USD/CAD: Shorts still in play, book interim profits near 1.0760
Finally I'm making some money on a CAD trade :) I'm still short from last week and will look to book some interim profits near 1.0760. I think we may see some consolidation between 1.0750/1.0950 over the coming days before the next leg lower develops. Have a look at EUR/CAD and GBP/CAD! Both look ripe for significant retracements?
Looking to play EUR and GBP crosses from short side
Morning all. Draghi, as expected, signposted that the ECB will take some action next month and this should ensure that we see some bearish pressure on the EUR crosses over the coming weeks. I will go into the individual cases throughout the morning with my absolute preferred trade being short EUR/CAD and with EUR/JPY also showing significant short-term downside potential.
Whilst I think EUR/GBP will eventually break lower, the fact that cable has stalled ahead of 1.7000 suggests to me that we may also get a wave of profit taking in the GBP crosses. We need to get our timing perfect in the EUR/GBP cross.
Good luck today and TGIF.
EUR: All eyes on ECB and possible dovish leaning
The majority of bank analysts are expecting no changes in policy or language from the ECB later today but I'm hearing a slightly different story.
The ECB will not be pleased to see EUR/USD trading near 1.40 and I would not be at all surprised if the statement language is more bearish than expected and lays the groundwork for some not unexpected policy changes next month.
I don't like trading these risk events but if I did, I'd be trading the EUR crosses with a modest bearish bias intraday.
AUD/USD making fresh intraday highs
The AUD is making fresh intraday highs against the NZD and the USD and looking quite comfortable at these levels. I heard some rumblings yesterday of AUD/NZD M&A flows but no confirmation at this stage.
Next resistance levels are at .9377 and .9390 in the AUD/USD and at 1.0870 in the cross.
AUD/USD pops up after decent jobs data but plenty of sellers around
There is some hourly technical resistance in AUD/USD near .9360 and that seems to have attracted some sellers. The jobs data was definitely decent but the market isn't really focussed on underlying fundamentals at the moment, hence the willingness to sell rallies and/or buy dips, whatever the news.
USD/JPY: Resistance near current 101.90/95 level
This current level provided solid technical support on the way down, in the form of a long-term trend-line. We can expect nervous longs who bought here on the way down to now exit the market as their levels didn't hold.
GBP: Still see some short-term downside risk
It's important to remember where cable has come from, not just where it might be headed. It's not terribly long ago that we were trading near 1.50 and the whole world was bearish. Now we are trading just below 1.70 and the world is bullish! Looking at the crosses, the GBP has made massive moves higher against the JPY, AUD, CAD etc over the last few months and looks like we could easily see a modest retracement of some of these gains.
As you know, I'm a GBP bull and have done well on this up-move. But, there's a time and a price for entering a market and neither seems right at the moment for the Sterling bulls.
Need to readjust for slower moving markets
It seems very unlikely at the moment that we will get fast-moving impulsive moves of 300-500 pips in any pairs and I think we need to readjust our expectations. We will of course get directional moves well in excess on 500 pips but they are likely to take weeks rather than hours. Be prepared.
Australian employment data and Chinese trade numbers will provide interest on today's economic calendar.
Yen crosses still edging lower in quiet Asian trade
- The NZD has been affected by talk of intervention from the RBNZ Gov as well as the slightly worse-than-expected jobs data;
- The AUD has edged lower alongside the NZD and has also been impacted by the slightly softer retail sales data;
- Regional equity markets are lower with the Nikkei almost 2.5% lower, this is obviously impacting on risk sentiment.
With cable stalling ahead of 1.70 and with USD/JPY having broken an important bullish trend-line, the focus during European trade could well turn to GBP/JPY.
GBP looking overbought on the crosses to me
I booked profits on my medium term cable long position as I don't like the look of some of the crosses:
- EUR/GBP still looks heavy but there is super important support at .8150/60 (if we break below there then I turn GBP bullish again for sure);
- GBP/CAD is exhibiting severely overbought readings on my indicators;
- GBP/JPY has been unable to consolidate it's bullish break.
The GBP trend is still bullish but we've come a long way. If you want to pick a top, GBP/CAD looks promising to me. If you are staying bullish GBP, then I'd suggest buying cable dips or selling a break in EUR/GBP.
USD/JPY: I'm staying neutral, easier trades elsewhere
The cases for being short USD and/or JPY are too strong and too similar in my opinion so I'm avoiding this pair. The break below the trend-line support at 101.90 is certainly a bearish technical event but with the strong up-trend in place, it's probably just a flattening out of the uptrend. We could easily fall to 98 or rise to 104 and nothing would change in my view.
Short-term bias bearish but medium-term bias still bullish.
Trade of the Year #2: Short USD/CAD
- USD sentiment has now turned definitively bearish;
- CAD sentiment and short positioning has been at quite extreme levels;
- Some of the crosses such as GBP/CAD are exhibiting extremely overbought technical signals;
- Recent interbank reports suggest that the real money brigade have exited their CAD shorts, leaving the Speccys holding the overflowing saucepan!
It's positioning which will ultimately drive this market and if the speculators start buying back their CAD shorts in a turning market then we will see some big moves.
I'm short in USD/CAD from last week with a stop now above 1.1050 (it is a medium term trade). I'm looking for an initial dip now towards 1.0750 and possibly a short consolidation phase between 1.0750/1.0950 before the big sell-off really begins.
(My track record on the CAD isn't exactly brilliant so keep that in mind :( )
USD fall set to continue but still need to pick right levels in right pair!
USD/JPY broke below it's long-term bullish trend-line, USD/CAD has closed below a previously strong support level and cable is knocking on the door of 1.70. The USD is sick and further losses are almost certain in the medium term in my opinion. But, we still need to be wary of getting the right entry levels and picking the right pair.
I'll work through the pairs this morning. I have booked profits on my long-term cable long trade and will now concentrate my efforts on my short USD/CAD position, where I see significant possibilities.
GBP/USD: Looking to book profits near 1.6970
- I would not advise going short cable given the current sentiment but I am happy to book some profits on the approach to 1.7000;
- My cross-matrix is suggesting that we are nearing good levels to short GBP/CAD.
NZD/USD negates possible H&S formation
There had been some speculation regarding a potential H&S in the NZD/USD but this has been scuppered with the break above .8705. Next technical resistance is a daily high at .8745. French bank reporting plenty of NZD buying, especially against the AUD.
USD/CAD: Stops reported below 1.0925
I read some reports this morning of large-ish stops in USD/CAD below 1.0925 and it's worth keeping an eye on this level.
AUD ticking higher after RBA as expected
No surprises from the RBA but it looks as if the market may have been sitting a bit short as the AUD/USD has squeezed 20 pips higher to .9300.
What to expect from the RBA
Not much is the short answer. Most bank analysts here in Australia are expecting the core of the statement and all language to stay the same, though there is likely to be a reference to the recent low CPI data and of course the 'historically high' AUD.
There have been a few buyers noted this morning but local dealers tell me that they are more comfortable (and feel more protected) being short going into the event. This suggests that there are decent sell orders above the market.