AUD: Latest RBA FX reserve data confirms passive intervention
Just reading the latest RBA FX reserves data for October on DJ newswires and it confirms the same trend that we saw in August and September; namely that the RBA is allowing its FX reserves to grow by not balancing out inflows through AUD purchases in the spot market. The amounts have been very consistent, around AUD450 million per month for each of the last 3 months. Certainly not huge amounts but it will have some effect over time.
AUD/USD: Solid bids near 1.0350 stalling bearish momentum
No definitive reports yet of who is buying, but there is plenty of AUD changing hands around 1.0350. AUD/JPY is holding above 83.00 and we may see a mild rally once the Tokyo Fix is over in 10 minutes or so.
Yen crosses getting hit again on the Tokyo open
I still can't confirm any investment bond redemptions but it sure is trading like there are! AUD/JPY is suffering the main brunt and AUD/USD is testing those reported reserve manager bids at 1.0350. Looks like we might have an interesting day for a change.
AUD/JPY: Starts the day with very heavy feel
Since my last post on the AUD an hour ago, AUD/JPY has fallen by 20 pips and still looks heavy. There are some rumours of investment bond redemptions today which would normally lead to some increased Yen buying at the Tokyo fix, but I have no confirmation on this (perhaps someone can help on this news?). I'm still a little baffled as to why the market bought USD/JPY so aggressively on yesterday's election news, as this had been widely reported over the previous days, but perhaps the market was simply bullish and wanted a reason to buy.
EUR/USD session outlook: Range trade whilst cross-flows dominate
The EUR will benefit of course from the heavy short-covering in the crosses of the last 24-hours so I expect dips in EUR/USD back towards 1.2660/80 to find plenty of willing buyers. Nevertheless, EUR/USD is still in a downtrend and the overnight flight back to the USD and out of emerging currencies would imply that any EUR/USD rallies will find plenty of willing sellers. I'd guess that 1.2650/1.2800 should cover most eventualities for the next few sessions, but much will depend on where and when the big orders enter the market.
AUD session outlook: Could be in for big fall if reserve manager bids don't materialise
Everybody seems to have good reasons to be bullish the AUD but a quick look at positioning reports shows that not many people are long. That tells me that the market would rather be short and is waiting for a good excuse to start selling. I think people tend to forget 'price' after a while and they should look at the bigger picture and realise that the Aussie is at multi-decade highs against a number of currencies, despite falling interest rates and a sharply-slowing commodity sector. The comments from the FOMC overnight seemed to suggest that future QE isn't the foregone conclusion that the market is presuming and if that's the case, its bearish risk, bullish USD, bearish gold and very bearish AUD/USD. Sovereign reserve manager bids are expected at 1.0350 but if they don't appear, watch for a sharp sell-off. AUD/JPY could easily fall back towards the lower end of a holding pattern at 80.00 (see chart) and EUR/AUD has staged an impressive recovery over the last 12 hours and this move should be respected. Risk-reward favours the bears in my very biased opinion.
FOMC: Active debate over efficacy of further QE
Whilst the majority of Fed members (and this includes Bernanke and his likely replacement Yellen) remain on the side of further QE there were also some interesting comments like "several participants questioned the effectiveness of current asset purchases or whether a continuation would be warranted". Obviously there is still ongoing vigorous debate and further QE is probably not the foregone conclusion that many in the market had presumed (and priced in?).
The day ahead in the FX market, Thursday November 15th
- Speech from Ben Bernanke is the highlight on the economic calendar:
- EUR crosses made big rally overnight and will be the key to Asian market moves:
- EUR/AUD has made a significant reversal and has little technical resistance until 1.2375:
- EUR/JPY has dumped the bears and is back in the middle of its recent 100/104 range:
- Market positioning is pretty flat apart from EUR shorts (which are obviously being unwound), so there is plenty of scope for some speculative pushes:
- AUD/USD bids from reserve managers are expected at 1.0350:
- USD/JPY stops are reportedly quite heavy above 80.50:
- FOMC minutes show some unexpected resistance to future QE:
- Emerging currencies like ZAR and MXN get hit especially hard overnight and Asian currencies will also need close watching today.
USD/JPY testing offers at 80.00
All of the Yen crosses are looking quite solid still and the Yen bears (and there are lots of those) are trying their best to regain the psychologically important 80.00 level. Looks like I might have another sleepless night!
Thanks for your company today and I'll catch you tomorrow++
Cable: Real money funds still noted sellers
- No exact levels given, but the same real money funds that sold GBP/JPY yesterday have been sniffing around cable this morning in London looking to sell as well:
- Very solid bids 1.5850/60 with large stops directly below that level:
- Barrier option at 1.5800 (it's possible that barrier also at 1.5850 but no confirmation at moment).
EUR/USD: Interbank order books favour buying dips
There is a bit of a scrap going on near 1.2740 and the bulls seem to be lacking the necessary momentum for now to bust through that level. Dealers say that bids on the downside are becoming more solid, especially near 1.2680, so buying dips might be the path of least resistance in the short run.
I can't think of any good reason to be long of EUR, but on the other hand I can equally think of no good reason for being long the USD either! Best to ask no questions and go with the flow I suppose.
EUR/JPY: Testing technical resistance at 101.70
There is a 38.2% retracement level at 101.70 which is currently being severely tested.
USD/JPY technicals: Looking to add to shorts at 79.90
I see solid resistance at 79.90 on 1-hour chart and I will look to add to my existing short position there. You can follow my progress (or lack thereof) by clicking on the "Sean Position Building" sheet in the members section.
USD/JPY orders: Sellers and stops nearby
- Plentiful corporate sell interest near 80.00:
- Stop-loss buy orders immediately above 80.00:
EUR/USD: European open analysis
Courtesy of Chifbaw.com
Recommendations:
- Buy the EUR/USD in between 1.2665-1.2650, SL 1.2635, targets 1.2670, 1.2730, 1.2770, possibly 1.2870, 1.3020, 1.317, 1.335.
- Risky: buy the EUR/USD at 1.2715/1.2720, SL 1.2690, target 1.2770.
Paradigms:
- The EUR/USD 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:
This morning the market is signaling further upside in EUR/USD. The bears seem to have become weak, and a market that can’t go down, starts to go up. Yesterday and on Monday, we formed dojis, suggesting that a possible short term reversal must be considered. The market needs to revisit the middle (~1.2770) or the upper side (~1.2890) of the down trending channel to remember why he became bearish in the first place. It is much more difficult to find long entry points today, and trading today will require taking more risks. If you have long positions from yesterday at 1.2665, you should try to hold them today since 1.2770 is in sight. If the market would move down again to the down trending channel support at 1.2650, we would strongly recommend to buy again, but this is very unlikely today. A possible but rather risky play is to enter long at current levels with SL below 1.270. Our main risk event today is the release of the FOMC minutes. The effect of this release is very difficult to assess, and could easily reverse the EUR bullish sentiment to turn it into USD bullish sentiment.
On a side note, AUD/USD is also bullish this morning and seems to be very akin on retesting the upper range of its weekly wedge. We, therefore recommend scalping the AUD/USD in the area between 1.049 and 1.052, where resistance will be very high with a probable return towards 1.045 (and possibly lower).
Japanese PM set to call election on December 16th
Reports out of Japan say that PM Noda, whose popularity is very low, will call an early general election on December 16th. USD/JPY is trading nearing session highs at 79.60. I'm still short of this pair and am looking to add to my position near 79.90 (you can follow this very slow trade in the members section).
Market is best left alone if it isn't moving
Volatility in the AUD/USD is at 66 month lows and it's not the only pair stuck in the doldrums, with big players corralling most of the major pairings and making movement very difficult indeed. My advice; don't trade markets like this just to be the brokers best friend! They are the only ones making money out of this excuse for a market.