FX market looking to non-USD pairs for trading opportunities
- Unusual pairs like GBP/NZD saw much of the volatility overnight, falling heavily before recovering all losses;
- I suspect that many traders prefer to look to non-USD pairs whilst the US budget fiasco continues;
- Much of focus in Asia will be on the Yen crosses, particularly the large stops reported below 96.50 and through 96.00;
- BOJ minutes and Australian consumer confidence on the economic calendar;
- I am maintaining my sell-USD-rally strategy across the board.
European open: Still prefer to play market from short-USD side
- USD/JPY broke below the 200-DMA at 96.68 but failed to trigger stops below 96.50;
- Semi-official names remain the noted buyers on dips;
- JPY crosses are higher across the board after Asian session;
- I think USD/JPY will struggle to break above 97.20/30 and any further gains in Yen crosses will come through the components;
- AUD/NZD continues to edge higher.
AUD outlook, Tuesday October 8th
- No major orders reported within 80 pips either side of AUD/USD market;
- Important technical support in AUD/JPY 90.00/50;
- NAB business confidence data and HSBC services PMI on the economic calendar;
- Market trying to build longs in AUD/NZD, stops now building below 1.1310;
- China returns after week-long holiday and we may see some belated reaction to US budget events;
- Conclusion; we can expect another tight range trading session but I remain in dip-buyers camp.
USD/JPY: Ready to test important support levels
- As I mentioned yesterday, the bids between 96.70/90 were very large;
- Semi-official names and Japanese corporates were main buyers;
- Technical support between 96.60/70 is strong (see chart);
- Large stop-loss sell orders from macro players expected below 96.50.
USD/JPY: Large bids reported between 96.70/90
The low so far has been 96.87 and interbank dealers report large bids at regular intervals between 96.70/90, mainly from Japanese institutional and semi-official names. Like I mentioned earlier today, the 200-day SMA is the big technical level close by and large stops are expected sub-96.50.
Very quiet in Asia with China and Australia closed
- USD/JPY has looked like the pair most likely to move with heavy stops touted below 96.50 but the bids between 96.70/90 are reportedly very solid indeed;
- The NZ FinMin took advantage of the quiet markets to try and talk down the NZD, saying that it's "still too high";
- Markets still expect some sort of a resolution out of Washington in coming days, hence the lack of panic and nobody seriously contemplating a default;
- Not much of note on the European economic calendar.
AUD/USD: Buying dips favoured for .9525 re-test
- USD sentiment remains weak amid on-going US budget impasse;
- AUD has started to recover strongly on the crosses;
- This recovery has happened despite supposed 'risk-off' trading conditions;
- Technically, AUD/USD dipped and bounced off a 38.2% retracement level, usually a sign of a strong trend;
- I favour the buy-dips strategy in AUD/USD until something happens to change the outlook, with initial short-term support at .9380.
USD/JPY: 96.60/75 looks like the pivotal level to watch
Depending on which charting system you are using, the 200-day SMA comes in somewhere between 96.60/75. We also have the previously broken trend-line which many are now watching for support (see chart) and I'd expect many macro longs to start exiting below 96.50.
The US budget situation is not helping either USD-longs or risk-longs and we could be just one bad headline away from seeing these levels tested.
Cable: Looking to re-buy on dips towards 1.5940/50
The vertical up-trend has finally started to retrace after the market got itself bullish at the wrong levels above 1.6200. Some of the crosses like GBP/AUD and EUR/GBP still look to have some room to run so there is no rush in buying this dip in the cable imho.
I'm still very bearish on the USD and its a matter of picking the right pair to trade and of course entering at sensible levels.
I'm looking at re-entering my long position as close to 1.5940/50 as possible (see chart).
Away until Monday next
I'm off for a few days break, starting tomorrow and will be away until Monday next. If anything unbelievable happens I will of course share my thoughts but sometimes we just need a break!
The main FXWW chat-room on Reuters Messenger will continue to update of course and don't forget that all can contribute news and views in the FXWW Techs room.
Cable: Profit target hit, now looking to re-load on deep dips
Despite getting stopped out on my first attempt at building a long position, this trade has treated me well. I sold out of 1/2 my position at 1.5900 and my sell order on the balance was triggered a little earlier near 1.6250. I still maintain that the best (and safest) way to maker money trading the FX market is through more medium-term trade building strategies. This way it's easier to have tight risk-management policies in place yet still make some hay when the market moves in our direction. With regards leverage, I usually run a core position using around 7:1 leverage but do sometimes use more than this for shorter-term plays. Experience has taught me cruelly that using any more than this can be too hard to manage.
I'm still bullish on the cable but now the same people who were bearish at 1.52/1.53 are now bullish at 1.62/1.63, a sure sign in my book that a top is imminent. I'm hoping for an extended dip towards 1.5800 where I can re-buy for the next leg.
I remain small short of EUR/GBP, just in case the GBP bull train doesn't stop for a breath.
RBA policy statement, October 1st
"At its meeting today, the Board decided to leave the cash rate unchanged at 2.5 per cent.
Recent information is consistent with global growth running a bit below average this year, with reasonable prospects of a pick-up next year. Commodity prices have declined from their peaks, but generally remain at high levels by historical standards. Inflation in most countries remains well contained.
Overall, global financial conditions remain very accommodative. Changes in the outlook for US monetary policy have increased volatility in financial markets, but long-term interest rates remain very low and there is ample funding available for creditworthy borrowers.
In Australia, the economy has been growing a bit below trend over the past year. This is expected to continue in the near term as the economy adjusts to lower levels of mining investment. The unemployment rate has edged higher. There has been an improvement in indicators of household and business sentiment recently, though it is too soon to judge how persistent this will be. Inflation has been consistent with the medium-term target. With growth in labour costs moderating, this is expected to remain the case over the next one to two years, even with the effects of the lower exchange rate.
The easing in monetary policy since late 2011 has supported interest-sensitive spending and asset values. The full effects of these decisions are still coming through, and will be for a while yet. The pace of borrowing has remained relatively subdued to date, though recently there have been signs of increased demand for finance by households. There is also continuing evidence of a shift in savers' behaviour in response to declining returns on low-risk assets.
The Australian dollar rose recently, but is still about 10 per cent below its level in April. A lower level of the currency than seen at present would assist in rebalancing growth in the economy.
At today's meeting, the Board judged that the setting of monetary policy remained appropriate. The Board will continue to assess the outlook and adjust policy as needed to foster sustainable growth in demand and inflation outcomes consistent with the target."
AUD/USD: Hourly resistance at .9400 but buying dips favoured
The USD is out of favour after the deadline of midnight came and went without any end to the budget impasse. The RBA statement gave the Aussie bears little wood to burn and with technical support and real-money bids below .9300, the easiest way was up.
There is some hourly resistance at .9400 but buying-dips is now favoured intraday for a test of .9525.
GBP, NZD remain in favour whilst others chop around
The trend has been very solid over the last few months with the market happy to buy the GBP and the NZD, and chopping and changing between the other major currencies. The EUR, CHF, JPY, AUD and USD have all had phases of weakness and of strength but as yet we haven't seen one race ahead in the race to the bottom.
I'm going to stick with my long GBP play against the USD and the EUR and try to pick up some 150/250 pip swings in other pairs when all the stars align.
The RBA is not expected to do anything dramatic this afternoon, and most of the main pairs are tied in between big 'order book' levels.
AUD/USD Techs: Fibo support held firm at .9285
- The 38.2% retracement of .8890/.9525 came in at .9285 (see chart);
- AUD/NZD sitting just above 1.1200 again;
- Other main AUD crosses still trading sideways in short term.
Retail sales and RBA will ensure risk-event volatility but I'm starting the day with an intraday dip-buying bias.
Plenty to watch out for on today's economic calendar including RBA
- Japanese Tankan report doesn't have same impact that it once had but is closely watched nonetheless;
- Australian retail sales are expected to improve slightly on an MoM basis;
- The RBA will meet as usual, first Tuesday of the month, and are widely expected to leave policy unchanged.
Chinese markets will be closed for the next week and whilst it should be reasonably busy today, enjoy it while you can as it will only get quieter.
Cable: Lack of momentum increase above 1.6160 infers top could be imminent
Price action usually tells us all we need to know about a pair and the fact that there was no momentum increase above previous highs at 1.6165 suggests to me that the market might be getting a bit overly long. I'm on heightened alert now and will book the remaining profits on my longs and will even contemplate a short-term short position, depending on how the market develops from here.
Large end-of-month GBP buying against the EUR is also expected and if this cannot shift the cable higher then we really are close to a top.
JPY crosses bounced off key support levels
- NZD/JPY (see chart) support at 80.40 remains untested;
- AUD/JPY (see chart) shows similar picture to above;
- EUR/JPY (see chart) traded to 131.35 in early interbank trade but technical support remains in place.