AUD/USD: Play downward channel 1.0280/1.0460
My view all week has been that the market will get continually more bearish as this week progresses due to the RBA meeting next Tuesday (Monday is a holiday here in Australia). The market expects that the RBA will cut rates by 50bps this year but is split 50:50 on when these cuts begin, October or November.
The short-term charts are showing a nice bearish channel which I think will contain prices for the next few sessions. I am still short but will greatly reduce positioning as we near the bottom of this range, which currently is near 1.0280.
Cable: Taking a bit of profit off the table
I've bought back my 1.6255 sales from yesterday at 1.6185 and will continue to play a broad 1.6160/1.6270 trading range whilst building a core short position.
Still running shorts but looking to book partial profits on dips
I added to my cable shorts earlier at 1.6255 and am hoping to book partial profits on dips to 1.6170. I've already booked 50% profits on my EUR/ USD shorts and will cover the balance on any major dips. With the RBA due next Tuesday, I'm happy to try and be a bit greedy with my Aussie but of course if any quick profits should suddenly appear... Catch you tomorrow+
Early European flows
- EUR/USD: Asian and Middle Eastern players were main sellers in early trade with the unconfirmed article from the German Bild Zeitung saying that the Buba and ECB were checking the legality of ECB's new bond buying program being the most likely reason behind the selling.
- Real money funds and macro funds were notable sellers of EUR/GBP
- UK clearer bought cable from 1.6225 in early trade; leveraged players seen selling near 1.6260.
Adding smalls to cable position
I've sold a small amount of cable at 1.6255, adding to my existing short position. A UK clearer was notable buyer from 1.6225 a little earlier. There should be plenty of stop-loss buying above 1.6310. Let's see how this develops.
EUR crosses touch Fibo supports
EUR/JPY touched the 61.8% support level at 100.20 mentioned below and EUR/GBP pulled up just shy of its 61.8% support at .7940 (https://www.tradingview.com/x/AfrbhXpI/).
EUR/USD is again bouncing after failing to hold below 1.2900.
EUR/JPY: Technical support at 100.20
That's the 61.8% retracement of 98.00/103.80 upmove. That should be an important level. Below there targets 99.50.
What the big Prime Brokers are reporting..
Not much is the short answer, though it seems many of the big hedge funds are quite neutrally positioned and are keen to get involved again:
- Short AUD is the favourite play for exactly the same reasons that I'm short, namely indecisive price action post-Fed, a stuttering Chinese economy, interest rates about to be dropped by 50bps and the RBA selling into rallies. Interestingly one PB says that their big accounts haven't really sold yet as they are nervous about buying USD with infinite QE looming.
- One interesting fact is that long GBP positioning amongst big hedge funds is at near 4-year highs but general market positioning is almost neutral.
- Professional market is still quite short of EUR and short of CHF as well.
- There has been some demand today for short-term USD/JPY out-of-the-money calls in the hope (forlorn?) of actual intervention before month's end.
- Amongst the emerging Asian currencies, selling USD/INR and USD/MYR seem to be the favoured strategies.
Commodities slightly higher; risk trades follow suit
The Chinese leading indicators index rose more than expected, oil prices rose overnight after recent falls, and equity markets are at least not falling, all of which has led to a very modest rise in 'risk' trades with EUR/JPY 15 pips higher on the session and AUD/USD 20 pips higher. No flows of note have been reported so we should stay quiet until Europe opens.
Asian market likely to stay very quiet
Risk trades have edged marginally higher this morning but there's nothing really going on in the FX market, with interbank dealers saying that interest is very low at current levels. Unless some headlines emerge out of China to shake things up, we can expect these quiet conditions to remain with us until Europe opens.
One interesting titbit from the interbank market is that Asian central banks have reportedly raised their bids in the Gold market from $1525/50 to $1625/50.
EUR overview: Play 1.2755/1.2980 range
EUR/USD looks heavy to me and I expect to see a test of low 1.28s before Thursday. That said, EUR/GBP is near important support levels and both EUR/JPY and EUR/CHF have also retraced after decent gains and look to be better 'buy-dip' propositions. In other words I expect any EUR/USD falls to be less than falls in AUD/USD, cable etc. (Prime brokers report that EUR shorts are still at significant levels and one of the better-connected PBs expects to see 1.36 in EUR/USD in coming months).
The double-top on the 4-hr chart suggests to me that strong technical support at 1.2755 will be tested over coming days. Resistance levels start at the short-term bearish trendline near 1.2980. I'm playing this range with a distinct bearish bias.
AUD/USD: Offers nearby
Local interbank dealers say that there is some selling interest close-by near 1.0435 but overall the order boards are quite light. The economic calendar is quite light with only Chinese leading indicators likely to cause any short-term volatility.
I'm still bearish this pair and I am in the process of building a short position, hoping for a sharp bearish break. I expect 1.0470/80 to cap any intraday rallies and my initial target is 1.0340.
Cable: Look to cover partials near 1.6160/70
I remain bearish but will look to book partial profits near 1.6170ish, hoping to re-sell on 100 pip rallies.
Similar story on the AUD/USD, I will look to book partial profits near 1.0330 and re-sell on 100 pip rallies.
EUR/USD I will book all profits at 1.2860ish and re-assess.
EUR/JPY: Breaking below 101 but don't expect a major collapse
There is solid technical support 100.20/50 (https://www.tradingview.com/x/uH0Gf4bT/) and I'd expect this level to hold initial bearish thrusts barring something unexpected. Even if USD/JPY does drift a bit lower alongside the cross selling, that still gives the EUR/USD scope for a fall towards 1.2860ish. That's my target should 1.2910/15 break.
Hoping for some volatility in Europe
Fairly quiet session in Asia with one-way traffic mainly, risk trades easing slowly lower. USD/JPY is stalling ahead of 78.00 but the going is too slow there so its best to look elsewhere for opportunities.
As I mentioned this morning, I'm "short the screen" but I am taking some P off the table and buying 1/2 of my EUR/USD shorts back at 1.2942. I've still got a decent whack on the Aussie and cable so let's hope we see some movement.