reward is quite good.
Don't ask me about the Loonie, I refuse to trade it anymore. It's taken enough of my 'hard-earned' for one lifetime!
Edit: Thanks to Kirill who makes a good point that the escalating violence in the Middle East could drive up oil prices which would of course favour the CAD.
EUR/USD orders: Stops reported above 1.2800
- Above 1.2805 to be exact, again not sure on size but with Friday liquidity it usually doesn't take much to move the market!
FX market stays very quiet on Tokyo open
Dealers say that the trading platforms are gathering cobwebs this morning with little or no visible interest being shown by anybody. I would have expected to see some modest profit-taking in the Yen crosses out of Tokyo but no sign of that happening yet either.
EUR/USD session outlook: Dominated by cross plays
I don't think there is much point in looking for technical guides for the EUR/USD when it is so clearly dominated by events in the crosses. The big topside levels to watch are 104.80 in EUR/JPY and 1.2450 in EUR/AUD; when the market gets close to these levels then EUR/USD should start hitting solid resistance. Crosses like EUR/JPY have had a vertical rise and the fall is likely to be vertical as well, so care is warranted once the reversal kicks in.