AUD/USD: Still struggling to clear .9425/50 resistance area
The well-chronicled option-related selling around .9450 continues to cap the AUD/USD and the failure to close above there does give the AUD/USD a mild bearish bias in the short-term.
Yesterday's lows near .9370 will provide initial support but with very little of note on the economic calendar, I think we can expect a very quiet session.
I remain very bullish in the medium-term on the AUD and will look for further dip-buying opportunities against the USD and the CHF.
CAD consolidating, more gains ahead
The FX market does not like sitting for long periods of time on positions in momentum-less markets. One of the favourite market trades in recent months has been to sell the CAD (especially against the rampaging GBP) but the longer we spend in the doldrums, the more likely we are to see these positions starting to exit the market.
I believe that is what we are currently seeing and I expect more to come.
USD/CAD has been consolidating near technical support levels at 1.0725 and I suspect that any rallies from here will meet with plenty of grateful sellers.
AUD/CHF: Small longs still in play, looking to add on dips
This is a very long-term play for me and I will be trying to build on this position in coming months. In very simple terms I'm bullish AUD and bearish CHF and the levels which the cross is currently trading at are historically quite low.
The daily chart is starting to obey some basic technical signals such as stalling at trend-lines and Fibo retracements which suggests to me that the market is looking for places to buy.
As with all crosses, patience is a virtue, and I think this trade will be a slow burner but with the Chinese economy picking up and with the real-money market sitting on massive CHF long positions, I see this particular carry trade as having plenty of upside.
Levels to watch in majors as USD struggles during Asian trade
- USD/CAD: Technical support at a 50% retracement level 1.0725;
- AUD/USD: Recent daily highs at .9460;
- Cable: Recent daily highs at 1.7060.
EUR and JPY are also making modest session gains against the USD but all 3 big currencies are range trading against each other.
AUD/USD: Testing strong resistance levels again after China PMI data
The HSBC flash version of Chinese manufacturing PMI showed it's first expansion (reading came in at 50.8) in 6 months.
The AUD has jumped 30 pips on the back of this to now be testing well-proven resistance levels between .9425/50.
USD/CAD: Interim profits booked, patience required
My bearish USD/CAD strategy has worked out nicely so far and I have booked interim profits at 1.0760. I'm expecting some more sideways trade here and I am definitely staying in rally-selling mode. The main drivers in my mind are market positioning and sentiment; the market remains short of CAD and susceptible to squeezes but seems willing to sell more as soon as there is any reason.
GBP/JPY: Likely to grab much of the focus during Asian trade
If anything happens during the Asian session then it's likely to be in cross pairs like GBP/JPY. There is some very important technical resistance between 173.60/174.85 and we are just starting to sneak inside of this resistance band.
The market is already long of this pair so the temptation will be to book profits if it starts to stall again. On the other hand, a break above 175 will undoubtedly force the hand of the big macros and the options market.
Look for some consolidation perhaps in a 173/175 range but the bullish bias remains very strong.
AUD/USD: Still tied in predictable ranges
No change to the outlook here; big dips are buying opportunities with sentiment driven by Fed policy but the falling iron ore price is undermining AUD confidence so rallies are also heavy.
Option-related selling remains heavy .9425/50 but AUD/NZD support near 1.0750 is also relevant to the overall equation.
Cable: No point in fading this rally just yet
The daily close above 1.7000 shows just how strong this trend is and those who'd been hoping to pick a top have again been disappointed. Any dips are likely to be limited to the 1.6925 region and now it becomes a matter of judging how far the rally can extend.
If we continue to edge slowly higher then it will be extremely difficult to fade the rally, so I wouldn't even try.
Early Europe on the stop-loss hunt
All of the majors are higher against the USD in early European trade with well-chronicled stops in EUR/USD, cable and AUD/USD providing the targets. With the Fed now out of the way for another month, then market has obviously decided to try selling the USD and see how far it can run.
Cable: Market still eyeing stops above 1.7020
I'm hearing pretty much the same story as yesterday, a decent sized sell order near 1.7010 is still capping the market and protecting stops above 1.7020 for now.
Bids are being reported now quite close to the market at 1.6960/65 which does seem to support the idea that the short-term market is short and nervous.
Technicals don't work so well in momentum-less, range-bound markets
It's worth reminding ourselves of the types of markets that we are trading in and re-adjust our strategies accordingly.
I'm seeing plenty of very technical trade ideas being suggested but in my experience, many technical indicators are either momentum or trend based and both of these are sadly lacking at the moment.
Levels to watch today in the AUD and NZD
- AUD/USD: Option-related selling is still reported to be heavy between .9430/40 but watch for stops above there. Local banks suggest that intraday support levels will be at .9375 and .9360;
- NZD/USD: Previous short-term resistance at .8700 now provides support and the topside target is at .8780;
- AUD/NZD: Still sitting above the technical and psychological support levels 1.0735/50 which we mentioned yesterday;
- EUR/AUD: Possible shortish-term basing indicators emerging and I still like the contrarian trade possibilities here. Dips towards 1.4400 should be well supported.
USD/CAD: Lucky I'm a patient person
Well I'm not usually but in this case I've had to be as it's been moving so slowly. Many in the market remain quite bullish on USD/CAD but I'm of the opposite opinion; I think the market has gotten itself overly short of CAD across the board and the next significant CAD move will be up.
That said, I'm not expecting any sudden fireworks and we are likely to continue to trade sideways in a broad 1.0750/1.1000 channel until the black swan flies in and puts the cat amongst the pigeons (with all these clichés I should be reporting on the World Cup soccer!)
One of the favourite crosses for the professional traders in recent months has been GBP/CAD and I suspect the market is still very long here. If USD/CAD bottoms out near 1.0750 then I may look for a 200-pip reversal trade in the cable depending on where it's trading at the time (hope that makes sense, but I'm sure it will to all the cross traders out there).
EUR/USD: Base above 1.3500 looking more secure
You know my thoughts on the EUR/USD by now, neither currency is worth buying. But the recent downtrend in this pair has run out of steam and a base of sorts has formed just above 1.3500. With market momentum at 7 year lows, we need to be very patient and wait for the correct entry levels, but a gradual move higher to find trailing stops looks quite likely.
Dips should now be limited to 1.3540/50 and topside expectations shouldn't go too far beyond 1.3685/90.
Cable: Trades above 1.7000 after minutes but 'stops' still safe
The high after the release of the BOE minutes was around 1.7005. Market chatter suggests that the retail market is heavily short with large stops above 1.7015. The first attempt to trigger these stops failed.
Buying dips still looks like the safest play, we just gotta figure out what the dip is :)
Cable: Time to be wary heading into BOE later today
Most of the signals coming from the BOE over the last few days have been pointing to the fact that the MPC has taken a hawkish turn due to an over-heating property market.
I'm also hearing that there are some very large short positions being built up ahead of 1.70, after the renewed failure there a few days ago.
I had been running a small short position but I've cut it for a tiny profit. We may get some good trading opportunities in the GBP later today and I want to have a clean and objective approach if it does start moving.
AUD/NZD: Technical and psychological support levels looming
The market (myself included) has been trying to pick a top in the NZD, especially against the AUD where the Kiwi is trading at close to historical highs. We almost formed a nice basing pattern in the AUD/NZD, only to reverse at the last minute. Now we are nearing important technical (daily lows and recent trend-line) and psychological support levels near 1.0750. My gut-feeling is that a few daily closes below these levels will drive the bottom-picking bulls out in sheer frustration.
On the day, I'd look to trade something like a 1.0735/1.0815 range.