EUR/USD: Hit again by late liquidation
Dealers say the latest drop is attributable to more long liquidation ahead of the weekend in fairly thin markets. There have been no reports of any actual ACB buying as of yet and with Europe still not up and running, liquidity is quite poor.
First reports of solid buying interest is at 1.2865/70.
USD/AXY: No sign of any intervention today
Central banks and their agents have been very active this week in USD/HKD, USD/SGD and USD/KRW but there has been no sign of any activity at all today. Dealers still expect to see ACBs on the bid in EUR/USD and AUD/USD as they recycle USD purchases from the last few days.
Very quiet Asian session ahead of risk events tonight
Absolutely nothing to report from today's 'excuse' for a trading session. AUD/USD took out light stops above 1.0415 but immediately ran into sell orders at 1.0420 and retraced to opening levels. USD/JPY edged higher early but the level of interest was very low; and the prospect of ACBs buying near 1.2920 in EUR/USD dissuaded the bears from having another downside run. Perhaps the Europeans can come up with a reason to trade, let's hope so.
USD slightly higher across the board in Asian trade; shorts covering ahead of NFP
AUD/USD triggered those aforementioned light stops above 1.0415 but stalled exactly at the reported sell orders near 1.0420 and has now retraced all of this morning's gains. USD/JPY is 10 pips higher in quiet trade and both EUR/USD and GBP/USD have given up 20 pips as the Asian market trims USD shorts ahead of tonight's big risk event.
AUD/USD: Inching higher; updated info on orders
AUD/USD is making marginal new highs above 1.0410 but dealers say that the stops above 1.0415 are not particularly huge and are being somewhat offset by more selling interest at 1.0420/25.
AUD/JPY is also fast approaching technical resistance at 83.55, so we can expect sellers ahead of the level and stop-losses above.
Finding the trade most likely to stuff the most people
It's a sad state of affairs but most movement in the market at the moment is caused by stop-loss hunting. The market finds a bias and starts building positions but with momentum and confidence lacking, tight trailing stops have become the norm. Once positioning gets to any sort of sizeable level, the market then turns and starts targeting the trailing stops.
There's nothing we can do about this, it's just the way the market presently is so best we join in!
What's the biggest current market trend which would hurt the most people if it suddenly turned around? I think it could be USD/JPY? The market is long and understandably so, as we are near historic lows and the BOJ has quite aggressive easing policies. JPY short positions got to extreme levels last week and the selling has now re-commenced after a brief clean-out post-BOJ. Retail positioning in USD/JPY is only 60% long, but that does not have such a big impact as they are mainly short-term traders. It's the big macro funds we need to watch, once their positions get too big, then they are in big danger of a stop-loss squeeze.
Looking at the daily chart, a really cheap trade idea would be to sell near 80.40 with a relatively tight stop above 80.80 just in case the positional squeeze happens. The closer to year-end we get without this pair going higher, the more likely we are to see a sell-off imho.
Asian market open, Friday November 2nd
You can click through here and read my opening comments on FX Street.
EUR/USD: Sovereign buyers reported below 1.2920
- AUD/USD: Reserve managers buying 1.0310/20; solid offers still 1.0400 with stops above 1.0415:
- USD/JPY: Decent-sized offers near 80.20:
- Cable: Heavy stops above 1.6180:
EUR/GBP: Fibo support holding for now
The 38.2% retracement of the strong 5-wave upmove from .7750 to .8160 comes in at .8005 and this level has already held firm on the first test 4 days ago. There will of course be plenty of stops just below .8000 and if the cable stops above 1.6180 go off, then that will probably trigger the stops in the cross as well.
Stop Losses R Us
If the FX market was a store it would be called Stop Losses R Us!
Or perhaps as Iridium suggests, The STOLOSSUS market?
Any more suggestions??
We are renaming the FX market, "the stop-loss hunting market"
The market builds positions and then stops get triggered, and then on to the next position. It sounds rather flippant but its unfortunately very true.
Stops in cable are being targeted with larger stops reported above 1.6180.
Early Europe targeting EUR/GBP stops
Looks like there are more stops on the downside in EUR/GBP, mine included, and the early European market is having a look. The cross is back below .8030 and there are certain to be stops below .8020.
USD/AXY flows point towards further EUR/USD support
Asian central banks have been busy again with the Bank of Korea and the Hong Kong Monetary Authority buying close to an estimated $1 billion between them today as they try to limit gains in their currencies. If these central banks continue usual practices, then we will see them buying EUR/USD and selling USD/JPY as they try to keep their reserve ratios balanced.
Cable: Decent order interest nearby
- Solid sell orders reported 1.6140/45:
- Large stop-loss buy orders above 1.6180 and at regular intervals above 1.6220.
Good-news day out of China
- Both official and HSBC PMI data came in near or above expectations:
- The Shanghai index is over 1.5% higher:
- Chinese home prices have risen for the 5th successive month:
USD/JPY back above 80.00; AUD/JPY important resistance at 83.55 now looms
Not so much fanfare this time, but perhaps that means that the move can have more legs this time? The market is still short of JPY, but not at extreme levels anymore amongst the big speculators, so the signs are positive for USD/JPY bulls.
Sell orders are reported starting at 80.20 so that might be a good place to book interim profits.
EUR/JPY and AUD/JPY are also edging higher with the latter now back above 83.00, with next important technical target at 83.55 prior daily highs.
Still no movement after data drop is complete
The final HSBC number came in at 49.5, up from 47.9 last time, but nobody cares and nobody is doing anything! All of the majors are in 20/25 pip ranges. Let's hope the lunch break encourages some traders to get involved!
AUD unchanged after official China PMI comes in on expectations at 50.2
AUD/USD got above 1.0380 just before the data but has now slipped back to its opening level after the official PMI came in as expected. I can't see any movement happening between now and the London open with tight range trading likely to stay in place.
HSBC PMI data due in 45 minutes.