China's industrial production comes in above expectations
Looks like the AUD/USD is triggering more short-covering above 1.0430 and EUR/USD stops above 1.2780 are well and truly done.
Old wives tale #77; always ignore GBP moves in Asia
Cable has rallied 40 pips already in Asia and if it rallies another 30, up to hourly resistance near 1.6040, I'd be tempted to try an intraday short with a tight stop-loss. The liklihood is that when London walk in, they say "Asia did what?" and promptly undo most of what happened in thin Asian Friday markets.
Pre-weekend positional square-up underway
Dealers say that liquidity is terrible and relatively small flows are moving the market. It seems that Asia at least has been short EUR/JPY and GBP/JPY, and we are seeing a Friday afternoon short-squeeze. There are stop-loss orders rumoured above 1.2780 in the EUR/USD but I have no confirmation today.
EUR/USD medium-term overview: Risk-reward favours buying deep dips
I know it's a bit of a cop-out, but in reality its almost impossible to be bullish on either the EUR or the USD, so it comes squarely down to price and short-term sentiment. A look at the weekly chart shows that the fall from 1.4940 to 1.2035 has retraced almost exactly 38.2% to 1.3145 and then stalled. So its possible that we have already entered the next phase of a medium-term down-move. But it's also possible that we have only seen the first leg of the retracement and that we soon see a 'C' wave which takes us at least to 1.3485?
Short-term sentiment is currently bearish and the market isn't showing much ability to rally, so it looks like we will see further losses very soon. I would look to buy a deep and exhaustive dip towards the 61.8% retracement of 1.2035/1.3140 which comes in near 1.2475. If this level holds, then we have the possibility of a 10 big figure rally. If it breaks, then plenty of bulls will be bailing ship and one could even try a stop-and-reverse strategy, with tight trailing stops of course.
Short-term traders should also watch out for a weekly close below 1.2740 (prior highs and 38.2% 1.2035/1.3140); if this occurs then sentiment will certainly turn negative for quite a few sessions.
China CPI +1.7% YoY, -0.1% MoM
- Bank of Korea left interest rates unchanged as expected:
USD/JPY: Should be toppy now near 80.00
I'm looking to increase my short position on rallies and I think the market will struggle to get back above 80.00. The low after the initial election result was near 79.85 and it rallied 50 pips from there on the back of retail market buying out of Japan. I think that level, 79.85/80.00, now becomes psychologically important I will look to sell there initially.
AUD/USD: Still short but its time to cover partially I think
The AUD looks fairly heavy this morning but then again it looked really well bid at 1.0470 as well a few short sessions ago! I'm short and overall am still happy to be short but I think we may see higher levels again before the big sell-off materialises (if at all). Reserve managers are expected to appear at 1.0350 so I'm not going to wait around for them; I've taken smalls back at 1.0386 and will buy more smalls at 1.0370ish and then see what happens from there.
Asian market open
You can click through to FX Street and read my opening comments. Just popping out for coffee with a true market legend (at least in his own mind :) ), so back shortly.
Yen crosses likely to get squeezed lower as we near year-end illiquid markets
My argument here remains the same, hedge funds have been building large positions in the Yen crosses hoping for a late rally which could 'save' their year. The Romney defeat has put this trade in jeopardy and as we get closer to December and much thinner markets, these positions are in danger of getting squeezed out. So forget about fundamentals and risk-sentiment, these moves will be all about market positioning and I think the risk-reward ratio favours the bears.
On an intraday basis, AUD/JPY could be of interest as we near the recent pivot level at 82.55 and a clean break below there could see more bulls head for safety. The next technical support below there is near 81.60.
AUD/USD trailing stops now reported below 1.0380 and they could also come under scrutiny in early Asian trade.
USD/JPY: Stops triggered but bids reported near 79.25
The short-term market is being squeezed but the macro longs still probably feel safe whilst reported institutional bids 79.25/79.00 are in place. Stops were tripped below 79.50 and 79.40 but my information suggests that most of the tight stops are now done with the next big batch kicking in below 79.00. Nevertheless I remain strongly bearish and see this pair as a definite sell-rally proposition, basically because the market is positioned wrongly coming towards the illiquid end-of-year markets.
I'm reducing my short position slightly and will look to increase again on rallies back towards 79.90, and you can follow this trade in the members section.
All quiet in FX market ahead of central bank meetings
I'm sure things will pick up a bit later on today after the ECB and BOE (neither expected to change policy) but it looks as if we are in for a few very slow hours. Thanks for your company today and TGTF!
If you don't like rumours, look away now!
Another day, another FX market rumour! The goss this time is that the BOE is set to announce additional policy measures at its meeting later today. EUR/GBP is 10 pips higher in the last 40 minutes or so, probably related to this rumour and attempts to trigger weak trailing stops in the EUR/USD above 1.2780. Unfortunately the market is back to normal after yesterday's heavenly volatility.
Cable and EUR/GBP orders
- Cable: Solid bids reported near 1.5960:
- EUR/GBP: Stops reported below the market (no exact levels given), large bids seen near .7920/25.
EUR/USD: Early Europe market analysis
Courtesy of Chifbaw.com and you can view charts etc. on their site.
Recommendations:
- Short the EURUSD at 1.2730 with SL 1.2750 target 1.2650 PROVIDED that volatility contracts (the market stays range bound 1.2740-1.2780 till 12:45 GMT) and a rate cut is announced.
- Buy EURUSD in between 1.2630 and 1.260 with SL 1.2570, targets 1.2650, 1.2670, 1.2730.
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:
This morning the market has a bearish bias, continuing the risk-off started by the US election results. The ECB council meeting today is a key risk event and we expect the market to stay quiet (volatility contraction) until the ECB announces its rate decision. Yesterday’s bearish comments by Draghi suggest that a rate cut will be discussed. Given that the economic numbers have been mostly bad all across the Eurozone, given that Germany’s economy is now most likely entering a recession, given that the inflation rate in Germany (~2%) is moderate, and given that Germany is an export led economy, we believe that there are good chances for a rate cut (-0.25%) to be announced today. This rate cut is possibly already partially priced in. Our recommendation is to short the EUR/USD on a volatility breakout if there is a rate cut indeed. Our target to the downside is 1.2650, thus breaking the down trend channel that we identified earlier (see graph). Buying the EUR/USD is also an option if the market gets overly bearish and moves closer to 1.260. Two key levels to watch are the 100-MA at 1.263 and the 50% Fibonacci retracement at 1.2605. Our models also show that this area has strong probabilities of reversal or saturation of the price action if reached today. Keeping these long positions overnight might be a good idea since some of the EUR/USD shorts will cover tomorrow. If the ECB would maintain its interest rate at 0.75% the upside move will remain limited and will not offer good short opportunities.
USD/AXY: Not much action today
Some minor activity in USD/PHP and USD/TWD, where agents were seen buying smallish amounts, but no action of note in the bigger currencies.
EUR/USD orders: Stops heavier on the downside
I've just updated the orders in the members section, and it seems that stop-loss orders are situated either side of the market, at 1.2780 and 1.2730 but the downside orders are heavier. I'm guessing that both sets will get done before the European session is over!
Remember that both the ECB and the BOE are in session today.
Quick overview of Asian FX market
- The NZD fell very heavily after shocking unemployment data came in at 7.3% against expectations of 6.7%:
- The AUD rose after Australian jobs data came in slightly better than expected at 5.4%:
- AUD/NZD was of course one of the big movers, up almost 150 pips on the session:
- Regional stocks took the negative lead from Wall Street and fell by 1.5% on average:
- The Chinese communist party congress began today with no major announcements thus far:
- The major pairings have traded in tight ranges with very few big flows noted.
Around the Asian markets
- Stocks are -1.5% on average:
- Gold steady around $1715/oz:
- Copper +0.25%:
- Oil $107.50/bbl +0.6%.