AUD/USD: Drifting as local interbank players prefer shorts intraday
No-one is expecting any major moves in the AUD today but local dealers seem to prefer the short side, particularly when prices get close to reportedly decent sized sell orders at 1.0460/65. It's possible we could drift further towards 1.0400 but ranges are expected to remain tight during the Asian session.
There are some risk-events looming for the AUD, with the HSBC China PMI data due out over the weekend and official PMI on Monday, when much of Asia will be closed. This will of course be followed by the RBA on Tuesday with the market spilt 50:50 on whether the expected rate cuts start in October or November.
EUR: Spanish bank stress tests due shortly
The results should hit the newswires in the next few minutes and could cause some volatility.
GBP/JPY technicals: Getting ready for a big move higher
Have a look at the daily chart and see what you think of my analysis, remembering that I'm an incurable bull on this particular pair.
- Look back to January this year when we had a sharp 5-wave bull move which sets the scene:
- This was followed by a nasty 3-wave retracement back to 119.00 before stability returned:
- After sideways action, the bull trend recommenced from 120.80 to 128.80:
- This move has retraced approx. 38.2% to a previous high at 125.75:
- If a base can form here we will see the next leg of bull-move take this pair to 135+
GBP/USD: Play short-term range 1.6185/1.6265 with bullish bias
The GBP has been very interesting this week due to the very heavy turnover particularly during European trade. Asset managers, reserve managers and real-money funds have been using each small 50 pip dip to buy sterling and the bigger banks that I speak with are all bullish. That said, US corporates have been selling plenty and that has led to heavy turnover.
The short-term range seems now pretty clear between 1.6185 and 1.6265 but the bulls do seem still to be in overall control so I prefer the bullish bias now. There are heavy stops in cable above 1.6315 and in EUR/GBP below .7910, and if both go off together then we will certainly see some gaps. Range trading during Asia looks the likely outcome but don't get caught short if it breaks higher!
Good luck tonight
I'm switching off for the day otherwise my family will disown me completely. Good luck tonight, I have a feeling everything's going to look different in 12 hours time++
GBP staying strong amid plentiful institutional demand
Interbank squawk boxes are all issuing the same story, plenty of end-of-month demand for GBP. EUR/GBP has broken below the previous lows at .7935 and is looking very soft indeed. As mentioned earlier, talk of large stops below .7910, now only 15 pips away.
EUR/GBP: Nearing recent lows
- Recent support points at .7935 are coming back into view and there is a 61.8% retracement level just below there, which you can see here on the 4-hr chart:
- Interbank dealers report large stop-loss orders below .7910:
- The Buba normally buys around 1billion EUR/GBP at the end of every month but this hasn't yet been reported.
EBS volumes down by 50% compared with last year
Interesting dynamic in the professional market as the big 5 or 6 banks get so big that they must now be nearing critical mass, meaning that they don't need to go and clear in the market as much as they had to in the past. Those now relying on the big electronic brokers to see what's going through the market are missing out on half the story. Of course EBS has also been hit by cut-throat competition in the electronic broking market as well as some changes they made to their pricing precision.
Seems to be large difference of opinion, retail vs professional markets
I certainly don't talk to everyone in the professional market but I do see pretty much everything that 4 big players write on a daily basis, and they seem to be unflinchingly bullish on EUR/USD, cable and AUD/USD. On the other hand, the retail market (myself included) seems to be mainly bearish on the three mentioned pairs.
So why the large difference of opinion? I sense that it's got a lot to do with flows but it wouldn't be the first time that big players bought at the wrong level and got burnt! Probably also fair to say that it wouldn't be the first time that the retail market got it wrong!
I think we are due for a short period of consolidation to be then followed by a 500/700 pip move one way or the other, but I'm not so confident anymore that the next move is down.
GBP: Asset rebalancing demand expected at London fix
Just like the AUD during the Asian session, the GBP is likely to be the main beneficiary of end-of-financial-quarter asset rebalancing flows during European trade. On the flip side of that flow, we have also the usual Buba buying of EUR/GBP which should happen today or tomorrow.
Short-term charts are pretty neutral with resistance levels at 1.6207 and 1.6226, and support building between 1.6170/80.
AUD/USD technicals: Bearish channel suggests a top near 1.0430
This descending channel on the 2-hour chart has been pretty accurate recently and if it holds I will certainly be increasing my short position again.
EUR/USD: Looks like a 1.2870/1.2910 range for early Europe
There will be the usual cut n thrust in early European trade when dealers seek out the weak side but a quick look at the 30-min chart would suggest that the range should be contained between 1.2870/1.2910 approx.
GBP/USD: Interesting buyers noted but 1.75 by Christmas?
One of the big Prime Brokers is extremely bullish on GBP. They have been seeing some very large buying from asset managers, reserve managers and real-money accounts and these big players have been buying on every 50 pip dip. The PB thinks we could see cable near 1.75 before Christmas. Not sure what they're smoking, but I'd like some :)
EUR/JPY: Going nowhere fast
I was quite bullish this morning, and in fact I still think that the long trade is the correct play, but I've been wrong before and there has been very little movement at all today.
It's quite possible that we see another test of 99.70 in early European trade but I think it's an excellent risk-reward play to buy that dip with a tight-ish stop below 99.40. My reasoning is that the market is very bearish and already short of EUR heading into the Spanish risk events later tonight. Then there is also the aggressive comments from the BOJ overnight which seemed to say that further measures (easing, intervention?) are not far away.
AUD still grinding higher
Most of this region's institutional buying has been done now although there is likely to be another fresh round of demand at the London fix. There were most probably some light stops above 1.0400 which have now been done. I'm guessing that there might be more weak stops above 1.0410, or at least if I was short that's probably where I would have mine.
AUD well bid on back of asset manager demand
Well I did warn you! Forget everything else today, it's all about end-of-quarter flows which are heavily AUD positive. Next technical resistance is at 1.0420 but I think we might see higher levels later today and I'm hoping to re-sell my purchases from last night closer to 1.0450/60.
JPY demand expected at Tokyo fix
It's all about end-of-quarter currency demand today and dealers are expecting some decent demand for the JPY at the Tokyo fix, starting shortly. Hence the modest strengthening of the Yen in the last hour of trade.