AUD/USD: Capex data today; using .9270 as downside guide
The AUD/USD steadfastly refused to fall when the market was turning bullish on the USD, the big question now is will it also refuse to move if the USD turns the other way? Or will AUD/USD lead the way?
We are unlikely to get any answers during today's Asian session but I'm firmly in the buy-dip camp. The pair couldn't fall below .9270 earlier in the week when iron-ore prices were falling, so I'm using this level as my downside guide.
Capex data at 11:30am Sydney time should ensure some volatility enters the market. There is quite a wide range of expectations for Q2 real Capex, with analysts tipping anything from -4.1% to +3.2%. Any + number will be modestly bullish for the AUD whilst a number below -1% will have the opposite effect.
USD: Retracement or reversal- latter I think
The USD bears will need a bit more evidence before getting overly excited but the recent price action in AUD/USD, NZD/USD and USD/CAD certainly suggests that the greenback will struggle on these fronts.
We often get impulsive market moves in September when the traditional holiday season has ended, and I'm definitely still of the opinion that this move will be USD negative. If we are to see a negative reversal in fortunes for the USD then EUR/USD will need to start some sort of a mini recovery and USD/JPY will need to revert to range trading mode. If this happens, then I think we shut our eyes and buy cable and/or sell USD/CAD.
- EUR/USD: Needs to close the gap to 1.3240 and start trading regularly above there. I have no intention of going long EUR/USD, with further ECB easing on the cards, but short squeezes are definitely possible.
- USD/JPY: I see no reason to change my view that we are in a medium-term 100-105 holding pattern. Rallies onto 104 are chances to start building shorts whilst dips onto 101 offer the bulls a chance.
- Cable: Still likely to be the leader of the pack imho. If we can start making some daily closes above 1.6600 then I'll be more confident that the up-trend is about to re-ignite.
- USD/CAD: Headed much lower in my biased opinion!
- AUD/USD: Care needed still as we are in a sideways pattern between .9200/.9450 but I'm still convinced that this will break higher eventually. NZD/USD movements will depend to a significant extent on what happens in the AUD/NZD cross.
USD/CAD: Short position looking stronger
Unfortunately we did not get that one last spike up towards 1.1050 but my short trade is looking quite healthy and a break below 1.0850 would have it looking even better. There have been various rumours flying around today in the CAD from heavy stops in the crosses to M&A activity in the funds. Whatever's happening, the CAD certainly looks like it needs to rise some more.
NZD ticking higher as Fonterra headlines hit the newswires
- Fonterra forming partnership with Chinese infant-formula company Beingmate;
- Keeping NZ46 per kg milk price forecast;
- Expects global milk prices to rise later this year.
NZD is trying to stage a mini-rally on the back of this news (many had been expecting something negative).
EUR/USD: Barrier protection ahead of 1.3150
There have been some reports in the last few minutes in the FXWW chatroom of decent-sized selling flows in EUR/CAD and of strong bids ahead of an expected 1.3150 barrier in EUR/USD.
There is an increasing expectation that the ECB will roll out some special easing measures as early as next week and that is fuelling the EUR bearish sentiment.
USD/CAD: Still behaving like a pair that wants to go lower
That is in my very biased opinion. We are currently seeing some decent-sized EUR/CAD flows going through, which is unusual for this time zone. Most likely stop-loss driven I'm guessing.
USD/CAD has fairly clear support/resistance at 1.0850/1.1050 so there is little point in getting excited until these levels break.
AUD/NZD: Waiting on Fonterra press conference
AUD/NZD is sitting just below important technical resistance between 1.1185/1.1220 and the market is waiting on a global strategy announcement from the big dairy producer Fonterra. This is scheduled at 01:55 GMT but no-one in the market seems overly sure what this announcement will relate to.
Cable: I'm long but not feeling overly confident
Cable is sitting just above recent trend lows at 1.6535. The fact that it couldn't close below will encourage the bulls that a double-bottom might develop, but the bears will also be salivating at the prospect of triggering stops below this level. The next major technical support level below here is a weekly low at 1.6455.
I'm running a small long position but I'm not at all confident that I've got the timing right on this one. As usual, let's see how it develops.
NZD/USD and AUD/USD bounce off intraday lows
Despite some fairly bearish conditions, a disappointing trade balance in New Zealand and lower iron ore prices to affect the AUD, both Anzac currencies have bounced nicely against the USD.
As the old adage goes, if currencies bounce amid bearish news/events then they must be going higher! Let's wait and see.
USD: Getting very close to an interim top
- USD/JPY: Lot of people getting very bullish this pair on the back of potential central bank policy divergence but all we have heard so far is bluster, and no actions to follow it up. Recent history suggests that this pair is in a 100/105 holding range and I'm sticking to this.
- Cable: Has been the leader for many months and after a solid retracement/consolidation, technical indicators suggest that a short-term bottom may be in place. I think this could be the trade again and I'm happy to start buying again.
- USD/CAD: Another pair which has been consolidating and is trying to make its mind up. It's certainly possible that the uptrend reignites but risk-reward suggests to me that I should be selling this rally. If it starts trading on the 1.11 handle then I will need to re-consider.
- AUD/USD: We are in sideways consolidation and the market is split down middle as to whether we see .85 or 1.00 next. I'm in the latter camp, I think we are within 1% of a base (.9150ish at most) and we will soon start to break higher.
Early September is traditionally the moving period for FX markets so it's time to start picking your side!
AUD/NZD: Important resistance at 1.1185/00
The NZ has started sliding again after a July trade deficit of NZD690 million was recorded.
The next major level to watch will be in the AUD/NZD cross at previously important support near 1.1185/00.
NZ trade data in 10 minutes; analysts expecting renewed deficit
China had previously reported a narrowing of its trade deficit with New Zealand and this suggests that the NZ trade balance will slide into deficit for the first time in 10 months.
AUD: Falling iron ore prices will weigh on sentiment
AUD/NZD still looks quite buoyant but AUD/USD has been in sideways mode for months and will eventually break. Falling iron-ore prices will help the AUD bear case and we may get a downside test in coming days especially if commodity prices stay soft.
AUD/JPY has also failed to gain a foothold above 97.00 and I suspect that the market is quite long of this pair and susceptible to sell-offs.
On the day, I prefer the short AUD/USD side but I'm still very much in the buy-big-dip camp. With little on the calendar, range edges at .9240/.9320 are unlikely to be tested.
NZD still looking heavy across the board
- AUD/NZD has been consolidating it's break above 1.1100. I will have a closer look through the morning but this pair tends to move, consolidate, move. So look for a 1.1050/1.1200 type range over coming days with a medium-term buy-dip bias.
- NZD/JPY is starting to look a bit toppy on the medium-term charts and is definitely worth watching. The Japanese investment market is heavily long this pair so we will be prone to long liquidations when important support points break.
- NZD/USD looks like it wants to take out the Fibo level we mentioned yesterday and technical support levels are pretty scarce below there.
Looks like the 'race to the bottom' also picking up pace
The Big 3 used the Jackson Hole symposium to stay in the race to the bottom. Ms Yellen from the Fed was the least dovish, but she was still more cautious than many had hoped/expected, whilst the ECB and BOJ made no secret of the fact that they will stay in aggressive easing mode for some time to come.
Like I said earlier, being long AUD and CAD against the EUR and JPY certainly makes fundamental sense. As always it becomes a matter of getting the timing right.
I'm avoiding the other majors (for medium-term plays) because sentiment towards the USD remains moderately bullish and long positioning in GBP and NZD is still an important factor.
NZD looking soft across the board, breaching some big levels
- AUD/NZD has obviously been the main mover, breaking and holding above 1.1100 and triggering plenty of long-NZD-liquidation;
- NZD/USD is sitting right on an important Fibo, .8345 is the 61.8% retracement of this years big rally from .8045 to .8835. A clean break below could set off more long-NZD liquidation so keep a close eye on this level and what happens below;
- NZD/CAD has broken below it's 200-dma and also breached prior daily lows at .9160.
Looks like the NZD bulls should take a break for a while.
Should find some good trading opportunities in stop-driven markets
My macro views haven't changed in the slightest, I am still looking to sell the USD, EUR and JPY and buy the CAD, GBP, AUD and NZD.
Of course we are seeing some significant shifts inside of these 2 groups, with the USD making strong gains against the EUR and JPY, whilst the AUD and CAD have been strong against the GBP and NZD. All the usual swings and roundabouts of the FX market.
My favourite medium-term trade for now is to sell the USD against the AUD and CAD and I think we are nearing important levels.
- I think USD/CAD may well take out 1.10 in this burst of USD friendliness but I am looking to sell aggressively if my resistance levels at 1.1050/75 hold up.
- I'm hoping that I get a chance to buy the AUD/USD near .9150. The break higher in AUD/NZD and lower in EUR/AUD should help keep the AUD with a 'bid' tone.
AUD/NZD: Gapping higher in stop-driven markets
Firstly it was EUR/USD where the stops were targeted, now its AUD/NZD which is the market focus.
The market gapped nastily through 1.1100/10 to trade above 1.1150. There is very little technical resistance until 1.1200.