USD/JPY session outlook: Levels to watch at 80.70/81.50
The market is bullish so there is no point in getting in the way of this sentiment. Initial support is near yesterday's break-up level and resistance should be very solid 81.50 through 81.75. I'd play this range and also keep a close eye on important resistance in EUR/JPY at 104.80.
AUD/USD session outlook
As you know I am short and bearish but there is no compelling reason to suspect that the recent consolidation around the 100-day MA is suddenly about to end. True we are entering thin end-of-year markets so expecting the unexpected is a wise thing to do. On the day, more reserve manager bids are reported at 1.0300 but we haven't heard much regarding the size of these bids. Resistance should be firm near yesterday's highs at 1.0380. Playing this range makes sense and I'm sticking with my overall bearish bias.
The day ahead in the FX market, Friday November 16th
- Fed member speeches starting soon may cast more light on 'vigorous debate' re future QE, and replacing Operation Twist:
- Asian economic calendar looks very bare:
- JPY stays weak with heavy selling coming from hedge fund players:
- USD/JPY tops out overnight near the 61.8% retracement of 84.15/77.10 fall:
- EUR/USD still in range trading mode, crosses like EUR/JPY and EUR/AUD are well bid but USD demand capping rallies:
- Cable held up well despite poor retail sales and talk of more easing; large barrier at 1.5800:
- AUD/USD broke below support levels near 1.0350 but more reserve manager bids reported near 1.0300:
GBP holding well above 1.5800 despite poor retail sales data
EUR/GBP has moved more than cable after the worse-than-expected UK retail sales data. The cross has jumped above .8060 but cable has only lost 10 pips or so. Much of this is to do with the large barrier protection at 1.5800 I'm sure.
I'm done for the day, have a great evening and catch you tomorrow.
USD/AXY updates
- PBOC seen buying USD/CNY in recent trade (around $1 billion) pushing it up 60 pips off lows:
- Other ACBs generally quiet only Taiwan seen buying USD on the close:
USD/AXY did not follow the sharp overnight lead higher from USD/ZAR and USD/MXN which suggests that the selling in USD/AXY is much more structural in nature whilst the positioning in ZAR, MXN etc is more speculative. (Could be yet another reason in favour of taking some AUD shorts off the table?).
USD/JPY: Technical analysis
Courtesy of Chifbaw.com:
What is happening with the Yen?
Analysis:
The USD/JPY has been very active in the past few days. On one side, the breakout to the downside in the US 10 year yields has pushed the USD/JPY back towards 79.05. On the other side, the collapse of the Japanese government, and the new elections are giving hopes to the USD/JPY bulls that the impotent BOJ would lose its independence and start massively printing Yen to combat deflation and Yen strength, and the pair has rallied heavily back above 80.00.
Technically speaking the first breakout that occurred two weeks ago did not succeed and the market reverted from 80.60 to 79.05. However, this time around the breakout is much stronger:
- A clear move above the weekly trend line resistance, with a likely weekly close above it.
- A breakout of the 50% Fibonacci retrace at 80.60 (top 84.x, bottom 77.x)
- Bullish engulfing at the weekly level (in formation).
- The price is above the 100-DMA, 150-DMA, 200-DMA, 100 weeks moving average.
In addition, as shown on the chart below, our long term sentiment indicator suggests that the market is turning on a weekly basis bullish on USD/JPY. This indicator tries to measure the amount of bulls in the market. The critical area is 50% (0.5). When the market crosses 50%, it is usually an area of trend formation. The last time we crossed 50% was in March of this year, but the price was not able to break above the trend line resistance and we fell back below 50%. This time around the move above the 50% is much stronger and has chances to be more sustained. It could be that we are witnessing the reversal in USD/JPY that will lead it above 100, but we don’t believe this can happen without a break down in the JGBs (a push above 2% on the 10Y for instance, currently sits at 0.74%). The Japanese bond market is still quiet.
If at the end of this week, we close above 80.60, then we believe that we are in for a new leg up in USD/JPY for at least a few weeks with a first target in between 83 and 84. Elections and changes to the status of the BOJ will take time to be implemented. Therefore, we should not get too excited by today’s breakout and upside movement will most probably remain slow. In our view there is a high probability that we reach 81.50 (38.2% retrace) next week. The low risk reward approach here is to look for dips to enter long again. Also, given the upside potential in EUR/USD, the EUR/JPY could be the best vehicle to profit from this weakness in the yen.
Escalation in MiddleEast violence also spurs flight to safety
The sharp escalation in violence between Israel and the Palestinians in the Gaza Strip is also likely to lead to a "flight to safety" for some asset holders. In FX terms, this is usually bullish USD, CHF and Gold.
USD/JPY technicals: Next decent resistance is near 81.50
That is where the 61.8% retracement of the 84.15/77.10 move lies.
Cable: Could gravitate towards barrier protection at 1.5800
This market likes going looking for the levels where the big orders are placed and that is at 1.5800 in the cable, with option protection ahead of a barrier and likely stop-loss sell orders just below there. Retail sales data is due out this morning in London and that could well be the catalyst for the next big move.
AUD/USD: Reducing my short position again
I've been short for a while now and even though the pair is looking quite heavy, recent experience tells us that range-trading with a modest bullish bias is the way to go. There has been talk of reserve manager bids at 1.0350 and earlier price action would seem to confirm their presence. I'm taking back some more of my medium term short position here at 1.0358 and will sit back and see what happens from here.
EUR/USD: European open analysis
Courtesy of Chifbaw.com
Recommendations:
- No trade recommendations.
Paradigms:
- The EURUSD will not make new highs (higher than 1.317) until Spain requests a bailout and the OMT is activated.
- The market will have a moderately bearish bias until further clarity emerges on the US Fiscal Cliff issue.
Analysis:
The EURUSD seems to be a secondary currency today despite the heavy economic calendar, and most of the action is in the Asian currencies (JPY, AUD). Yesterday we touched the middle of the down trending channel at 1.2770, but we were not able to stabilize there, despite FOMC minutes rather bearish for USD. We expect to revisit the area 1.2770-1.2830 in the coming days, but the timing of it is difficult. Today, we expect the EURUSD to remain stuck in between 1.270 and 1.28. Moves towards 1.28 during the first two hours of the European session will be met with stark resistance and present a possible scalping opportunity for a small 10-20 pip profit but it is risky.
Quick overview of Asian session
- Nikkei rises 1.5% on weaker Yen, Hang Seng -1%:
- Latest RBA FX reserves data confirms passive intervention to tune of around AUD450 million for 3rd consecutive month:
- Japanese opposition part president Abe calls for unlimited easing to beat deflation:
- USD/JPY triggers stops above 80.50:
- AUD/USD stalls at reported reserve manager bids near 1.0350:
- EUR/USD driven by EUR/JPY and EUR/AUD flows:
I should've listened to Lefty!
My mate in hedge fund sales told me last night to buy USD, particularly USD/JPY, and that we will see a big move back into the USD in coming weeks. I knew better of course, as I not only ignored his sage advice but I actually had the opposite position; a fool and their money are easily parted :( No harm done, was a fairly small trade and a 40 pip stop, but I'm wondering what he knew and who's done what? I'm sure all will be revealed in due course.
More technical resistance at 80.65 but a clean break above there should have us buying dips for 84.00!
USD/JPY: Sell orders at 80.50, stops directly above
Bulls back in charge again and the market is eyeing stops above 80.50.
If I missed any webinar questions, please feel free...
Apologies but I missed one whole section of questions so if you've got any questions or queries, now's your chance!
AUD/USD: Looks like the bids at 1.0350 were indeed very solid
The buy orders have been confirmed by the market price action and with an hourly low now set to form, bulls can buy dips in safety with a tightish stop below 1.0340. I'll stick with my short position for now but those dastardly Sovereigns sure do make a bears life miserable :(
Webinar on "FX spot market structure" in 1 hour on FX Street
I'll be giving a very general overview of how the market is structured, who the main players are and how everyone is connected. You can access it via this link and it starts in 1 hour's time.