USD/JPY: Still think it's a matter of picking the range
USD/JPY has over-extended on the topside and recent history would suggest that range trading is still the obvious way to play this pair. The market was surprised by extreme end-of-month demand out of Japan but we should see things settle back again into the usual range-trading routine for the month of August. Maybe 102/104 or something like that for the next few weeks?
AUD/NZD: 1.0970/1.1020 with bearish bias
Reading through some of overnight interbank reports and after a quick look at the charts, I'd suggest a 1.0970/1.1020ish range in the short-term (if we're lucky) and I have a definite bearish bias as I think market slightly over positioned.
Bids and offers are reported either side of this range.
AUD/NZD: Looks like a 'sell' to me
The market has been trying to buy dips and breaks in AUD/NZD but I have the feeling that it may be now a bit long and wrong.
The NZD/USD is really struggling to make any new lows whilst the AUD/USD looks to have plenty of potential to test large optionality at .9250.
Sell intraday rallies is the way to play this cross imho.
Looking to re-enter USD/CAD shorts and buy NZD/USD dip
Apologies for my silence today and if I haven't replied to emails or DTs, the dreaded flu has hit me for six :(
The market remains cautiously bullish on the USD but I'm sticking to the tried and trusted policy of buying GBP, AUD, CAD and NZD whilst selling the USD, JPY and EUR. Don't ask me which pairs yet, I'll tell you when I know :)
- USD/CAD: The small matter of a 25 year losing streak in the CAD is now confined to the annals of history and hopefully I've now started the 25 year winning streak :) I caught the move from 1.10 down to 1.06 and I'm looking to repeat the dose. The short-term trend is bullish but I think the next move lower will be a very nasty one indeed so I'm looking to sell any 60/80 pip rallies from here and start building a short position.
- NZD/USD: Dipped sharply after the RBNZ and Fonterra. The rates in NZ are still much higher than elsewhere and the glut of milk powder in China is a temporary phenomenon. Once the market gets past this, I think we will see NZD demand return in spades. It's important to keep a close eye on AUD/NZD; if this cross fails to break above 1.11/1.12 then the NZD strength will only be increased. The level I'm watching for in NZD/USD is around .8400.
NZD/USD: Levels to watch today
- Macro players still very long of NZD but short-term market has been getting short after RBNZ and up-coming risk events;
- Interbank market reported some very solid bids yesterday at .8525 and more are expected .8500/15;
- There are some tight trailing stops mentioned above .8570 but sources with one of the big prime brokers expect offers to be very heavy on any rally towards .8600;
- Macro longs are unlikely to panic but a break below the 200-dma at .8450 could change that;
- Much of course will depend on the Fonterra announcement and we will probably see positional adjustment ahead of that.
Overnight review: Sometimes it's best to say nothing
It's the end of July and the holiday season in Europe and the US is getting into full swing. This will go on through the month of August so I think it's fair to assume that we will have plenty of full trading days when absolutely nothing moves.
The main event during Asian trade won't happen until late in the session with the Fonterra board meeting announcement (sources in the chat-room say it will happen around 5 am London time).
End of month flows will impact on USD/AXY and any big flows will move the market further than usual, given the overall low volumes. This is definitely worth noting today.
NZD: Significant risk event on Tuesday afternoon
All NZD traders should take note of the Fonterra board meeting tomorrow afternoon NZ time.
The following is an excerpt from a WestPac report which is available in the FXWW chat-room on Reuters Messenger.
WP.. Nzd - No dairy auction this week but note on Tuesday there is the Fonterra board meeting. Expect a revision to the payout from a current Nzd$7.00 to the low 6.00's - our own revised forecast is currently at 6.00. Announcement seen as bearish and likely to push nzd towards our 1 week target of 0.8400. Currently Nzd testing support off Feb lows 0.8540 with bids seen 0.8520-00 giving way to further stops below 0.8500 for a test of 200dma at 0.8450. Nzd - The effect of lowering the dairy payout from NZ$ 7.00 to NZ$ 6.20 would take 4 billion NZ out of the dairy sector.
Hedge Fund fast money looking to the US for opportunities
What I'm hearing from some contacts in the broader hedge fund market is that tech stocks and tech investments are very much the buzz words of the moment and the pointy end of every international flight into San Francisco is totally sold out. Silicon valley is where all the fast money is headed and if this trend continues, then the USD is set for some prolonged strength.
The last time we had a big tech stock boom in the late 1990's, the NZD/USD was trading well below .4000! Now it's almost at .9000!
Levels to watch in Asian session, July 28th
- USD/CAD: 200-dma at 1.0830;
- EUR/USD: Large expiries tomorrow at 1.3450;
- Cable: Market eyeing 1.6925 as next important downside level;
- USD/JPY: Seemingly immovable obstructions 101.00/102.50 :(
- AUD/USD: Options players also all over this pair and with volumes heavily reduced from speculative accounts, breaking the range will be hard work.
Busy week ahead for US data; jobs and FOMC the highlights
- The general consensus amongst professional analysts is that the Fed will acknowledge the improvement in general labour market conditions, and taper again by $10 billion. This is the outcome which is currently being priced into the market.
- The market will be focusing as much on the wage-price pressure as on the headline unemployment numbers and the general feeling that I'm getting from the professional analysts is that both numbers could be USD supportive (more jobs, higher wages).
Overall, the market has turned modestly USD bullish in the short-term and I expect this mini-trend to continue at least until the data on Friday.
JPY crosses: I still prefer the downside in the short-term
I'm not expecting any massive moves but with EUR/JPY looking decidedly toppy, and with heavy longs in pairs like NZD/JPY and GBP/JPY starting to exit the market, I'm still solidly in the bear camp for the short-term at least. Selling straight USD/JPY is probably the least risky way of playing this but pairs like CAD/JPY offer more volatility and more interesting risk-reward.
It is Friday after all the traditional risk-off day (although last Friday was completely the opposite).
Cable: Weekly close below 1.70 would certainly trouble the bulls; 1.6970/1.7020 daily parameters
Long GBP has been the trade of choice (along with long NZD) amongst professional traders over the last 6 months. The big macro players are still very long and I suspect that they may start re-assessing if we get a weekly close below 1.7000. Present markets are being influenced more by sentiment than by technicals, and the big big figure is always an important psychological event.
Personally I still prefer the buy-dip strategy in cable but if the USD can maintain its short-term positive sentiment then we could see levels closer to 1.65 over the next few weeks.
There is an important pivot at 1.6970 which should provide initial intraday support and I'd expect 1.7020/30 to now attract sellers.
AUD/USD dragged back towards large optionality at .9400
- The USD has made some decent gains across the board with profit-taking in GBP/USD and NZD/USD having a big influence;
- The AUD was well supported by AUD/NZD buying and improving fundamentals;
- There are a large number of expiries and strikes around .9400 which will continually drag prices back towards there, at least until the majority roll off;
- Momentum and conviction are lacking in AUD/USD so more range trading is favoured.
NZD/USD: Still looking very soft, best wait with buy-dip strategy
Absolutely no respite for the NZD today and the bears have taken over control. NZD/USD is encountering waves of selling from multiple directions with long positions exiting en-masse.
I still like the buy-dip play but I'm in no rush and there's no point in a short-term selling strategy imho, as I've missed the boat.
SNB Jordan: Cap on CHF remains key policy tool
Reuters headline quoting a newspaper interview with the SNB Chief.
No surprise there.
NZD/USD: Model funds triggering stops below .8590
Most of the action is still in the flightless bird with stops triggered below .8590 in NZD/USD and the AUD/NZD cross trading above 1.1000.
AUD trying to edge higher after China flash PMI
The number was slightly above expectations and the market seems happy to try buying the AUD. AUD/NZD got a boost after the RBNZ this morning and there are big levels looming above 1.1000.
AUD/USD looks like it will now gravitate towards big option strikes/expiries at .9500 and .9525.
NZD: No sign of bounce despite decent trade data
The monthly trade data for June has just been released and it came in slightly better than expected. Despite this, the NZD hasn't shown any propensity to bounce.
I'm still in buy-dip camp but will stay in 'watching mode' for now.