JPY crosses: Trendline supports holding firm
- The long-term bullish USD/JPY trendline came in yesterday near 101.90 and that level held very nicely;
- Similarly in EUR/JPY, the base of the consolidative wedge held nicely near 141.20.
Japanese markets will be open again after yesterday's holiday, let's see what they make of these levels.
(Edit: Apologies :( Tokyo, HK and Seoul still closed today)
Plenty of AUD data to get the market moving
It should be a big day for the AUD with the RBA rate decision preceded by the trade data for March. I do not expect any change in policy or language from the RBA. (Economic calendar).
- AUD/NZD is starting the day below 1.0700 which is not a good sign for those who've been trying to pick the base. Today's data/decision might give the market an excuse to go looking for more stops in the cross, possibly below the 61.8% Fibo support at 1.0670;
- AUD/USD is still range-bound broadly between .9200/.9350 and as we are right in the middle of this range I'm staying patient.
JPY crosses: Some big levels to watch nearby
- AUD/JPY has just broken below s/t support at 94.50 and has technical scope for a fall to 93.35;
- USD/JPY is sitting right on it's daily trendline near 101.90;
- EUR/JPY is trading near the bottom of its consolidation 'wedge' which comes in near 141.20.
AUD/USD: Short-term strategy; prefer to sell intraday rallies now
- The latest US employment data was quite solid and should give the USD some modest short-term support;
- The AUD/USD tried to run higher in early inter-bank trade but ran into plenty of quite heavy selling interest;
- There is still a whiff of risk-aversion in the air despite the rallies in global equities on Friday.
I'd suggest a short-term range for the AUD/USD of .9150/.9325 with a sell-rally bias from current levels.
Medium-term I am still very much in the buy-dip camp.
NZD continually baffles the bears
The market's strongest currency on Friday was the NZD and the only explanation I can think of is that the Chinese buyers are still very active. Despite strong US jobs data and risk-averse news out of the Ukraine, the NZD has stayed strong across the board.
The break below 1.0700 in AUD/NZD will have greatly unsettled the bottom pickers in this market. More evidence is needed and I'm staying on the sidelines despite the persistent urge to buy!
I know plenty of traders have been trying to sell the NZD against the GBP, CAD and even the JPY, but the price action suggests that the NZD gains aren't done with yet.
USD struggling to hold gains despite strong jobs data
We had the usual whippy 50 pip volatility directly after the NFP on Friday but the fact that the market was unable to hold onto USD gains is a pretty bearish sign in my view. That said, perhaps it's apathy which is the main driving force with no market seemingly able to hold on to any momentum.
We've had a quiet start in Asia with the market sticking close to Friday's closing levels.
There is plenty of minor Australian economic data on the calendar with HSBC Chinese manufacturing PMI the obvious highlight.
AUD/NZD: Trading back towards support zones; buying dips preferred
There are plenty of willing buyers reported in the AUD/NZD between 1.0700/30 and buying dips is the preferred intraday play. I'm also of the view that this market is due for a healthier correction towards 1.15 later this year, so I'm also a medium-term dip buyer.
NFP Fridays usually risk-off events; GBP/JPY worth watching closely
I'm not sure if the market has big enough positions to warrant some risk-off trading today but with the NFP tonight, it certainly is possible.
One interesting pair to watch will be GBP/JPY with many traders (yours truly included) watching the evolving wedge break on the daily chart. This should be a bullish event but the lack of follow through suggests to me that the market might have bought enough already? Bears can consider selling exhaustive rallies to 173.70.
Lack of volatility making for difficult trading conditions
We seem to be getting the occasional sharpish 50/80 pip moves followed by hours if not sessions of sideways movement. Most traders find these conditions very hard to adapt to. Somehow we are hard-wired to always anticipate a big move, but these don't happen very often. The range trader in the FX market wins out most of the time.
There were only some very small moves yesterday and I've learned nothing new. Let's see if the market positioning is extreme heading into tonight's NFP, that might cause some positional adjustment.
TGIF times 2 :)
EUR/CAD short-term resistance at 1.5220 holding firm
A quick look at the hourly chart shows that technical resistance at 1.5220 is still holding firm in EUR/CAD. Good risk-reward entry levels for the bears at current levels.
AUD/USD: More consolidation favoured but bullish bias still in place
There will be plenty of stops above .9310/15 and i would not be surprised to see some of them triggered later today. Patient bears will no doubt be lying in wait near .9350 and I'd expect any rallies to peter out there.
I'm still in the buy-big-dip camp and am hopeful that my levels near .9150/75 will be tested before the next big bull run begins. Yesterday's lows near .9230 provide support ahead of there.
Cable: Keep your finger on the buy button
I still see no reason for abandoning the bullish cable strategy and my target at 1.75 is looking more realistic by the day. The daily close above previous highs near 1.6850 will only add to the momentum. I don't expect any wild straight-line moves, so continue to book profits on rallies and re-load on dips.
Corporate offers above 1.6900 will slow progress down but dips should be limited to 1.6770.
EUR/GBP continues to consolidate around .8200 and a test of massively important technical support near .8160 is surely also in the offing.
Flows and Orders updates
- Citi bank reporting that end-of-month hedge re-balancing flows are likely to be relatively neutral. In fact we could see negative flows in the USD, EUR and GBP which is a bit unusual;
- USD/CAD battle currently going on between two of the bigger Canadian banks near the 100-dma at 1.0965;
- Strong end-of-month AUD demand was noted today especially against the European currencies.
EUR/USD: Bears get some hope from overnight dip but...
It seems to me that the majority of traders, both professional and retail, are bearish EUR/USD. Whether they are short or not is another question. Certainly in the greater scheme of things, 1.3800 is a reasonably high level for the EUR/USD but whether we see 1.36 or 1.40 next is really a coin toss in my view.
On the crosses, EUR/JPY looks more likely to go up rather than down, EUR/GBP and EUR/CHF are pretty close to important support levels but EUR/CAD and EUR/AUD now look bearish.
I am leaving EUR/USD alone for now but despite the overnight dip, I'm maintaining a very modest bullish bias.
GBP bullish case looking stronger
- Cable doesn't want to retrace it would seem and this consolidation near new highs is a very bullish sign. We still need to pick the right entry levels but I think we will see 1.75 fairly soon.
- EUR/GBP is consolidating just above .8200 but the outlook is a little clouded as long as strong technical support near .8150 holds firm. It's too risky to be going short at current levels, selling rallies is still the safer play in my view. Perhaps .8175/.8275 consolidation before the big break lower?
- GBP/JPY looks to be breaking out of a wedge consolidation pattern and I prefer the long play here (though best avoided on BOJ risk-event day).
Overly short CAD market takes a big hit
Most moves in the FX market are based on positioning; the market is either getting into positions or getting out.
There was an invaluable comment yesterday in the FXWW chat-room on Reuters Messenger where one of the big banks reported that the USD/CAD bids near 1.1000 had been cancelled. Someone knew something, that's for sure.
- EUR/CAD is now looking 'toppy' again and a test of 1.4900 is likely to develop in coming days;
- USD/CAD has closed back below its 100-dma and looks vulnerable to further stop-loss selling;
- Anyone for a CAD/JPY rollercoaster trade!!!
Main focus today on BOJ; USD/JPY bulls again to the fore
USD/JPY is stuck right in the middle of its medium-term consolidation so its pretty hard to get overly excited at current levels. Nevertheless, with some of the crosses like GBP/JPY starting to make interesting technical moves, the Yen bears will probably be hopeful that another bout of easing from the BOJ might get the market moving.
Risk-reward would seem to favour the USD/JPY bulls but be warned, the market will be somewhat long and there will be a stop-loss run if the BOJ disappoints.
EUR/NZD: Very nice technical resistance level at 1.6320
You can see a 61.8% retracement level and a bearish trendline coming together near 1.6320.
