AUD/JPY breakdown weakens the case for 'bottom-picking' the AUD
More stops have just gone off below 97.00 in USD/JPY and I think this will be a common theme in coming weeks as we gradually head back towards 92.50. The crosses are all looking weak, with cable and AUD/USD also falling today although EUR/USD managed to hold steady.
I'm leaving the AUD/USD alone for now, and will concentrate on USD/JPY and cable. The latter looks a bit toppy under the weight of GBP/JPY sales but I'm hoping that once this is absorbed, it can start making fresh highs.
USD/JPY: Stops triggered below 97.50
The next leg of the run lower has started to pick up pace with the break below 97.50. There isn't much technical support nearby and the main downside target is a trendline support near 95.00.
FXWW/RM chat-room update
Thanks to all those who've applied for access to the new FXWW/Reuters Messenger chat-room which is now up and running. Existing Reuters customers can can easily gain access whilst non-customers will need to download special Reuters software, which I will provide.
The application process is taking slightly longer than expected but those who've applied already should receive an instructions email at some stage today. It is an IT matter, and as we know IT-time can be somewhat different to normal time, so please be patient :)
The highlights of the last two days were the rumour on UK PMI which proved to be 100% accurate (thanks John) and the reports of China selling USD/JPY yesterday afternoon (thanks 888), which also proved immediately profitable. All lowlights were provided by me :(
EUR/USD: More gains ahead, targeting 1.3350 option barrier
Despite reports of really heavy selling at every level, we have still managed to close above 1.3300 and further gains look likely. EUR/CHF and EUR/GBP have both steadied after a few down sessions and a large barrier at 1.3350 will act like a magnet for EUR/USD.
Short-term I prefer to buy intraday dips towards 1.3260 looking for 1.3350 test. Medium-term, selling any rally to 1.3400 with reasonably tight stops looks to be the better risk-reward play.
JPY outlook, Wednesday August 7th
- USD/JPY sitting on technical support near 97.50 and we can expect stops below there.
- China noted seller of USD/JPY yesterday afternoon.
- AUD/JPY should be interesting with big levels at 87.20/89.00.
- Macros still have reported selling interest in GBP/JPY and CAD/JPY.
- BOJ 2-day meeting starts today.
I remain short-term bearish on USD/JPY for re-test of 92.50 this month.
AUD/USD outlook, Wednesday August 7th
The AUD looks reasonably stable this morning after yesterday's 25bps rate cut. Today's economic calendar has Kiwi unemployment, Australian housing data, and a speech from the RBA assistant Governor; none of these should have a major impact on the AUD.
- AUD/USD is stalling ahead of technical resistance near .9000 (see chart) and there are further levels near .9030. Bears still in control but keep trailing stops above .9050 as a break above there could infer that a bottoming formation is evolving.
- AUD/JPY looks technically interesting, with a possible double-bottom at 87.20 and very strong resistance at 89.00/50. I'd play the edges of this range for now.
- AUD/NZD should remain similarly range-bound between 1.12/1.15 and selling any big rallies still looks like the obvious play.
Intraday on AUD/USD; should be toppy near .9000/30 especially if AUD/JPY starts to break lower. Beware if .9050 breaks topside as I think that might set off some heavy short-covering.
Cable longs in play, initial target at 1.5435
I took a small long position earlier today at 1.5350 (see post) for the very unscientific reason that I feel I should be long. The next technical target is at 1.5435 and if that gets breached, I'll be looking for levels to add to the position.
AUD/JPY: Possible double-bottom now at 87.20
This cross should be very interesting in coming sessions with a possible double-bottom at 87.20 and of course the previous support now turned resistance at 89.35/50.
Playing the edges as usual with tight stops makes excellent sense.
AUD looking modestly bullish after RBA
25bps rate cut as expected but the market reaction is interesting; AUD/USD has taken out stops above .8955 and AUD/JPY is forming a possible double-bottom at 87.20.
What to expect from the RBA
- A 25 bps rate cut is priced in and if we do get the cut as expected, I'd think we might get a 30/40 pip dip before short-covering kicks in.
- 25bps with dovish statement; we should see market testing .8850 straight away.
- A 50bps rate cut and we will test .8770 pretty quickly.
- No cut; stops above .9050 will be triggered.
Good luck.
USD/JPY: Covering shorts at 98.10
I'm booking my 140 pip profit (see trade) as I want to concentrate on the AUD around the time of the RBA. (Plus I see @FXWW303 is also booking profits on his intraday shorts and his levels are usually pretty good).
EUR/CHF: Big Swiss players noted sellers overnight
EUR/CHF seems destined to grind the bulls into submission again and it looks as if some of the bigger players took advantage of still-reasonable liquidity to get out of stale longs. Big Swiss players were reported selling in size near 1.2330 overnight.
AUD: The market is short, it's August, and volumes are down....
That spells danger in my book. The big banks reported significantly lower volumes overnight and with the market already running at close to record shorts, what's going to happen if they all try and exit together! If you're short, keep those trailing stops tight would be my advice.
GBP looking friendlier after strong PMI data yesterday
The GBP is looking stronger on the crosses after yesterday's strong (and leaked) PMI data. EUR/GBP is edging back towards it's important pivot at .8600 and GBP/AUD made fresh highs above 1.7250. It's by no means a completely bullish picture on the crosses, with GBP/JPY still being capped below 151.50 (which is where macro funds were noted sellers last week).
Nevertheless I remain very bullish on cable and have taken a very small long position at 1.5350. My last attempt at building a long position ended in tears, lets hope for better luck this time.
USD/JPY: Still favour lower, but will stay choppy
No major change to my outlook here, I still think that we will gradually trade lower over coming weeks but we will also find long periods of range trading. Presently we seem to be caught between 97.50 and 100.00 and trading as close as possible to the edges of this range makes good risk-reward sense. A break of either side should set us up for a decent move either way.
The crosses still look heavy overall, with AUD/JPY leading the way, and even the recovering GBP was unable to re-take resistance levels against the Yen at 151.50 (which is where the macros were selling last week).
AUD to stay range-bound ahead of RBA decision
At one stage yesterday, after the disappointing retail sales data, the market was pricing in a 102% chance of a 25bps rate cut today and some analysts were even speculating that we might get a 50% cut. While it's highly probable that we do get a 25bps rate cut, one fly in the ointment is the fact that the Australian PM called an election at the weekend. The RBA has never cut rates during an election campaign and will have to break with tradition to do so today.
(Edit: I've been mis-informing you so sincerest apologies. The RBA hasn't cut rates during an election campaign but they did raise them in 2007. That negates my theory).
AUD/USD has been fairly quiet over the last two sessions and I'd expect some .8880/.8950 range trading in the run-up to the rate decision.
Insiders had jump on UK PMI data
There were very strong rumours in the London market in the 30 minutes prior to the data release, that a very strong number was likely. The interbank market was long GBP across the board going into the event and that helped to subdue gains, which were impressive nonetheless.
EUR/GBP is expected to run into strong bids below .8645 and GBP/JPY has struggled recently near 151.50, where macro funds have been selling.
But this data will give the GBP bulls some hope and the pound is still one of the most oversold currencies on many indicators so don't be surprised if the bulls grab control for a few sessions.
USD/JPY takes out support near 98.55/60; targeting recent lows at 97.70
I don't think this pair is going to collapse but I think short is the correct position to have. I'm looking to book profits near 97.80 on any exhaustive spike lower and then look to re-sell rallies.