AUD/USD: Might be worth trying intraday short position near .9075/80
- Equity markets across the region will open around 0.5% lower;
- Tensions in the Ukraine are still simmering and 1 headline could spark more risk aversion;
- The apparent terrorist attack on Malaysian Airlines will also increase risk aversion.
After a long period of momentum-less trading, the AUD/USD suddenly broke higher last week. Nevertheless, many traders will be unsure of whether this is an up-trend or a consolidation and where there is uncertainty, there will be retracements.
If it's your side, it might be worth selling any morning rallies back towards .9080 with a tight-ish stop above .9140 looking for a test of .9000 again.
USD/JPY: Market getting increasingly bullish, Citi adds to long position
I'm not quite sure what others are seeing that I'm not but it seems that many of the bigger players are getting increasingly bullish on USD/JPY. Citi Techs added to their long position on Friday night at 103.30 and general hearsay amongst the Prime Broker and Hedge Fund communities shows a general impatience to get long USD/JPY in a hurry.
EUR/USD: Still well supported, buying dips favoured
Initial support is to be found around 1.3835 and if these levels attract plenty of buyers then we can start to believe more strongly in the emerging up-trend. There is stronger support now around 1.3785 and that is my optimal entry level.
On the crosses, both EUR/GBP and EUR/JPY are also building bullish profiles.
This will be a fairly quiet week on the economic data front so geo-political risk sentiment and positional adjustments are likely to be the main drivers.
AUD starts week bit lower after China trade data
AUD/USD is 100 pips off it's Friday highs after relatively poor Chinese export data over the weekend. The strength shown last week suggests to me that buying medium-term dips is the safer play for AUD/USD but with the market seemingly unable to generate much momentum in either direction, I wouldn't be overly hopeful of any trends emerging any-time soon.
Intraday support levels for AUD/USD start at .9010.
AUD/USD: Weekly close above .9080 would be very bullish event
- RBA Stevens giving a speech this morning and no sign of any talking-down of the AUD;
- Market currently testing overnight highs at .9112;
- 200-dma at .9165 is the next notable resistance level;
- A weekly close above previous resistance at .9080 might well encourage some aggressive short-covering.
GBP likely to under-perform across the board
The GBP looks to have put in a top for now against the AUD and the EUR and if it's starting to struggle on the crosses then Cable will also struggle to rally too much.
- I think EUR/GBP is starting to look very bullish with a strong base in place at .8155/60, so buying dips definitely preferred in the short-term;
- GBP/AUD should gradually move towards 1.80 whilst current sentiment prevails, so sell rallies the play here;
- Cable, I'd look to play a very wide 1.6450/1.6850 type range with a modest bullish bias (as I expect the USD to under-perform also).
AUD/JPY: +5% on the week
I wonder what happened to Monday's risk aversion when AUD/JPY was trading near 90.00? Now we are 4.5% higher! No point in chasing moves like this but congrats to anyone who was clever enough to stick a silly bid in last Monday morning.
I understand the rally in the AUD/USD to some extent, but the move in USD/JPY has certainly taken me by surprise. I guess it's typical USD/JPY price-action; stop both sides of the market out!
I'm leaving this cross alone, missed out on another one.
AUD/USD takes out important resistance levels; EUR/USD could be next
- AUD/USD has breached previously important technical resistance at .9080 and a daily close above there would be a bullish event;
- EUR/USD is closing in on spike highs near 1.3880 and a weekly close above there would be a bullish event;
- AUD/JPY is another pair worth watching as it attempts to break out of a consolidation phase.
Looks like we should have an interesting TGIF.
EUR/USD: Mixed expectations ahead of ECB
- Most reports suggest that the market is sitting short of EUR/USD;
- Majority of analysts say ECB will not cut rates but we may see sterilisation of SMP;
- EUR crosses are mixed with the single currency recovering against the JPY and CHF but staying heavy against the AUD and GBP.
My overall bias is to be small long EUR/USD near 1.3710/20 but with tight stops below 1.3670.
Australian retail sales +1.2% MoM
AUD/USD takes out stops above .9010 after better than expected economic data.
Goldman Sachs ECB expectations
- They do not expect the ECB to ease although they may end the sterilisation of the securities market programme (SMP);
- Cuts to the deposit rate and main refinancing operations (MRO) are still possible;
- End of SMP sterilisation would be worth around 50 pips in EUR/USD;
- Depot cut to 0.15% would be worth up to 150/200 pips;
- Reaction will depend on language which Draghi uses, whether it sounds like a 'one-off' or 'more-to-come'.
GBP/AUD trade update: Feeling less bearish today
- Like I mentioned below, I don't like the fact that AUD/NZD is consolidating at such low levels;
- Cable is back above 1.67 and EUR/GBP is hugging levels near .8200, no indication there that the GBP bull train is about to de-rail;
- The potential short-term topping pattern on GBP/AUD hasn't materialised.
I'm reducing my short position for now and locking in some profits near 1.8600. Doesn't look like this one will develop into a 'retirement trade' :)
Focus on AUD again with retail sales and trade data
Just like yesterday with the GDP data, neither retail sales or trade data is likely to have any major impact on interest rates as the RBA seems to be very firmly in holding mode. Nevertheless, we can expect the usual volatility around the data. AUD short positioning is gradually being reduced but the fact that pairs like AUD/NZD are still consolidating at lowly levels will give the bears some hope.
USD/JPY: Talk of plenty of bids but I prefer 'sell rally' play
There was a lot of talk in the interbank market about the very large bids at 101.35/40 and then last night more talk of big bids 101.50/70. Understandably the spot market took this as a signal to get long again. I don't agree.
- Risk-aversion is only one headline away;
- Precious metals are telling me that the USD is due for a bearish phase;
- USD/JPY positioning is still quite long;
- Recent price-action favours range-trading if anything.
Overall I prefer to sell rallies towards the top of recent ranges 102.50/70 in expectation of a move to 100.75 at least.
China's National People's Congress opens today
The main market focus will be on any mentions of economic growth forecasts with most analysts I've read expecting that Beijing will stick with it's 7.5% growth target.
Any deviation from this should have some short-term impact on the AUD.
GBP/AUD update: Still running short strategy
I've been building a short position since yesterday inside of the broad consolidation range 1.8560/1.8690. I remain bearish in the short-term and will look to increase risk levels if we get a break below 1.8550. Initial target is 1.8425 with a strategy stop now above 1.8730.
Australian GDP main event on the economic calendar
It's pretty obvious that the RBA is plotting a very steady course when it comes to interest rates so today's GDP number shouldn't really have any lasting impact. Nevertheless, short-term positions will get spooked as usual so we may see some volatility.
I'm still running a long AUD position against the GBP but with a fairly tight strategy stop above 1.8750.
The HSBC China services PMI is also set for release. Here's the full economic calendar.
EUR/JPY jumps 50 pips after Putin recalls troops
The traditional risk trades like AUD/CHF and EUR/JPY have rallied after Russian President Putin reportedly ordered his troops to return to their bases.
(Edit: Just to reiterate that these are NOT troops based in Crimea but part of broader Russian army which was having 'trials' near Crimean borders.)