South Korean economic data improves in October: PMI and trade surplus rise
- PMI rose to 47.4 from 45.7 in September:
- Trade surplus came in at $3.8bln, better than the expected $3.45bln:
Risk trades could get a lift today from HSBC China PMI
The official China PMI has been above the HSBC reading by an average of 2.2 points so far this year. If that equation stays true, this months HSBC data will rise (edit) from below 48.00 last time, and that should give risk trades a minor boost (any number above 50 signifies expansion in the manufacturing sector).
AUD/USD: 1.0350/1.0400 likely to cover most eventualities
Unofficial Chinese PMI data is the main risk event (01:45 GMT) but dealers still expect the AUD/USD to stay inside tight ranges. There was some selling overnight around the time of the London Fix but those losses were quickly reversed. Dealers mention bids near 1.0350 and solid offers at 1.0400, and they do not expect the pair to trade outside of this range during Asian trade (barring a big surprise from the HSBC data). As a rough sentiment guide, 3 out of 4 dealers are tending bearish on today's session.
EUR: Factors affecting and general sentiment overview
- Asian central banks have been buying EUR/USD firstly below 1.2900 and more recently near 1.2950. This is likely some diversification out of USD bought as part of intervention in USD/AXY, most notably USD/SGD, USD/HKD and USD/KRW:
- Macro technical picture could be turning bullish after the 50-day MA crossed the 200-day MA:
- General sentiment remains bearish against the backdrop of Greek/Troika negotiations and Spanish economic woes:
- Market positioning is short, but not at critical levels: In EUR/USD for instance, the retail market is roughly 55:45 short:long whilst the professional market was slightly more exposed but has started to cover again in recent sessions (very approximate guesstimate of 60:40 short:long):
- Crosses are mixed; EUR/CHF is starting to look heavy again, EUR/GBP gave up recent gains too easily; but both EUR/JPY and EUR/AUD look well supported in the short-term.
Asian market open, Thursday November 1st
You can click through here and read my opening comments on FX Street.
Update on overnight trades
You can follow all the details in the members section. The trailing stop on part of the EUR/GBP position has been adjusted slightly lower and the EUR/AUD position was traded a few times, improving the average slightly. Otherwise same views and positions. Have a good day.
EUR/CHF: Time for me to give up on long position.
I've had enough of the frustration and am taking my loss and giving up on this pair. It's probably the low but I don't care. The info hasn't delivered so I'll concentrate my energy and resources elsewhere.
EUR/AUD trade update
The position has been reduced again as our trader feels he may have entered at less than attractive levels, more in members section.
Looks like the SNB is done with its EUR selling, for now at least.
The EUR is also getting a lift after the latest SNB reserve allocation data was published (link is available in members section). The share of EUR in total reserves is back at longer term average numbers, near 48%, which probably means that the SNB is done selling EUR (they have been one of the consistently biggest sellers as they sought to reduce their total EUR holdings after buying large amounts of EUR/CHF). Also of interest is the fact that the SNB has lowered its allocation of GBP and has increased AUD, CAD and AXY.
EUR/JPY takes out yesterday's post BOJ spike high
EUR/JPY is looking very strong already although the European session is only young. I'm still looking to reinstate my short position on any rally towards major technical resistance at 104.80, although that might be a few steps too far for today. I'd expect to see some 103.20/104.20 consolidation but I'm also happy to sell any sharp spikes intraday.
EUR/USD: Corporate sell orders reported just below 1.3000
Not sure on the amounts, but this source only usually mentions decent-sized orders. I'll keep the members page updated for the next few hours as information flows through.
Few comments re market positioning
The professional market and the retail market act in different ways. If you read that the retail market is heavily short (say 70% of accounts are short) then they are likely to have fairly tight trailing stops which usually means that the market will soon start to move against them. The professional market (and I exclude CTAs here) are generally much more patient and tend to build positions over time. So if the professional market is only slightly long AUD for instance, it could mean that they are at the beginning of a position-building phase which should be bullish AUD in the medium term. There are of course occasions like last week in USD/JPY when the professional market got itself overly long and then we saw a bit of a wipe-out.
EU FinMins holding conference call later today
There is the possibility of a post-meeting statement around noon London time, so keep an eye out for that potential risk event.
GBP: European session overview
- I'm bullish EUR/GBP at the moment and I think this pair should hold above .8040 roughly, before the next bullish leg initiates. There is the possibility of end-of-month buying here which should also help. No major orders being reported at the moment.
- GBP/JPY shows plenty of the usual volatility but its hard to find any short term trend. It needs to spend some time above 128.35 in my opinion or otherwise could slip back towards the lower end of the range near 127.00.
- Cable has been totally direction less in recent times and further range trading between 1.5920/1.6120 seems likely. Professional positioning is almost flat though I've been advised today that retail accounts are around 70% short.
Talking my position here (long EUR/GBP), but overall I prefer GBP shorts across the board.
Troika/Greek negotiations finally seem to be coming to a close
That's is according to some early news reports out of Europe. If and when the end is announced, that should be moderately bullish EUR I would think, if only in very short-run.
No reports on any major orders close to the market in any of the major pairs, apart perhaps from those AUD/USD sell orders near 1.0400.
Asian stocks edge higher; US nuclear plants get all clear
Thankfully I missed most of this lackluster session by going to lunch. Stocks are up a bit in Asia and much of the US infrastructure seems to be getting back to normal. The AUD tried to rally on this but ran into plentiful selling interest ahead of 1.0400. Let's see what Europe has to do, perhaps some end of month central bank activity.
Professional market positioning overview: EUR shorts on increase again
I collate this data from 3 of the biggest prime brokers and one leading investment bank. In general, positioning across all 4 seems to be very consistent:
- The biggest move has been back into short EUR positioning and this is the largest open position amongst professional players:
- JPY shorts have been markedly reduced, by over 50% in the last 4 days, but prior positioning was at very extreme levels meaning that the market is still short (but probably more comfortable):
- CHF shorts remain significant and are gradually increasing every week:
- USD, GBP and CAD positioning levels are virtually square:
- AUD market has flipped from small short to small long:
EUR/JPY: Consolidation 102.60/103.40 before higher to test 104.80
The BOJ easing had little or no impact and with the market already sitting short Yen, we saw some volatile trading in EUR/JPY. It is now back to where it was pre-BOJ and with the EUR starting to show mild bullish tendencies, I think we may see the bulls take short-term control to at least test important resistance at 104.80 but firstly it must break out of a short-term consolidation range between 102.60/103.40. The market is still short of Yen but probably has good reason to be so, so I don't expect any more sharp sell-offs in the Yen crosses, at least for the next few days.