Back later..
Much of Asia is closed today so I'm expecting the market to stay quiet. I'll be back in a few hours for the early European crowd.
AUD/USD: Will likely stay heavy ahead of RBA tomorrow
The chances seem to be increasing that the RBA will cut rates by 25 bps tomorrow, with US and Chinese data staying soft and Spanish woes still in the headlines. That should mean that the AUD stays heavy until lunchtime tomorrow when the decision will be publicised.
The short-term charts are in a sideways-lower channel so selling any intraday rallies is the obvious play.
EUR/USD: Bulls may find better risk-reward at 1.2755
The 200-day MA has been supporting the EUR/USD for a few sessions now but that probably means that there will be plenty of stops lined up below there as well. A quick look at the 4-hr chart shows some excellent support at 1.2755, where a 61.8% retracement and prior low come together. With EUR/USD opening the week on a softish note, bulls might find better risk-reward in waiting for the stops to get triggered and then look for a 100 pip bounce.
Back to normal after huge week of flows
The end-of-financial-quarter brought a massive week of flows which started mid-week with substantial AUD buying, followed by large-scale GBP buying on Thursday and ending the week with massive USD buying by US corporates. Throw into the mix some massive two-way business in EUR/GBP at the London fix and we can look back on a week of unusually large flows. These should now be complete and we can get back to our more normal market practices.
Today will be quiet with Australian and Chinese markets closed, but things will pick up pace again tomorrow around the time of the RBA decision.
Nothing more to add
I've had enough for this week, thanks for all your input and it feels good to be back in the saddle. I'm sure there are plenty of issues still with the site, so please keep your feedback coming and we will get round to fixing them in the next few weeks.
Remember that the HSBC china PMI is out over the weekend and that can move the market, and much of Asia is closed next Monday.
Have a great weekend and good luck tonight++
Asian session flow overview
- EUR/USD: Asian Sovereigns and Asian Funds bought throughout the session but corporate offers remain healthy:
- EUR/USD bids now noted 1.2900/10 (more details in Members):
- USD/JPY selling came from Japanese corporates and dealers triggering stops under 77.50. Solid bids reported every 10 pips for next 100. Large optionality at 77.00 and 76.50 might prove magnetic:
- AUD/USD: Large European offers filled 1.0460/65; stops triggered above 1.0470 but more offers awaiting 1.0480:
Deutsche revises up year-end forecasts for AUD, NZD and CAD
They've followed the lead of Barclays who did the same earlier this week. They feel that the easy monetary policy around the globe is the main factor in play.
- AUD/USD revised up to 1.06 for end of year from 1.00 previously:
- NZD/USD revised up to .83 from .78:
- USD/CAD revised down to .98 from 1.00.
So what does that mean for AUD/JPY?
If GBP/AUD is going to fall to 1.53 and if my analysis on GBP/JPY is correct and it's about to head much higher, then AUD/JPY is headed back to 88.00. What are the chances of that happening? It would mean that risk sentiment would take off towards the year's end. Possible I guess but rather unlikely.
GBP/AUD trade idea
This is a medium-term technical trade strategy from a professional technical analyst based in Singapore.
He has gone short at 1.5540 with a s/l at 1.5655 and a minimum take-profit target at 1.5290. His signals are based primarily on statistical measures which give indications as to whether a pair is over-bought or over-sold, mainly on the 4-hr timeframe.
USD/JPY: Stops triggered below 77.50
This has also led to some selling in the JPY crosses which this has eased the upside pressure on cable, EUR/USD and AUD/USD. All are 15/20 pips off earlier session highs.
Cable now testing recent highs
1.6265 proved to be the high a few days ago and we are now testing that level again. Technical resistance is firm on the weekly chart near 1.6300 but there is 300 pips of fresh air above there.
AUD/USD: Some technical analysts getting all 'bulled up'
No, I did not forget a few letters from the middle of 'bulled'!
Yesterday it was cable where the big calls were being made and today I see where a technical analyst is looking for 1.1150 in AUD/USD in the next few weeks. I must be missing something as I cannot see any justification for such a call just yet. If the weekly wedge were to break, then I could understand such a call but as long as it's in place I think that all big calls on the Aussie are premature.
Lack of bad news re Spanish bank tests is causing short-covering
I don't think we are witnessing any major move here, simply that some players were short EUR and playing 'risk aversion' trades in expectation of poor results from the Spanish bank stress tests and/or budget reform bill. Both have passed without incident so the shorts are covering.
AUD/USD worked through some decent offers at 1.0460/65 and triggered more stops above 1.0470 whilst EUR/USD is still edging higher and showing few signs of wanting to pull-back.
Stop-loss buying in EUR/USD
Leveraged players are cutting short positions ahead of the weekend, according to one of the bigger banks, and EUR/USD has taken out the overnight high but is stalling at small but plentiful offers near 1.2930.
The next resistance level of note is an hourly high at 1.2970 but I think the EUR will need some help from the crosses, EUR/JPY and EUR/GBP, if its to make that sort of a move in this session.
USD/JPY: Looks set to target weak stops below 77.50
Many felt that there was a minor possibility of some BOJ intervention today (last day of financial quarter) but hopes are fading and stops are tight, starting below 77.50. I've heard rumours of semi-official bids at 77.50 but no confirmation as of yet.
Spanish bank stress tests: 6 ok, 8 need more capital
First reports on the Spanish bank stress tests suggest that 6 banks have sufficient capital whereas 8 banks will need to raise some more. The EUR/USD hasn't reacted, trading in a 10 pip range between 1.2910/20.
Japanese data has no effect on JPY
As usual the market has completely ignored the raft of Japanese economic data. The CPI number will have disappointed the BOJ, meaning they have to work harder to get to their 1% inflation target.