AUD making gains on crosses after upbeat housing data
My GBP/AUD trade is looking healthier after some reasonably upbeat Australian housing data.
I'm hoping for a short-term test of 1.8550.
RBA: Watch for comments on inflation, jobs and the AUD
Today's RBA meeting will keep interest rate policy steady but it will be interesting to see what the RBA has to say in it's statement on 3 big issues;
- Inflation has been under control but with house prices rising and the cost of imports rising due to the lower AUD, the RBA might just signal that it's starting to become even more cautious on this front?
- There have been no shortage of headlines regarding employment in Australia with big car manufacturers, the iron ore industry, as well as Qantas all signalling significant job cuts. If the RBA stresses the jobs issue then policy is most likely to stay easy;
- Finally the value of the AUD will cause plenty of debate with many arguing that we are now back at more neutral levels especially against the European currencies and our Asian neighbours. It might be the lack of any AUD mention which is the most interesting factor?
All told, we should get plenty of analysis (but hopefully no paralysis).
GBP/AUD: Intraday short strategy
- Risky strategy given the strong up-trend but for all the aforementioned reasons, I think the biggest danger in the market is that over-extended positions start to reduce;
- Market is very long of GBP and quite short of AUD;
- I'm looking to play a short term range between 1.8550/1.8700 with a bearish bias.
Let's see how it develops from there.
GBP will be vulnerable whilst geo-political uncertainties continue
In the short-term, the overly long GBP market will remain vulnerable to squeezes whilst the geo-political tensions surrounding Ukraine continue. One can make a strong medium-term case for being long GBP whilst the situation is ongoing but in the short-term it will be all about positioning.
Look to pairs like GBP/CAD and GBP/AUD for some opportunities.
EUR/USD: RUB intervention main factor overnight
The Russian central bank sold over $10 billion of USD/RUB yesterday, as it sought to halt a run on Russian assets after Putin's intervention in Crimea. A large portion of these USD were then bought back, primarily against the EUR but also against the Yen, in order to keep FX reserve ratios constant.
This kept a solid cap on EUR/USD throughout the European session and also provided plenty of support on dips for USD/JPY.
GBP: Long positions might be threatened if risk-aversion escalates
Reports last week suggested that the market was getting very long of GBP across the board and the first thing to go in a risk averse market is the big positions. I think it makes sense to keep a very close eye on EUR/GBP and GBP/JPY.
EUR/USD: Friday's price action suggests more topside ahead
Notwithstanding the risk aversion in the market and the sell-off in EUR/JPY and EUR/CHF, Friday's price action in EUR/USD looked very bullish to me and I'd prefer the buy-dip strategy here. Perhaps selling USD/CHF rallies makes more sense but the SNB won't give up EUR/CHF without a fight. Any levels near 1.3700 are starting to look like dips.
USD/JPY: Favour selling rallies for test of 100.75
Trade has been fairly orderly so far but I still get the sense that the risk is to the downside in USD/JPY. The obvious technical target is recent daily lows at 100.75 and selling any 40/50 pip recovery rallies in expectation of a test lower makes good sense to me.
GBP/CHF trading near it's 100-dma technical support
The GBP/CHF 100-dma, which comes in near 1.4720, has proven to be reliable support for this pair over the last 9 months and we are trading close to there again. Caution is advised with GBP longs reportedly at severe levels and risk aversion causing a flight into the CHF.
Risk trades lower in early interbank trade
EUR/JPY is trading near 139.50 and EUR/CHF is near 1.2100 as the market opens the week in risk aversion mode. The situation in the Ukraine is causing the unrest. I wouldn't be trying to buy a dip in any of these crosses just yet, unless you are booking profit of course. Best to wait and let things settle in my view.
Stop-losses and political tensions supporting the CHF
- The situation in the Ukraine is making the traditional safe-haven CHF particularly attractive;
- USD/CHF triggered heavy stops below .8850 on Friday and this level is now the first resistance point;
- EUR/CHF has broken recent daily lows and looks likely to test the SNB resolve at 1.2000 as macro players exit the cross in frustration.
USD/CHF looks very dangerous now and the risk would seem to be firmly to the downside.
Market rumours that PBOC band widening this weekend
USD/CNH spiked briefly up to 6.1340 before settling back near 6.1270 amid more chatter concerning a widening of the currency band by the PBOC. The chat earlier in the week was that the PBOC and its agents bought USD/CNH aggressively in order to squeeze the speculators out before any band adjustments could take place.
The AUD has edged lower on the crosses especially against the Yen and the NZD.
AUD/NZD: taking my ball and going home
Once again the NZD defeats me and I'm giving up on my latest attempt to pick a base in this pair.
The rise in the NZD seems relentless and the AUD has no friends so I will step aside and await another day.
Choppy, tricky market-conditions continue
If I could come up with a few more adjectives to describe the current market conditions then I would but safe to say that most traders are finding conditions very tough. Trends seem to continue in short sharp bursts like in the GBP or CAD and then revert to sideways consolidation. The other majors simply chop sideways with plenty of false dawns.
I've been tracking a large number of traders constantly for the last few weeks for the Forextell trade-idea portal and most of them are having it equally tough.
One of the banks put out a sell recommendation overnight in USD/JPY IF it closes below 102.10. Current price is 102.10. Typical.
Good luck today and TGIF.
EUR/CHF: Daily support levels at 1.2165
Most of the action is once again in the crosses:
- AUD/NZD has taken out important daily support at 1.0730;
- EUR/CHF is closing in on daily support at 1.2165.
AUD/NZD: Testing recent support levels near 1.0730
I remain long of this pair and in fact I bought a bit more yesterday, which doesn't look like a great move right now.
Nevertheless, important support near 1.0730 is still holding and I will stick with the strategy for now. If it starts trading consistently below 1.0700 then I will have to re-assess the strategy.
NZD higher in early trade on higher milk price forecasts
New Zealand is a small economy which is heavily reliant on the dairy industry. Any change in the milk-price forecast will have an immediate impact. Dairy giant Fonterra has just raised their forecast by NZD0.35/kg and this has helped the NZD/USD to pop back above .8300 and AUD/NZD to test short-term support near 1.0770.
Cable: Large expiries today might keep the pair capped
There are some large expiries later today at both 1.6600 and 1.6650 which should ensure that cable stays capped for the next session or two. Any big moves away from the expiry level will encourage the holder to start selling in the spot market, if they haven't done so already. Also the fact that the pair hasn't rallied strongly despite the reportedly big M&A demand, might curb bullish GBP sentiment.
That said I'd expect 1.6580 to continue to hold and dips and 1.6750 should be a step too far for the bulls in the short-term.