AUD/USD: Break below 1.0320 should shift prices onto lower plane
The market was anticipating a rate cut today and it got what it wanted. Now we have seen support levels at 1.0320 breached but with the market already short, I'm not expecting a complete collapse. I'd expect profit taking to be quite solid around 1.0250/70 and the downward channel which we've been monitoring should provide support ahead of there near 1.0290ish.
Overall though the bears will be more comfortable and any 100 pip rallies should be seen as selling opportunities.
RBA meeting, October 2nd: Australian rates lowered by 25bps
Full details are available here on the RBA website.
RBA: Market expectations
It seems that the market has already factored in a 25bps rate cut so in this event, we would likely see the AUD/USD fall back towards support at 1.0330 and if there are large stops below 1.0320, they will probably also be targeted.
12 out of 19 experts polled by Reuters suggested that there will be no cut today, and that the RBA will signal its intention to cut next month instead. In this event, I'd expect short covering to kick in and push the AUD/USD back above 1.0400.
The two outliers are a 50bps rate cut or a no-cut with hawkish statement. Either of these would move the market by around 100pips initially.
GBP/AUD trade update: Short position cut for a small loss
This idea was from Friday last and due to the upcoming RBA statement and the lack of momentum on the trade, he has decided to cut the position for a 20 pip loss and re-assess. Wise man me thinks.
GBP/JPY update: Still running long position
I went long yesterday and though I sold and bought a bit overnight, my levels are still pretty much the same, just with a slightly larger position now. First target is 126.65.
Whole lotta nothing going on
The JPY crosses are modestly higher in early Tokyo but interest has been very low so far. China is still on holidays and the rest of the market is waiting for the RBA. I'd expect the market to stay quiet for thenext few hours.
Order boards looking pretty light
USD/JPY, sell orders starting at 78.20, bids 77.75/80, trailing stops below 77.65:
EUR/GBP, stops above .8010:
GBP/USD, bids reported 1.6070:
AUD/USD intraday: Buy dips sell rallies
Cliched and boring but always true, even on event risk days. Obvious technical parameters at 1.0325/1.0450. If we get a 50 pip move either way in the next 5 hours then I'd look to enter the market. Even if the market moves further away after the RBA then we will always get a profit-taking pullback allowing exit for smallish pain. If the market moves my way after the RBA then the profit potential is multiplied. Trade the market, not the news.
Catch you tomorrow..
I'm thinking most rates will be pretty much as they are now but at least we should get some excitement around the RBA.
EUR/USD: A Tale of Two Central Banks
Just read a note from one of the big investment banks and they are advising their customers to avoid getting caught out trading mid-range whilst 2 big central banks are sitting either side.
They are looking at a very broad 1.2650/1.3250 range for the 6 to 8 weeks and although they don't mention the CBs by name, I'm presuming it's the SNB who is selling rallies and China who is buying dips.
Cable trade idea updated
I've just put a cable trade idea in the members section, which cancels at 5pm London time when I knock off. Cheers- London Calling.
AUD/USD technicals: 1.0320 becoming increasingly important
We've now had 3 lows on the 4-hourly chart between 1.0320 and 1.0330 and there is a 61.8% retracement just above there. What is also very interesting, is that the retracement from 1.0620 to 1.0330 has followed the ABC wave pattern with both A and C also comprising of 3 waves.
The risk-reward outlook for bulls, with a stop below 1.0320, looks quite good indeed.
Asian markets update
- China closed all week; Korea and Australia closed today:
- Chinese National Party Congress will be on November 8th:
- RRR cut likely sometime in October:
- Trade numbers for Korea came in better than expected:
- Hedge funds continue to build short positions in USD/MYR and USD/INR.
GBP/JPY: Long with a tight stop
The GBP had a rough ride on Friday yet support levels in GBP/JPY are still holding and I like the possibilities for a move higher. My thoughts on Friday re the daily chart were that we might see a bullish move start to develop and the 4-hour chart is giving me an obvious stop-loss level below 125.35.
I'm long at 125.62 with a stop at 125.17 and an open profit target for the moment. I've only got a moderate position to begin with so I can monitor how it develops.
EUR/GBP volatility set to continue
There was some huge volume in EUR/GBP to finish last week and the London fix was reportedly the noisiest of the year. There are large stop-losses either side of the market, below .7910 and above .8000 and there are also large option expiries in coming days. Don't know where it's going but it should be an interesting ride. Maybe we trade .7850/.8050 for the week and meet back here at .7950 next Monday?
Positioning still quite neutral amongst big hedge funds
Positioning data from the futures market showed that EUR shorts have been reduced to 11 month lows. Also of interest are reports from Prime Brokers which suggest that the big hedge funds have mixed views on market direction. There would seem to be no one standout trade which the big players are all trying to pile on to, especially in the major pairs. There has been a noticeable increase in USD shorts against emerging Asian currencies but that is the only trend worth noticing.