Yen crosses open in Tokyo with bid tone
USD/JPY is again knocking on the door of some sizeable offers at 80.00 and both EUR/USD and AUD/USD are 10 pips higher in quiet trade. The bullish momentum which appeared yesterday afternoon in the Yen crosses after the Shirakawa comments, still seems to have some legs.
RBA: More public comments regarding the high AUD
Yesterday it was Jillian Broadbent who was quoted in the mainstream press as saying that the AUD was too high, and today it's incoming board member Heather Ridout, who is also saying that more attention needs to be focussed on the high level of the AUD. Perhaps if tomorrow's CPI data comes in below expectations, then the RBA board might consider cutting by 50bps? Not really the Glenn Steven's way, as he tends towards being cautious, but its certainly interesting that the public rhetoric is being increased.
Medium-term I still like the sell-big-rally play in AUD/USD. I've got a very small core short position there and I am hoping to get better levels to add more over the next few weeks.
Romney-Bernanke trade
There is increasing speculation that a Romney victory in the US Presidential election could lead to an immediate end to the Bernanke era. Romney has said that, should he win the election, he will replace Helicopter Ben when his second term ends in January 2014. Market speculation is that Mr Bernanke wouldn't wait that long, and that he will resign before Romney could take office.
Romney would look to put someone with more hawkish credentials in the Fed hot seat and this would have a major impact on world financial markets. US equity markets would fall heavily as stimulus is removed dragging worldwide risk sentiment lower and the USD would rally as prospects of further QE are diminished and long-end US rates start to rise. Sounds like yet more reasons to be selling any AUD/USD rally!
JPY crosses still marching higher
No sign of this afternoon's move higher in the JPY crosses to lose momentum. EUR/JPY has tripped stops above 104.20 and my ill-advised sortie into GBP/JPY has also met a sad end.
AUD/USD: Failing to go with the flow
EUR/USD and cable have rallied nicely alongside the Yen crosses in the last few hours but the Aussie isn't able to keep pace. We've had an unusually quiet 30 pip range for the last 12 hours and dealers have reported little or no interest, all day long.
Funny how this market can always bite you unexpectedly
There is no such thing as a safe trade and you'd think that after 26 years in the market that would be deeply ingrained in my mind. Nevertheless we all get complacent from time to time and then the market reacts in a way that we had absolutely not bargained for. If you'd asked me a few hours ago whether there was any chance of the Yen crosses moving 70/80 pips higher I'd have said less than 2%. Just another reminder that we always need to treat each and every trade with total care and if we don't understand what's happening, then put an affordable stop on the trade and start again.
Are we about to buck the 'risk-off-Monday' trend
Deutsche Bank have been tracking this phenomenon in recent times, with something 16 of the last 17 Monday's turning out to be risk-off events. With rumours of possible BOJ easing measures picking up steam, could this be the Monday to buck the trend?
I'm caught short GBP/JPY from lower down and am a bit unsure what to do, never a good trait! I'm reading that there are stops above 127.90 so I guess I'll join in and become another sacrificial lamb!
JPY crosses sharply higher
A sharp spike higher in the Yen crosses was caused by macro accounts buying USD/JPY and a big European buying both EUR/JPY and GBP/JPY (must have heard I was selling). Not sure what was behind the surge at this stage. Plentiful sell orders were reported earlier in USD/JPY towards 79.80. The Nikkei has also moved quite sharply higher off earlier lows (almost as if someone's suddenly heard rumours of easing measures perhaps?)
GBP/JPY: Time for first trade of the week
This pair looked terrible this morning when it was down at 126.70 but now that it has rallied 50 pips, I think it might be time to try a short trade around 127.20. I'm only taking a smallish position and we'll see how it develops from here.
Chances of RBA rate cut increase to 85%
The latest Australian government economic and fiscal outlook, announced earlier today, included a series of cutbacks aimed at delivering a forecast surplus of A$1.1 billion. Such spending cuts will make it easier for the RBA to cut rates by 25bps in 2 weeks time. Coming on the back of comments from board member Jillian Broadbent that she would like to see a lower AUD, the market has increased the chances of such a cut to 85%.
EUR/USD: First reports of some selling interest
- Interbank dealers report decent-sized offers starting at 1.3065 through 1.3080.
AUD/USD, GBP/JPY support lines hold; overall interest levels very low
The psychologically important 1.0300 has held so far this morning in the AUD/USD, but the bounce has been quite anaemic. GBP/JPY support at 126.70 also held and it has bounced back towards opening levels near 127.00. Local dealers say that interest across all pairs is almost non-existent, with very few players looking to get involved.
Tokyo open; quick overview
- Australian shares are 1% lower in early trade, taking a lead from US markets:
- Quite a bit of trading focus on the GBP, which is starting to exhibit signs of extreme weakness:
- Plentiful sellers reported in USD/JPY; above 79.50 and on a stop-loss basis below 79.00:
- EU leaders have been at pains over weekend to downplay any differences with Germany over bank recapitalisation timing.
AUD/USD outlook week October 22nd: Traders eyeing 1.0310/20 very closely
I have no need to tell regular AUD/USD traders of the importance of the 1.0320 level, as it's proved to be an important pivot in recent times. It proved to be a strong support level on 3 occasions before breaking after the RBA rate cut and then holding resistance. Subsequently most trailing stop-loss orders were placed above there. Now we will start the new week sitting right on this support and if it holds, then I think the bulls will buy hard. The drags on the AUD remain falling interest rates and a stuttering Chinese economy but the pluses are that, relative to everyone else, the AUD still looks attractive. CPI on Tuesday is the first main event risk.
EUR/USD outlook, week October 22nd: Likes range-trading, wants to go higher, but is overbought
The latest EU summit has finished as expected with no major initiatives being announced. The perma-EUR-bear analysts will be howling as usual but traders will ignore them and get back to trading. The attached 4-hour chart shows how the market currently views the EUR; it wants to buy it but is unable to find enough momentum to break the range-trading mentality. It's currently somewhat overbought so we can expect the usual Monday morning stop-loss hunt to find weak trailing stops below 1.3000. Any strong intraday rallies back towards 1.3100 are likely to run into heavy selling although with the EUR-crosses still looking quite well bid, deep dips will also be well supported. Throw any strong views out the window and stay in range-trading mode.