USD/JPY: Stops both sides of market ahead of Kuroda speech
USD/JPY reacted surprisingly little to the BOJ policy announcement. There had been some small expectation that the inflation target might be softened but we saw no sign of this. Perhaps Kuroda-san might say something during his press conference in 30 minutes?
Plenty of big orders still being reported with semi-state and Sovereign types on the bid ahead of 101.00, stops immediately below 101.00 and also stops now building topside above 101.60.
USD/JPY: Barrier at 101.05 has been vigorously defended
I'm not sure if this barrier is still live or not but it has been stoutly defended over the last few sessions. We are only 20 pips away from there now so it would be a surprise to me if we don't get a push lower to test the level whilst the markets are thin pre-Tokyo open.
AUD/USD: This is the dip I've been waiting for
AUD/USD is almost 100 pips lower compared with yesterday morning's open and I'm definitely in dip-buying mode. I expect this dip to bounce off .9150ish and that's where I'm concentrating my efforts.
AUD/NZD and AUD/JPY are both looking quite soft this morning so we may indeed get a test of .9150 in AUD/USD but based on recent momentum history, I'd be surprised if it happened in a straight line.
Next technical support in AUD/JPY is at 93.35 with resistance at yesterday's 94.25 break-down level.
BOJ main focus for today's trading session
We saw a lot of professional traders buying puts in pairs like EUR/JPY and AUD/JPY yesterday amid increasing speculation that the BOJ might be a little less hawkish than usual. Some are suggesting that the hard-line inflation target will be downplayed.
Large stops are still in place in USD/JPY directly below 101.05, where the big barrier was reported, and these stops are at regular intervals through 100.50. If it does break, it could be nasty.
AUD/USD: Closing in on stops below .9270
The second level of intraday stops were reported this morning below .9270 (first below .9310) and it looks like we will have an imminent try at triggering them. I'm also hearing of good bids between .9250/60 so intraday shorts should consider using this first dip to take some profit off the table.
Speculative market continues to buy downside puts in Yen crosses
It seems that some bigger professional speculators are of the opinion that the BOJ will do absolutely nothing tomorrow and there is even chatter that they will move away from their hardline inflation target. Short-dated downside puts in AUD/JPY and EUR/JPY are the main vehicles being used to play this view.
Spending a few days back on Forexlive
I'm helping Adam out over on Forexlive and even though there isn't much to report on, I'll be doing it anyway for a few days this week.
AUD lower on sliding iron ore prices
- Today's RBA minutes will not contain any surprises as we had the Statement of Monetary Policy last week (which will have included any discussions at the last RBA meeting);
- The fall in iron ore prices back below $100 on the back of weakening Chinese demand is the main driver behind the AUD fall;
- AUD/NZD is losing its short-term bullish momentum after failing to challenge the important resistance band near 1.0900.
I'm sticking with my medium-term buy-dip policy in AUD/USD but will be patient as the bears look to be gaining short-term ascendency, targeting .9150 perhaps?
Cable: M&A news could weigh on GBP over coming sessions
AstraZenica has rejected an improved bid from Pfizer to the tune of GBP69 billion. If this had gone through it would have led to a lot of GBP buying and we may even have seen some speculative buying in recent weeks in the hope that it could eventuate.
I'd suggest that the GBP might see some profit taking in the next few sessions, especially with CPI and retail sales tomorrow. GBP/JPY and particularly GBP/CAD are my favourite vehicles at current levels.
USD/JPY: Large stops below 101.15 drifting into focus
There still seem to be some large bids ahead of 101.20 but all I'm hearing about is the large stops sub-101.15. If they go off then they will also have a big impact on the Yen crosses as dealers scramble to cover wherever they can.
EUR: Everyone's getting very bearish
- Firstly, recent history would suggest that we are much more likely to see range trading markets than any impulsive trends;
- Secondly, many of the same people turning bearish EUR/USD on the 1.36 handle were bullish at 1.3950 very recently;
- Thirdly, the change in tone from the ECB was not unexpected and in fact had been widely expected on the two previous meetings;
- Finally, technical support at 1.3650 held very well on the first test.
I think the most likely outcome for the EUR/USD is that we trade sideways just as we've done for the last year. Some of the crosses are likely to trade lower over time, particularly EUR/GBP, but these things seldom move in a straight line and I prefer to trade such a view through a 'buy-cable-dips' strategy.
Very quiet start to interbank trading week
Not much movement anywhere in early interbank trade and the majors are basically unchanged from the Friday close.
The economic calendar is also looking very bare today which won't help with volatility.
I'm not seeing any big trading opportunities at the moment but the short EUR/GBP trade is certainly gaining attraction.
Good luck this week.
Watch weekend press closely for Bundesbank comments
My German trading Freunde are expecting so read some clarification in the weekend press regarding the Bundesbank position on any ECB easing. Don't expect the Buba to have suddenly turned ueber-dovish, that won't happen, and any policy changes are likely to be slow and measured.
(In other words, I'd be careful about being overly short EUR over the weekend, just as a precaution).
EUR/USD: Support levels confirmed, buy dips with tight-ish stops
Plenty of stops got done yesterday amid unusually heavy turnover across all EUR pairs during early European trade.
Support levels in EUR/USD towards 1.3650 have been confirmed in my view and there is a nice risk reward trade in buying dips towards 1.3670 with tight stops below 1.3640, targeting 1.3850.
Plenty of intraday opportunities if we wait for 'silly' moves
The present FX market is totally lacking in conviction and seemingly unwilling or unable to follow through on any major breaks or trends. Yesterday in early Europe was a typical example with some of the EUR crosses like EUR/AUD getting completely oversold in a stop-driven market before rebounding to starting levels.
Break traders are operating with tight stops and only the banks and brokers are left satisfied.
Don't have a strong view, wait for 50 pip moves, and fade everything; that's the way to trade these markets in my view.
USD/JPY: Next on the 'get all stops done' list
Yesterday we saw a stop-loss run in EUR/USD down through 1.3650 and with EUR/JPY now firmly entrenching itself below 140, it's probably safe to assume that the downside will stay in focus in USD/JPY. It's Friday, risk-off day in most markets when positions are trimmed pre-weekend, and those well-chronicled stops below 101.15 will most likely be targeted at some stage.
Elsewhere the AUD looks a little soft to me on the crosses and vulnerable for a short-term sell-off (possibly led by AUD/JPY?) and everyone I speak to is long AUD/NZD and that's never a good sign!
Support in EUR/USD was confirmed now at 1.3650 so I prefer to buy dips with stops below that level. TGIF :)
AUD/CHF looking bit toppy on short-term charts
AUD/CHF seems to be running out of a bit of momentum and if risk-aversion picks up, then this pair could easily fall back towards .8150. With the hourly charts starting to look a bit toppy, there might be some decent risk-reward trade possibilities for the AUD bears?
Unrest in Vietnam could impact on risk appetite and the AUD
There is growing unrest in Vietnam with some Chinese factories having been burnt down and also unconfirmed reports of casualties. This is related to a Chinese oil-rig which is parked off the coast of Vietnam in disputed waters.
Any escalation will have an impact on regional risk sentiment and of course anything China-related will affect the AUD.