EUR/JPY: Taking very small profits off the table at 103.75
Those following my efforts to build a EUR/JPY trading position can do so in the members section.
USD/JPY: Very solid offers on interbank dealing systems at 80.20
Yen bears are having a real go today and they've already managed to work through really heavy offers at 80.00 in USD/JPY. They are now up against more heavy offers at 80.20 and it looks like stalemate for the moment.
BoE's Bean says UK economy is over the worst
Cable is trading near session highs and the risk trades are all at intraday highs. Are we seeing the beginning of a big move or just another head-fake? I'm guessing it's the latter.
EUR/USD orders: Sell orders reported at 1.3015
First reports of any decent interest with sell orders reportedly solid near 1.3015/20.
EUR/JPY marches higher, important resistance at 104.80
It looks like some stops were tripped in EUR/USD above 1.3000, just as they were on the way down, and EUR/JPY looks to be the main culprit; macro funds have been selling a lot of JPY across the board. I see very important technical resistance at 104.80 (61.8% retracement of 5-wave downmove + best fit weekly trendline) and you can follow by attempts to trade this in the members section.
Hedge funds getting stuck into USD/JPY
Bit of action in the JGB world with the spread between 10 and 20-year bonds at a 13 year high. This is on the back of worries that the Japanese parliament will struggle to pass budget-funding laws.
Heavy offers above 80.00 have been soaked up be more relentless waves of buying from big macro funds but I'll stick to my earlier call, that selling rallies once everyone is really really long, is the best strategy here.
Hang Seng rises for 11th consecutive day
Lots of money still flowing into HK it would seem, with the local sharemarket posting it's longest run of consecutive gains since 2005, at 11 days, and the HKMA disclosing yesterday that they bought almost $2 billion worth of USD/HKD in order to protect their peg.
Chinese newspaper reports giving risk-sentiment a boost
Reports in official Chinese newspapers that China will take steps to increase domestic demand are giving risk trades like AUD/JPY a bit more bullish momentum.
AUD/JPY: Looks like some short-term stops were triggered above 82.70
I'm sorry to be so cynical but it seems like the only reason the market can find for moving is to try and trigger stop-loss orders. I suspect that there were some sitting above 82.70 in AUD/JPY, as I don't see any other reason for buying (apart from a small rise in the Nikkei).
USD/JPY: I still like the sell-rally play
The market is very long of USD/JPY, according to reports from the big prime brokers, but it's also safe to say that the market is bullish. There were very large offers near 80.00 earlier in the week and whilst they have remained solid, there has also been no major pullback either.
I think we should allow the bulls to have another big topside push taking out all the heavy offers above 80.00. Then, when the market is long to bursting point, we sell into the rally and wait for the inevitable sell-off whilst trailing stops are triggered. That's my cunning plan!
Webinar day today!
If you'd like to hear my thoughts on the pros of 'position building' and the cons of 'trade picking' then you can join me this afternoon for a webinar at FXStreet.
Why traders trigger stops!
The easiest way to describe this is with an example. Let's take EUR/USD yesterday as an example. The price was sitting around 1.3060 for much of the day but interbank dealers, many of whom chat with each other, all had pretty similar order books with heavy stops below 1.3000.
The dealers faced two obvious paths:
- Do nothing until the stops are triggered and then start selling to fill the orders. Remember that the dealers know there are plentiful stops below that level. Once 1.2999 deals, the dealer must start selling. If he's got EUR300 million worth of stops, they will probably not be filled better than 1.2990 on average? The dealer makes no money and the customers are very annoyed at the bad fill!
- The other alternative is to start selling in increments as the price starts falling. It could be something like this; sell 20 at 1.3060, sell 20 at 1.3050, sell 20 at 1.3040, buys back 30 at 1.3030 when price starts to stall, starts selling again more intensely once 1.3020 breaks, selling 30 at 1.3015, 50 at 1.3010, 100 at 1.3005 and then sell really hard through 1.3000 to ensure that the stops are done. This way, once 1.2999 deals (and he will make sure it does) the stops are filled at 1.2997, the customer says 'good fill, not happy but good fill' and the dealer makes $400k profit!
That's why dealers chase stops.
EUR/JPY falls below support at 103.10
Look for those trailing stops in USD/JPY below 79.50 to start proving magnetic!
EUR falls again after IFO: Next support at 1.2890
Quite a nasty fall across the board for the EUR, after poor PMI and IFO. Next risk event is Draghi at the Bundestag.
EUR/GBP nearing support levels at .8105/10 after weak German PMI
There is decent support in the EUR/GBP at .8105 which is bound to attract some buying interest.
Citibank FX strategist sees AUD hitting new highs in 2013
Steven Englander, head of G10 strategy at Citi, says reserve manager buying will the be main driver and ultra-loose US monetary policy also a big factor.