USD/JPY: I prefer to sell big rallies
- Certainly USD/JPY looks extremely well bid at the moment and there are no signs of a top forming just yet;
- The worrying point for me is the extreme positioning that is reported from some areas of the market, particularly amongst professional players;
- If you are playing from the long-side, I'd try to keep stops exceedingly tight just in case this pair turns;
- Gains made during illiquid holiday markets will usually be erased just as quickly once normality returns;
- I'm staying sidelined on this pair but am willing to sell any silly spikes towards 1.10/1.12 (getting closer!)
EUR/GBP ready to make move towards .80 and below
- Since breaking above 1.6250, cable has been unable to break back below (apart from one minor stop-loss binge);
- All data emanating from the UK economy has been very strong in recent months;
- The EUR will have a few nervy months as the EZ banking system again comes under the microscope;
- Long term equilibrium levels for the EUR/GBP cross lie around .7500 imho and I see no reason whatsoever for us currently to be trading 15% above these.
One of my strongest Q1 trades for 2014 will be the short EUR/GBP play with a minimum target at .7700.
AUD/NZD: Looks to be headed for 1.10
It looks to me as if the cross is forming an exhaustive base at 1.0750 (yes I'm biased and talking my position) and that we should see a test of levels near 1.1000 in coming days. The market is short of AUD and bearish on AUD/NZD at illogical levels. Despite some strong NZ economic data and a hawkish RBNZ, the NZD has been unable to sustain gains- another sure sign that the cross is oversold.
I ex[pect a base to form now at 1.0800/15 for the next leg higher to 1.1000.
Winding down early for the holiday period
The market has been very quiet overnight with only some modest flows in CAD, AUD and NZD being reported. The majors have been especially quiet and I expect it to stay this way.
My current thinking is that the USD and GBP will stay strong through the holidays, the AUD will re-bound on the crosses, and the NZD, CAD and JPY will encounter selling pressure. I'm neutral on the EUR.
If anything unexpected develops, I will certainly burden all with my views, but otherwise I'm hoping for a few quiet days to re-charge the batteries.
AUD/NZD: Trying to form a short-term base
- I'm hoping I might have managed to pick that elusive bottom yesterday;
- The hourly chart is trying to form a base now above 1.0800 (see chart);
- Short-term resistance is at 1.0880 but a break above there will bring my initial target at 1.10 quickly into view;
- My sense is that the speculative market is short AUD and we may see a gentle squeeze across the board ahead of next week's holidays.
AUD/NZD: Small longs in play
- AUD/USD feels oversold to me and whilst the trend is lower, I feel we may get some consolidation;
- NZD/USD rallied briefly after strong GDP data this morning but then fell immediately, usually a bearish sign.
I don't feel like taking on too much risk this close to the holidays but AUD/NZD looks very cheap to me near 1.0750.
Very classy call on GBP/CAD from Morgan Stanley
I posted this trade idea from Morgan Stanley just a few days ago and it turned out to be an absolute Humdinger.
Well done guys, pure class.
AUD starting to look oversold on the crosses
- AUD/NZD is way too low, with mid-range values for last 20 years around 1.18/1.20;
- AUD/JPY is another pair soon set to rally imho with super strong technical support at 90.00;
- GBP/AUD has just reached it's first technical target at 1.8500 and another big one is looming (38.2% of entire downmove from 2.60) around 1.8800;
- AUD/USD triggered large stops below .8850 but immediately bounced. It's certainly in a bearish channel but is seriously oversold.
I'm not saying this is the exact bottom for the AUD but I think we are getting close.
Dollar likely to stay well bid over holiday period
- USD/JPY is trading at 5-year highs and the market is all bulled-up for more gains. I'm not joining in as I missed this boat already;
- USD/CAD is worth watching closely as it seems to have plenty of scope for a big catch-up on the top-side;
- The GBP has out-performed all currencies overnight after more strong economic data. More gains are expected on the crosses but the cable is likely to range trade above 1.6200 now imho;
- The AUD/USD has been hit by more heavy stop-loss selling but is starting to look oversold on short-term timeframes;
- EUR/USD has finally broken below it's recent consolidation range but is likely to find another one on a lower plane.
Cable: Book some intraday profits and look to re-load on dips
This morning's trade has worked out nicely but there is no point in being too greedy ahead of the Fed so I've taken 90 pips profit off the table and will look to re-load on dips. I really like 1.6250 now as a potential base area.
AUD/JPY: Favour buying dips towards strong technical support levels
- Neckline of double bottom comes in around 90.00 (see chart);
- 61.8% retracement of rally from 86.50 comes in near same level.
USD/JPY: Vulnerable to positional squeezes
The market is very bullish USD/JPY, and already quite long, but events overnight in the CHF crosses might flow over into the Yen and cause a bit of nervous pre-FOMC position-squaring. Technically we could easily dip to 101.80 without endangering the bull trend and I see the early risk today as being to the downside.
GBP: Stops triggered but no follow through (bullish sign)
I've had a good feel for the GBP in recent months and I'm getting the feeling again that we may soon see another sharp spike higher. There were well reported stops in cable and EUR/GBP but the market seems just about able to muster enough momentum to trigger the stops and then no more.
Obviously it's a dangerous time to be taking positions just ahead of the Fed but I did manage to get out of most of my longs at 1.6410 so I'm comfortable increasing at current levels near 1.6265 with a stop below 1.6200.
RBA meeting minutes
http://www.rba.gov.au/monetary-policy/rba-board-minutes/2013/03122013.html
AUD market smells a bit short and despite the usual 'A$ still too high' comments, the AUD/USD is edging higher.
USD/JPY: Massive expiries ($27 billion) over next 5 days
Plenty of excellent information in the chat-room today and thanks to 888 for publishing this report from BofAML.
"Publicly available data shows there are $27,000,000,000 of USDJPY strikes expiring (103-103.90) over the next 5 business days. This figure, even if only half of this was open interest , is in the upper regions of the largest exposure market has seen in years. The markets expectations for a Fed Taper have been gradually increasing, but with that much exposure it would take a real outside surprise for USDJPY to be able to break itself away from the current 102.60/103.40 range – especially when one considers a large percentage of that $27,000,000,000 is centred around 103 and expires over the next 36hrs. BofAML’s APAC trading desk is flat in USDJPY here and anxiously awaits 2pm EST on Wednesday."
GBP/CAD trade idea
Thanks to Milan who just posted this in the chat-room. I'm not 100% on their levels but I love the direction:
"MORGAN STANLEY TRADE IDEA OF THE WEEK
In the week of the FOMC meeting, we still like being short CAD. As markets continue to price in tapering, we have found CAD to be the most vulnerable G10 currency to the expected resulting rise in bond yields. Canadian government bonds have the highest correlation with US Treasuries. In addition, Canada’s weak foreign asset liability and leverage position, relative to other G10 countries, make it particularly vulnerable. We believe that the retracement in GBPCAD should provide attractive entry levels for this position. In the UK, the unemployment data and the BoE minutes are key risk events for this trade.
Buy GBPCAD at 1.7200, stop at 1.7080, target 1.7600
USD/JPY: Buy-big-dips still obvious play but....
- This is another pair which will be severely affected by the FOMC decision;
- Marginal new trend highs were made last week but so far no follow-through;
- The speculative market remains quite long of USD/JPY but is also very bullish;
- I've got no strong feel here at all and am happily sidelined.
AUD/USD: Corporate demand returns but still feels heavy (play .8825/.9125 range)
- Speculators are heading for the sidelines ahead of the FOMC which will be a big risk event for pairs like AUD/USD;
- Real-money funds are still looking to sell into any big rallies but corporate end-of-year buyers have started to appear;
- Technically I'd expect resistance to be very firm near the 21-dma at .9125 and the bearish channel has a base now near .8825 which should provide support;
- We are close to the middle of these edges at the moment so there are no easy trades.