Cable: Nears support levels 1.5850/60
This is where the big bids were reported yesterday during London trade. If they are big, then there is no way that Asia will have enough power to work through them.
EUR/USD: Still no sign of Sovereign buyers; technical target at 1.2640
The 100-day MA comes in at 1.2640 and there is a 50% retracement just below there near 1.2605.
Regional stocks head lower
AUD/JPY has taken a bit of a hit in the last 45 minutes with risk sentiment suffering as regional equity markets lose ground. The Shanghai market is over 1% lower and no sign as yet of the plunge patrol. Next technical support in AUD/JPY is at 82.40.
EUR/USD back below 1.2700 as dollar strengthens slightly
No sign of any Sovereign buyers so far and interest remains very low.
Yen slightly weaker on election chatter
There have been newspaper reports out of Tokyo that PM Noda may call an election as early as this weekend and that is giving the Yen it's slightly bearish bias in early Japanese trade.
AUD dips slightly after business-conditions data
The Aussie is around 10 pips lower in quiet trade after business confidence index came in slightly below last month.
EZ FinMins to meet again on November 20th
As expected, no result from the EZ FinMin meeting and there is likely to be no decision on the aid tranche until at least November 28th.
EUR/USD dipped by 5 pips. We could be in for an excruciatingly quiet session from here!
The day ahead in the FX market, Tuesday November 13th
- EU group and FinMin meetings will wind to a close so expect headlines in the next few hours:
- Australian business confidence and Japanese industrial production are the 'highlights' on the economic calendar:
- The Diwali festival starts today and there will be holidays across much of Asia:
- EUR/USD has traded in very tight ranges with US financial markets mainly closed; Sovereign bids still expected below 1.2700:
- GBP/USD was under pressure for much of Monday in London but strong bids 1.5850/60 held firm:
- The AUD was dragged moderately higher by its neighbour as trailing stops were triggered in an overly short NZD market:
- USD/JPY became invisible again, hardly trading in tight ranges; barrier protection at 79.00 still the short-term key:
NZD: Trailing stops aplenty
As we know well, the prime occupation of this particular FX market is chasing stops, so that being the case we should look for the currency with the most number of trailing stops and I think I might have found it! It's the Kiwi!
All joking aside, trailing stops reported at regular intervals topside in NZD/USD, NZD/CAD and NZD/JPY. Unfortunately I avoid the NZD at all costs so will not be getting involved but if you are short NZD and in the money, how about booking a little profit just in case.
That's me done for the day. US markets are partially closed today so it should stay relatively quiet overnight. Catch you tomorrow++
Early European orders boards updated
- USD/JPY: Barrier protection ahead of 79.00:
- EUR/USD: Sovereigns were seen 1.2690/95 on Friday, no confirmation yet if still there but market did bounce quickly from 1.2697 lows:
- Cable: Large bids 1.5850/60, barrier protection 1.5800:
- USD/CAD: Solid bids .9950/60:
- AUD/USD: Reserve manager bids 1.0350, offers light until 1.0480:
Model funds selling risk early in European trade
GBP/JPY and EUR/JPY have come under early pressure from model funds this morning, who have also been buying the USD against the emerging Eastern European currencies and the Scandis.
EUR/USD: Hit by early wave of Algo selling
Not quite sure what the signal was, or perhaps they are all just chatting with each other and decided to undo whatever happened in Asia, but whatever the reason the Algos are being blamed for hitting the EUR/USD hard in very early London trade. The pair fell from 1.2735 to 1.2705 quite quickly but remember that these guys are basically all intraday jobbers and will not sit on big positions for long.
The strategy actually does make sense to me; as one session comes to a close, look to trade contrary to whatever intraday moves happened (presuming that there was no fundamental news) because session traders will be looking to square up their positions so you give them a hurry up call!
EUR/USD: London open analysis
Courtesy of Chifbaw.com and you can find full details on their website.
Recommendations:
- Preferred: buy the EUR/USD in between 1.2690 (150-DMA) and 1.2675 (trend line support), SL 1.2645, target 1.27, 1.2750.
- Medium: short/scalp the EUR/USD at 1.2785 on rallies during the first hours of the London session, SL 1.2805, targets 1.2750, 1.2690, 1.2630.
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:
As we were expecting, the market enlarged its down trending channel, although no rate cut was necessary to achieve this. We do believe the current channel will offer solid support in the coming days and provide for a low risk buy opportunity for short term profits. Of course, should there be any news signalling a “let go” of Greece by the Troika (refusal to provide the new loan that is currently being discussed), then the EUR/USD will simply collapse and nothing will provide any support. This is our main risk for the coming weeks in this pair. Technically the EUR/USD has rebounded off the 150DMA on Friday. Today we expect the market to stay within the range defined on Friday (1.2690-1.2790) before further continuation of the downtrend in the coming days. We therefore recommend looking for a long entry on a retest of the bottom of the range / 150DMA at 1.2690 or even better, a test of the trend line support (currently ~1.2675). Another opportunity with a higher risk is to short/scalp rallies toward the upper range during the early phase of the London session. A possible entry is Friday’s high which is also minor trend line resistance from the peaks 1.3020 & 1.2875 that comes around 1.2785.
Quick overview of Asian markets
- General sentiment improved again after very strong Chinese trade data over the weekend, where the trade surplus neared 4-year highs:
- Regional stock-markets did not follow the late US Friday lead higher, with Tokyo and Seoul lower and China and HK only slightly higher:
- EUR/USD sentiment improved after the Greek parliament passed the latest stage of austerity packages:
- The EU group meets today to discuss the situation with Greece but are not expected to pass the latest tranche of payments:
- Reports of Sovereign buyers below 1.2700 also gave the EUR/USD a lift:
- Reserve manager bids reported in AUD/USD near 1.0350 and strong buying interest also noted in cable near 1.5850/60:
- US bond markets are closed tonight for Armistice Day but stock-markets will be open:
Cable orders: Solid buying interest 1.5850/60
- Macro fund and Sovereign bids reported near 1.5850/60:
- A quick look at the daily chart shows that both the 100-day and 200-day MAs are near this same level:
- (That usually means that there will be plenty of stop-loss sell orders below there (probably below 1.5825ish)).
USD/JPY: Looks like short-term 79.00/80.00 range trade
This pair loves to range trade and the immediate downside pressure was eased last Thursday and Friday when some of the weaker long positions amongst retail players and CTAs were squeezed out. There is a barrier in place at 79.00 which provides an obvious downside support point and there is technical resistance (61.8% of 80.40/79.10) near 79.90. I'd play this range for now.
Overall though, I remain very bearish on this pair in short-to-medium term as I think the big macro longs will get squeezed when we near illiquid December trading conditions, so I'm happy to play this range and hopefully build my short trade into a strong position (you can follow this in the members section).
AUD/USD technicals: Getting set for a big break-out move
I've been following the weekly wedge on this pair for the last few months and as we know in FX markets, the longer a pair stays tied in a tight range, the bigger the breakout move will be. Taking a quick look at the daily chart, we can see that the big 4 MAs (21, 55, 100 and 200) are all lying very close together. So we either get a few more months of really tight ranges or we get a big breakout; of course I hope for the latter. Market positioning data shows that the market is totally flat, another indicator that we may soon see a move starting to build.
My preferred scenario is that we initially see a false break lower, taking the market into the low 90's again and everyone gets short and bearish, but then we see a sharp reversal in line with terrible USD fundamentals which will take AUD/USD towards 1.20 and beyond. Well you gotta have a plan!