EUR/GBP: Strong technical resistance near .8460 holding firm for now
- The 100-dma and a 61.8% retracement (see chart) are providing very solid resistance;
- The bearish trend-line and 200-dma come in closer to .8500;
- UK CPI data later should ensure a busy second-half of the day.
Cable: Risk-reward favours short-term bulls
- Recent trend has been strong and bears will need to be careful of selling into weakness;
- FOMC and plenty of UK data this week should ensure that interest remains high;
- Previous highs at 1.6250 provide support and Friday's fall stalled at 1.6260;
- Bulls can try buying at 1.6270 with a very tight stop below 1.6240 looking for a 1.6450 re-test;
- Bears need to be patient and wait for their case to strengthen- if 1.6240 breaks then revert to rally-selling mode.
Levels to watch in Asian trade, Monday December 16th
- Cable: Looks like 1.6240/50 is looming as the big level to watch here and a break below could see many longs bailing out;
- USD/JPY has had a quiet start to the week and will need to break outside of a 102.95/103.40 range in order to find its next short-term directional bias;
- The AUD has made a modest recovery on some of the crosses but AUD/USD remains heavy and sell orders are already reported between .8980/.9020;
- EUR/USD has stalled its recent up-trend after it ran into heavy Sovereign selling interest but all now depends on Wednesday's FOMC. Intra-day support/resistance now at 1.3700/60.
Good luck today.
Technical glitches in Gold market this morning
Stops were triggered in USD/JPY above 103.50 after Gold seemingly fell by 2% but it turns out the Gold pricing was a glitch of sorts and it hasn't dealt below $1224/oz. No chance of those USD/JPY stops being undone, just bad luck.
Cable: Could be in danger of sharp spike lower
- Heavy trailing stops are reported below 1.6265 and 1.6240;
- Market has been buying cable for some months now putting it at risk of a sharp spike lower especially now that the USD is establishing a 'bid tone';
- Overall I'm still bullish on cable (but I've taken most of my risk off the table in recent weeks) and if stops start getting triggered in thin markets, we could see a dip towards 1.6000 again.
AUD/USD still looking very heavy, more losses in store
- Markets are getting increasingly thinner in the lead up to Christmas and some big players like real-money funds and reserve managers still need to sell it seems;
- RBA Stevens again tried to talk the AUD down, saying that 85 cents would make more sense;
- The break below the psychologically important .9000 now gives rally-sellers somewhere to put their sell orders;
- If you really do feel like buying the AUD on dips, I'd look to the crosses like AUD/NZD near 1.0750, AUD/JPY near 90.00 and possibly even AUD/CAD;
- Nothing of note on the economic calendar;
- Initial AUD/USD target is trend lows at .8845 but a move to longer-term technical levels near .8650 looks quite feasible.
USD likely to stay bid through the holiday period
- Most of the big recent moves have been in the crosses but the USD is looking increasingly likely to enjoy an end-of-year surge;
- EUR, GBP and CHF have made strong gains in recent months and could easily enter a period of consolidation;
- Most of the USD gains have been coming against the AUD and the JPY, and the CAD and NZD may soon start to play catch-up;
- Tapering is most likely to begin in January but some token effort is certainly possible next Wednesday.
I'll run through the individual currencies over the next few hours but from a risk reward standpoint, long USD/CAD and short NZD/USD are looking favourable.
Good luck today, and TGIF even if it's Friday the 13th.
Today is the 30th anniversary of the AUD float
Obviously way way before my time but I believe the AUD/USD had been hanging around 89 cents before the float. The first move was up (and wrong as so often) but a big Aussie corporate sold massive amounts into the rally to 96 cents and it was one way traffic after that for next 25 years.
Funny how most FX rates eventually tend back towards the same levels in the long term, cable at 1.60, AUD/USD at 90 cents (so watch out if USD/JPY really starts reversing :) )
Final reminder that Jurassic Park will be re-created upstairs in the Occidental Hotel on York St, later this evening :)
AUD/NZD under pressure after RBNZ statement
Looks to me as if the market was in base-picking mode for last few days and now we are seeing their confidence tested. The RBNZ didn't say or do anything unexpected by my reading, but with rate rises in the offing for next year, it's not hard to put a bullish-NZD spin on things. The market is currently testing recent lows at 1.0945/50.
I still like the idea of putting a silly bid in somewhere (1.08 ish perhaps?) and then sitting back and waiting for a short-squeeze back toward more neutral long-term levels at 1.15.
EUR makes gains across the board as progress made on bank-plan
- Reuters reported that the EZ is making significant progress in coming up with a plan to tackle ailing banks;
- EUR/USD consolidated it's steady gains of recent days and is still targeting trend highs at 1.3830 (see chart). A clean break above there targets 1.40, always important psychologically and a magnet for options market;
- EUR/GBP regained the .8400 handle but resistance will be very strong between .8465/.8500;
- EUR/AUD made a fresh bullish drive after the consolidation period above 1.5030 ended.
AUD: Real-money and reserve managers continue to sell
- It will be difficult for the AUD to rally whilst bigger players are selling into increasingly thinner markets;
- Reserve managers seem to be re-balancing before end-of-year whilst real-money funds are also active;
- AUD/JPY is still capped by its 200-dma and looks set to test important technical support (neckline, 61.8%) around 90.00. If the AUD can't rally against the Yen then it really is the weakest of the majors for now;
- AUD/USD is in sideways consolidation but the bears are definitely holding the stronger cards (medium-term technical target at .8650);
- NZ monetary policy and Australian job numbers on the economic calendar.
USD/CAD medium-term overview: Headed for 1.17+?
I'll start this analysis with the Rider that my track record on the Loonie is not that strong and I don't spend as much time analysing it as I do on the other majors. Nevertheless, the CAD is an important component of the overall FX jigsaw puzzle and I have a strong sense that we are soon to see some very extended CAD weakness.
There are people who are a lot better qualified than me to comment on the fundamentals behind the CAD and I prefer to focus on where it's come from and whether it's at fair values. Remember that USD/CAD fell from 1.60 in a virtual straight line (see chart) through the GFC and the question is whether it's fall was over-extended. If it was, then levels near 1.0000 can be considered cheap and it would not be considered 'over-valued' until it reached 1.30+ imho. Could the Fed 'taper' be the trigger for this move? Possibly, but that will depend on how the macro players are positioned.
Other pairs like GBP/CAD (see chart) still have a long way to go before they reach even their minimum retracement, and the bullish momentum in this pair is clear to see. I haven't been actively trading any CAD pairs and therefore have no strong feel for what the big levels might be.
Timing is all that matters in the FX market but my sense with the CAD is that we are in for a big move lower which will take USD/CAD towards 1.20 and GBP/CAD to 1.90.
Aussie float party reminder
Just a reminder to all you dinosaurs out there who were in the interbank market 30 years ago when the AUD floated; presuming of course that you can remember that far back :)
The big reunion is upstairs at the Occidental Hotel on York Street, tomorrow evening from 6pm onwards.
I'm way too young to attend.
Silver closing in on resistance levels
Silver is up 50 cents from yesterday morning and the contrarian trade we looked at is looking increasingly relevant. There has been plenty of chatter re large trailing stops through $20.50 and we should see a test of this level at some stage over the next few sessions.
Levels to watch during Asian trade
- USD/JPY: Trying to form a double-top at 103.35 and some heavy profit-taking was reported yesterday in many Yen crosses;
- USD/CHF: Trying to close below previous lows at .8880;
- AUD/USD: Short-term technical resistance at .9170 and the 21-dma is always relevant, coming in near .9190 today;
- EUR/USD: Targeting recent trend highs at 1.3830 still.
EUR/CHF: Large barrier protection ahead of 1.2200
By the way, if you want more regular information on flows and orders then be sure to follow Milan on Twitter.
Big player reportedly selling GBP/JPY
The giant Norwegian state pension fund has reportedly been selling GBP/JPY above 169.50 in early European trade. They may only be taking a bit of hard-earned profit ahead of the Christmas holidays but their presence is always worth noting.
GBP/JPY intraday: More gains looking likely
- GBP/JPY has breached recent daily highs at 169.15 and closed above there;
- USD/JPY has had an intraday pivot in recent sessions near 103.00 and the close above there makes a test of 103.70 increasingly likely;
- 1.6410 has been the level I've been watching in cable and the close above there makes further impulsive gains increasingly likely.
Be patient, but play GBP/JPY from long side would be my suggestion.