Quick overview of Asian trade
- Shares across the region were around 0.2% higher with the Nikkei flat and HK +0.2%:
- Australian consumer confidence moved to 18-month highs:
- Risk trades marginally higher in quiet trade:
- AUD/USD stalled at moderate sell orders near 1.0450, with heavier selling noted at 1.0480:
- EUR/USD moved slightly higher on EUR/JPY short-covering, but the moves were hardly worth talking about:
Can't see the Algos being busy in early Europe
It's a complete waste of time looking for trade opportunities on days like today so best to do a bit of research and try and figure out where the next move might come from. The best chance of a move in early Europe will come from the much maligned (and unfairly so in my opinion) Algo funds. These guys look for short term trading opportunities when markets are out of sync or stops are ripe for plucking. It's difficult to see where such opportunities might arise today. We've had very little movement so the market can hardly be mis-aligned and positioning is very low overall, so can't see any moves being generated by stop hunts either.
AUD edges higher on stocks, consumer data
Basically nothing going on so no point in looking for news.Come back when Europe opens!
Overview of positioning in the professional market
EUR shorts have only increased slightly in the past week but they still remain the dominant large position in the market. CHF shorts are running a fairly close second although neither are close to extreme levels.
JPY shorts have been significantly reduced which should take the immediate downside pressure off USD/JPY. USD overall positioning has flipped from small short to modest long but in reality the overall level of positional risk is remarkably low.
(These figures are based on overall positioning amongst primarily leveraged, speculative players on 3 of the big bank trading platforms).
EUR/USD: Session outlook, favour selling rallies to 1.2740
The downtrend is still very much in control on the short-term charts so selling rallies back to resistance areas around 1.2740 makes the most sense to me. Bulls will want a premium for entering the market ie a silly dip, in the absence of any basing formation. EUR/JPY has steadied after yesterday's sell-off which was driven by real-money funds. This cross as always will determine the EUR fate during Asian trade and it's outlook remains bearish in short-term whilst below 101.30. On a fundamental note, the large increase in Spanish inflation is also a worry as most social payments are index-linked and could lead to a big increase in outlays for an already overly indebted government.
AUD/USD: Session outlook, favour selling rallies to 1.0480
As you can see on the attached 4-hour chart, this pair is on a very slow up-trend which is seriously lacking in momentum. Sell orders are reportedly starting at 1.0450 and getting heavier near 1.0480, and I will wait for the latter level before selling. I remain bearish on a slightly longer-term view, as I think the top-end of the weekly wedge, which is now near 1.0600, should again prove to be solid resistance. In the meantime, a broad 1.0350/1.0500 should cover most eventualities.
The day ahead in the FX market, Wednesday November 14th
- NZD retail sales and Australian consumer confidence are the only releases of note on the economic calendar:
- Risk aversion remains reasonably high in the face of uncertainty in Greece, Spain and the US:
- Higher than expected inflation data out of the UK and Spain only adds to uncertainty:
- Market positioning remains relatively low and momentum/confidence is also seriously lacking:
- Big players continue to dominate with the market unable to break through order levels:
- USD/JPY; still consolidating above option protection at 79.00, intraday flows depend on short-term sentiment changes, election talk could be Yen-negative:
- EUR/USD; option protection ahead of 1.2650 barrier provided the base, short-term sentiment swings on EZ headlines:
- AUD/USD; also dominated by large orders/flows either side of the market, reserve managers buying dips and asset managers selling into strength.
GBP pops up on CPI data
The bids at 1.5850/60 proved very strong indeed and cable is back near 1.5900 after the latest CPI figures rose to 2.7% YoY.
EUR/GBP bids reported near .7960, stops below .7950 but large bids near .7925.
I'm done for the day. I'm still running my short AUD/USD and short USD/JPY trades and am hoping to get some volatility soon so as I can build some decent sized positions before any big moves happen. Have a very pleasant evening and I'll catch you tomorrow.
EUR/JPY: Real money accounts continue to sell in recent trade
They must have quite a bit to do!
Edit: Talk that EUR/USD buying ahead of 1.2650 is barrier protection.
Flows and orders updated
- USD/JPY remains heavy with unconfirmed talk of heavy real money selling ahead of a Treasury redemption on Thursday; barrier protection ahead of 79.00:
- EUR/JPY: Real money accounts selling alongside corporates and asset managers:
- EUR/USD: Weighed down by EUR/JPY selling but very solid buying interest reported 1.2665 through 1.2650:
- AUD/USD: Reserve managers still expected at 1.0350:
- Cable: Solid bids 1.5850/60; barrier at 1.5800:
- USD/CAD: Solid bids .9955/60; solid offers 1.0020.
Raft of European economic data today
Don't forget that the economic calendar is quite full today with plenty of minor and major data (German ZEW and UK CPI).
USD/AXY: Light flows as holidays take effect
Plenty of centres are closed today for the Hindu festival and this has had an effect on Asian currency flows, with very little being reported. There was no obvious physical intervention, although the CNY was again trading near the upper end of its 1% daily range. There was some verbal intervention from the Taiwanese central bank but overall a fairly quiet day.
EUR/USD: European open analysis
Courtesy of Chifbaw.com and you can see full charts and analysis on their site.
Recommendations:
- Buy the EUR/USD small in between 1.2665-1.2650, medium in between 1.2650-1.2630 and big in between 1.2630-1.2600, SL 1.2550, targets 1.2650-1.2665 (channel trend line), 1.2690, 1.2730, 1.2780, possibly 1.2870, 1.3020, 1.317, 1.335.
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:
The EUR/USD is now below 1.27 in official oversold territory. This morning the market is bearish due to discords within the Troika on Greece. In our view, the area of 1.26-1.25 is the bottom of the range within the current conditions and buying support will soon become predominant. The risks are now mostly to the upside: the fiscal cliff issue is not as dramatic as in August 2011 so far, and the new loan for Greece has good chances of being delivered despite all the noise. Therefore, the area of 1.26/1.25 should see some stabilization in this downtrend, and possibly a rebound that would open the way to the next leg up. We should therefore try to pick the bottoms and start building positions to profit from the relief rally. Today, we expect the market to continue to push down the pair. Prices might fall temporarily outside of the down trending channel before reverting to it. We would consider buying everything below the down trending channel (currently ~1.2665) for a return into the channel by the end of the day. For a less risky play, one can look at entering long around the 100-DMA at 1.2640. If we would fall down to the 50% Fibonacci retrace at 1.2605, the EUR/USD would be an absolute buy for a minimum of 30-50 pips profit, but we do not believe that we will get there today. Since sellers have some momentum, the stop loss levels need to be distant today, deteriorating our risk reward ratio.
EUR/USD: I prefer the "buy silly dip" strategy
I still have trouble getting out of range trading mode in EUR/USD so I prefer to wait and buy any silly exhaustive dips looking for an easy retracement. I can't see this pair making any massive moves pre-Christmas so with that in mind, I think it's a matter of looking for obvious 100 pip trades. The one potential landmine for the EUR could be EUR/JPY, as if that turns really sour then EUR/USD could break lower.
On the day, if an hourly base forms near 1.2610/20 then I'd look to buy looking for 1.2750.
Quick overview of Asian market
Asian markets partially closed for Hindu holiday:
Equity markets fall led by Shanghai and Sydney:
Yen fell early on talk of Japanese general election:
EZ FinMins to speak again next week, no definitive date on loan tranche:
Yen crosses turned lower in afternoon following equity lead:
Raft of EU data this afternoon led by German ZEW.
EUR/USD orders: Solid bids reported 1.2650/60
I doubt very much if Asia will be able to generate any momentum to test these buy orders. There is however a raft of economic data out in early European trade, lead by the German ZEW, UK CPI as well as CPI from Spain and Portugal. That should be enough to get the market moving.
USD/JPY: Looking soft but should stay range-bound
After the initial push higher earlier today on election rumours, USD/JPY has given up those gains and fallen 30 pips on risk aversion plays in the Yen crosses. There is still institutional buying and option protection ahead of 79.00 and that level should hold firm for a few days yet. I remain very bearish in the medium term, and I expect macro longs to get squeezed before Christmas. No big macro stops are reported until 78.50 breaks, then watch out!