AUD/USD triggers stops above .8850 after higher-than-expected CPI
Just when we expect nothing to happen, the data surprises and the weighted median CPI is back above 2.6% which is significant.
AUD/USD has triggered stops above .8850 although dealers say that the really heavy stops aren't until .8890+
Nice call on USD/CAD last night
Yesterday evening, John in the chat-room posted a very nice little piece of information from Predicted Markets which said that resistance should kick in for USDCAD at 1.1015. “Since September 2013 there have been 25 times when – as was the case on Monday – USD/CAD has posted the session high 10 pips or less above the opening price. Of the 25, only 1 went on to close the next day more than 50 pips above where USDCAD started the session. The equivalent level on Tuesday is 1.1015,” it writes in an alert sent to clients. It says second resistance is at 1.1040.
Australian CPI expected at +0.4% in Q4
Not much to get excited about in overnight trade and the market will now focus on the Australian CPI data in a little over 30 minutes. This may add to short-term volatility but unless it's grossly different to expectations, it's unlikely to shift the RBA out of it's wait-and-see mode.
Of more importance to the short-term direction of the AUD could be the story re one of the Chinese Trust Banks possibly defaulting on January 31st. I will post some more information on this shortly or you can check out the RBS Q&A in the chat-room.
USD/CAD takes out barriers; USD/AXJ on march higher
- Large barriers at 1.1000 in USD/CAD have been taken out;
- Emerging Asian currencies are getting hit hard late in the session;
- AUD suffering on back of above two and at intraday lows.
Cable: Heavyish feel heading into the European open
The GBP hasn't seen a lot of action today apart from some selling against the all-conquering NZD but it does have a bit of a heavy feel heading into the European open. I remain long GBP against both the EUR and the USD and I'm not inclined to get off either trade just yet but I am preparing myself mentally to handle some reversals.
The ZEW survey will be the main event on the economic calendar and that should introduce some volatility into the cross.
EUR/USD: Feels like 1.3500 could be critical for all EUR pairs
- Solid technical support held yesterday at 1.3510/15 but the bounce has been fairly timid so far;
- EUR/JPY neckline support held near 140.40 but a break below will lead to heavy long-liquidation;
- EUR/AUD is overbought in the short term, in my view, after reaching 'neutral' levels at 1.5500;
- EUR/GBP is in a downtrend, the market sentiment is bearish, and players are looking for more reasons to sell.
If 1.3500 breaks then I see EUR bearish momentum increasing significantly.
NZD bounces after higher than expected CPI
- December came in at +0.1% MoM.
AUD/NZD is back below 1.0600 and NZD/USD has neutralised the downtrend on the hourly chart and is currently trading at .8300.
NZ CPI: Market expecting -0.2% in December
It's been a quiet night in the FX markets with the US closed for a public holiday.
The first event on today's calendar will be the NZ CPI number for December, with most of the big banks expecting a number close to -0.2% for December.
Most interest in the spot market will be on the AUD/NZD cross. If it breaks back above 1.0730 it's likely to trigger some heavy-ish trailing stops and certainly stall recent momentum.
Good luck today.
EUR testing important support levels
- EUR/USD is testing trend-line and 61.8% support at 1.3510/15; a clean break would indicate increased momentum.
- EUR/JPY is testing support near 140.40, a clean break would suggest a topping formation in place.
Cable: Buy intraday dips towards 1.6370
- Sentiment remains strongly pro-GBP after Friday's retail sales data came in well above expectations;
- EUR/GBP remains in a solid down-channel but isn't yet oversold;
- 1.6370 was the hourly high prior to the spike on Friday and this level now provides initial support for the cable;
- Levels near 1.6550 will be tough to overcome so book profits near there and re-load on dips.
AUD/USD still looking heavy
- Asian real money sellers capped the pair on Friday near .8820;
- Sentiment remains bearish as the market plays it as a 'Chinese credit bubble' proxy;
- Technical target at .8570, a 50% retracement of the big rally from .6050.
EUR/USD: Continue to favour the short side
- Medium-term trade idea from a week ago is starting to evolve;
- Trend-line support and a 61.8% retracement at 1.3510/15 (see chart);
- I'm staying bearish on some of the main EUR crosses with EUR/AUD back at long-term neutral levels, EUR/JPY looking heavily overbought and EUR/GBP sentiment decidedly bearish).
I'm running small shorts here from last week and will sell any 100 pip rallies but if 1.3500 is tested again and holds then will need to re-assess.
EUR/JPY: Shorts favoured but still need to respect important support levels
- Weekend win in Japanese regional elections by opposition parties will worry Yen shorts;
- Overall positioning still running at extreme levels;
- The topping formation which we started watching last week is still looking very plausible;
- Support levels will be firm starting at 140.50 but a break back below 140.00 could be critical on a number of levels (technical, psychological, and positioning).
Quiet start to interbank trading week
- EUR crosses made more significant losses on Friday and I continue to play the EUR with a bearish bias;
- The break and close below 1.3550 in EUR/USD will turn short-term sentiment bearish imho;
- EUR/GBP is headed to .77 I think and is currrently in a solid downward channel between .81/.84;
- EUR/JPY is trying to form a topping formation but needs to break and hold below 140.00 to change momentum there.
Most pairs are currently trading around their NY closing levels from Friday.
NZD: Institutional flows heavily negative today
Our analysis of the major interbank platforms shows a heavy slant towards NZD selling this morning. Asian real money names are getting the blame, just as they did yesterday for the AUD/USD sell-off.
Offers were very heavy towards .8350 and the selling picked up considerable pace on breaks below .8330 and again below .8310.
AUD/USD: Battle going on in low .88's amid heavy turnover
Asian real money names have been the big sellers of AUD/USD since it broke lower yesterday but our hedge fund insider @FXWW888 has been reporting in the chat-room that one of the local Australasian banks has been a very significant buyer again this morning.
EUR/GBP: Continue to trade the downward channel
- One constant for me is the fact that EUR/GBP is headed lower;
- I'm continuing to trade the downward channel (see chart);
- Sell rallies towards .8400 looking for .8100.
EUR/USD: Short side favoured as crosses look bearish
- EUR/AUD is back at longer term median levels near 1.55 (although the daily up-trend remains in place);
- EUR/GBP is headed back sub-.80 in coming months (imho of course);
- EUR/JPY as mentioned below, trying to form a topping formation below 143.00;
- EUR/USD weekly technicals suggest to me that we are more likely to move lower.
I don't expect any sudden trend to emerge but I do think that selling intraday rallies is the way to play EUR/USD.