GBP/JPY making bullish break out of wedge formation
The first bullish break is taking place in GBP/JPY (of the two wedge formations we mentioned earlier).
This has the potential to accelerate quite sharply.
EUR looking well supported across the board
- EUR/AUD is currently breaking above prior highs and a 38.2% retracement level near 1.5000;
- EUR/GBP is trading sideways but heavy stops are reported above .8250;
- EUR/JPY, like mentioned earlier, is threatening to break out of a consolidative wedge formation;
- EUR/NZD saw heavy buying reported yesterday from one of the big investment houses.
AUD/USD: Looking to start building longs at .9175
The NZD is still looking a bit soft overall and that is also having an adverse impact on the AUD. Iron ore prices were hit pretty hard yesterday after credit lines were tightened and the continuing unrest in the Ukraine is affecting risk sentiment.
AUD/USD is making fresh hourly lows but I remain very firmly in the buy-dip camp. I think the market is short AUD at the wrong levels, especially against the EUR, and I like the technical set-up in AUD/USD.
I am looking to buy small-ish at .9175 initially and see what happens from there.
Wedge formations in GBP/JPY and EUR/JPY reaching apices
Have a look at the two attached daily charts for GBP/JPY and EUR/JPY and you will see that both are primed for breakouts.
Wedge formations are usually consolidative in nature which would suggest that the next move in both pairs will be higher. Could the BOJ be the trigger later in the week?
New Zealand trade data on this mornings economic calendar
- There is solid technical support ion the NZD/USD at .8498/.8508, previous daily lows and the 55-dma;
- AUD/NZD is trying to form a basing pattern but for now is in the middle of its short-term 1.0750/1.0950 consolidation;
- NZ trade data is the highlight on this mornings economic calendar.
Cross flows driving EUR/USD higher
- Cable caught a bid tone on the back of M&A chat;
- EUR/GBP is well bid on the back of anticipated CB buying;
- EUR/NZD demand has been noted by one of the big investment houses.
All this adds up to a higher EUR/USD, now 50 pips above earlier Asian lows.
GBP/AUD: Short strategies worth considering for the GBP bears
Not really my side, (although I still like the long AUD play overall), but I'm still hearing some very strong arguments from professional traders for this pair to go lower.
There is short-term support now near 1.8030 and resistance is firming near a 38.2% retracement level at 1.8140. If you are a GBP/AUD bear, then I'd look to play this range with a bearish bias.
Cable: Still favour more topside moves
The short-term price action feels like classic consolidation and more gains look likely. That said, there will now be plenty of trailing stops below 1.6750 and it will only take one piece of bad economic data out of the UK to trigger those stops.
EUR/GBP is also at interesting levels, trading quietly below .8250 but with the bears salivating at the thought of a break below .8150.
Back to the cable, I'm looking to buy intraday dips to 1.6770 with relatively tight stops. My target is 1.7000.
Yen crosses slightly higher in early Asian trade
The lack of volatility in the FX market is increasingly becoming an issue and despite plenty of geo-political upheaval and economic changes in fortune, the market seems to be increasingly stuck in sideways mode. At least we've had decent moves in some of the crosses but those who are trying to earn a living from big trending moves will certainly be struggling.
The early Asian interbank market is now up and running for the week and we are seeing a modest rise in the Yen crosses, probably due to pre-weekend risk-off trades now being taken off. EUR/JPY is around 20 pips higher at 141.45, EUR/USD 1.3835, USD/JPY 102.25, AUD/USD .9275 and cable 1.6795.
Have a great week.
Cable intraday: Play 1.6770/1.6810 with bullish bias
- The very strong up-trend and consecutive hourly lows near 1.6760 give us the bullish bias;
- Momentum is lacking and there will be profit takers on rallies as well as range-traders aplenty, so selling rallies towards hourly highs also makes sense;
- I don't expect anything to happen during Asian trade but we might get a few dips/rallies in early European trade.
Still photos rather than moving pictures
The rates on my Reuters Eikon look to be frozen in time! Very little change from overnight and we can expect another quiet session in Asia due to the Anzac holiday.
- I still like the GBP higher and will consider adding a cable long to my EUR/GBP short if momentum can pick up (though probably not before Monday);
- EUR/USD is trapped in a very tight range but my feeling is that the market is short and we will get a top-side squeeze first;
- The AUD is slowly giving back some recent gains across the board and we can expect further consolidation today. I'm still very much in the buy-big-dip camp on the AUD/USD and I also like the look of AUD/NZD as a dip-buying opportunity;
- USD/JPY is tied in by some big option expiries and best left alone in my view.
Have a great day and TGIF.
Cable flows: Bids at 1.6760, stops below.
- There were large stops reported yesterday below 1.6760 but interestingly the overnight low was exactly 60. This suggests to me that there is a large bid at this level with stops directly below;
- Sell orders reported now 1.6810 (modest size).
NZD/USD: Next technical resistance at .8647
There is a 50% retracement level and an hourly high coming in at the same level.
Latest from WestPac on RBNZ statement
Once again, thanks to our hedge fund insider in the FXWW chatroom for posting the following information from WestPac.
The Reserve Bank of New Zealand increased the cash rate to 3.00%, as unanimously expected by economists and financial markets. In its statement, the RBNZ reiterated the main message that the OCR is set to rise over the next couple of years. Also as expected, the press release acknowledged two important downside developments since the March MPS: (1) The RBNZ said export commodity prices remain very high, but it acknowledged that auction prices for dairy products had fallen 20% recently. (2) The high exchange rate seemed to shift higher in importance. The bias sentence this time was "The speed and extent to which the OCR will be raised will depend on economic data and our continuing assessment of emerging inflationary pressures, including the extent to which the high exchange rate leads to lower inflationary pressure." By comparison, back in the March MPS the exchange rate was not mentioned in this context. However the RBNZ's acknowledgement of recent low inflation outturns was quite low key. It reiterated that headline inflation is moderate now, but inflationary pressures are increasing. This was enough to spark a bounce in NZD/USD from 0.8585 to highs above 0.8620. Our expectations for the OCR have not changed. We are forecasting further hikes of 25bps each in June, July, and December this year - although we admit that the July hike is a very close call. Markets are also divided on July, currently priced at 3.34%.
Levels to watch in the NZD crosses this morning
The NZD is still bouncing around after the RBNZ but the short-term bulls seem to have the upper hand for now. Levels to watch in the crosses are as follows:
- NZD/JPY resistance at 88.55;
- AUD/NZD reported bids at 1.0725/35;
- No exact levels in GBP/NZD but I've seen two sell signals from professional traders in the last 30 minutes.
NZD pops up 25 pips after RBNZ decision and statement
As expected change in the base rate to 3.00% and the comment that inflationary pressures are increasing has caused the NZD/USD to pop up towards .8620.
I still like the buy-dip play in AUD/NZD and am looking for entry levels near 1.0735.
EUR/GBP still tracking higher post-BOE
The aforementioned stops above .8230 were easy pickings after the Monetary Policy Committee of the Bank of England delivered their latest.
The big levels to watch in cable are 1.6760 on the downside, with stops tipped below there, and of course 1.6850 where barriers are touted.
EUR/USD: Totally at mercy of the crosses
I do not expect EUR/USD to move too far away from current levels over coming sessions. All the action will be in the crosses with pairs like EUR/AUD and EUR/GBP already leading the way today.