CBA: Expecting Australian trade data to disappoint and AUD to ease modestly
Based on peculiarities in iron ore pricing, the CBA is expecting the Australian trade data to be worse than the expected AUD 2.3 billion deficit. This should lead to a modestly lower AUD according to their research note.
The Commonwealth Bank of Australia is one of the big 4 Australian banks. They generally have a pretty good research department.
EUR/JPY: Looking at a 114.10/117.10 trading range in coming sessions
The overnight low was at 114.10 so I'm using that as my downside base. Presuming the recent up-trend remains in place, that should mean that we get another test of recent highs at 116.00. The technical target for USD/JPY is a 38.2% Fibo at 88.95 so if we get there and EUR/USD gets towards reported offers near 1.3170, that could have the cross trading above 117.10.
Not sure if that's a logical range or not but it does make some sense so I will try trading near the edges of this 114.10/117.10 range until something happens to change my view.
The day ahead in the FX market, Tuesday January 8th
- Australian trade balance 00:30 GMT, -AUD2.3bln expected:
- UK BRC retail sales 00:00 GMT, last +0.4% YoY:
- Majors back in range-mode with heavy orders dominating overnight trade:
- EUR/USD bids at 1.3020 proved to be very strong and heavy offers now reported 1.3160/70:
- EUR/JPY will be focussing on recent highs at 116.00:
- USD/JPY remains bullish but barriers reported at regular intervals 88.50, 88.75 and 89.00:
- AUD/USD also dominated by orders with Corporates buying overnight 1.0465 and sell orders reported 1.0540/50.
EUR/JPY support 114.20/30 getting tested again
If this level can hold again then we should see trailing stops building above 114.75. A clean breach brings hourly lows at 113.70 into focus.
EUR/USD orders: Bids reported near 1.3020
First reports of any decent buying interest now starting to emerge with Swiss names reporting solid bids near 1.3020.
EUR/JPY view #2: Wait for an outside week before commiting to contrarian trade
Very wise old trader just sent me his view of the world and he's expecting a very volatile week in EUR/JPY, possibly seeing 112.50/116.50 type range. He thinks both the bears and the bulls might get whipped around and that this might be the signal for a retracement/reversal to be set in motion?
Certainly makes plenty of sense. Short-term support at 114.30 has held so I've taken 1/2 my position from this morning off the table for a tidy 110 pip profit which will make any further trading decisions today much easier.
Head of Japan's business lobby expects USD/JPY range of JPY75/90
No wonder he's happy with the current level of 88.00.
EUR/JPY dipped towards support at 114.30 on these Dow Jones headlines.
USD/JPY technicals: Sooner or later the contrarians will get it right
Just a glance at the daily chart will show you how overbought USD/JPY is and the attached 4-hourly chart does seem to be trying to form some sort of top in preparation for a minimum retracement to 86.70 and possibly even deeper to 85.00. Elliot-wavers may get more than a little excited by the wave count and risk-reward around 88.00 certainly favours the contrarians, despite the vertical up-trend.
EUR/JPY: Next support at hourly lows near 114.30
There may even be stops placed below there so some care is needed if you are trying to pick a base. There are stronger support levels near 113.50/65. I'd expect resistance now to begin at 115.00, the level where we stalled for a few hours earlier in the session.
EUR/USD is edging lower alongside the cross and it should find support, at the latest, near Friday's lows at 1.3000.
EUR/JPY: Hanging around session lows, still looking softish
PM Abe made lots of bold statements in the weekend press, and a joint-statement between the government and the BOJ is being touted for the next meeting, but the Yen has disregarded all of this and has started to make some small gains; it will be interesting to see if Europe consider's this to be a sign that the powerful recent trend is stating to weaken?
EUR/JPY is hanging around session lows just above 114.80 and we may get a test of Friday's 114.30 lows at some stage later today. Resistance levels now looking more solid at 115.50.
Around the Asian markets
- Stocks slightly lower as morning sessions come to a close:
- Gold fairly steady near $1660/oz:
- Risk sentiment generally soft with EUR/JPY falling from session highs at 115.50 to lows near 114.80:
- Japanese Government and BOJ expect to issue joint statement at next meeting:
- Taiwan CPI +1.6% YoY, +1.4% expected.
EUR/JPY: Fails to maintain gains and now sliding lower
I've taken a small short position in this pair this morning as I feel there is plenty of scope for an already ultra-long market to be disappointed. Problems in the EZ are only ever just simmering below the surface and the market is always worried about being long of the single currency. On the Yen front, more Yen-negative comments from the new PM Abe don't seem to be having the desired effect so perhaps the market is getting close to saturation point?
I'm not calling an end to the trend here, but I do think a 300/400 pip pull-back is feasible?
EUR/USD orders: Should be toppy near 1.3160/75
When orders don't get cancelled on a Friday night it's usually a sign that the sellers are quite committed. Dealers from two major banks are telling pretty much the same story, namely that sellers are quite solid near 1.3160/75 so if you're bearish and looking for a good entry level, this might well be the one?
USD/JPY: Talk of optionality at 88.50
Some unconfirmed chatter of a barrier at 88.50 but I don't believe it's a very big one.
Most focus this morning is on the Abe comments from the weekend Japanese press which were very aggressive in nature. Early Tokyo will undoubtedly try selling the Yen again but if pairs like EUR/JPY fail to make new highs above 116.00 then watch out for some 'disappointment' selling.
AUD: Chances of a February rate cut continue to fall
Last week the chances of a rate cut in February were seen at over 60% by the market but the temporary fiscal cliff solution and the soaring iron ore price (+80% in 4 months!) has seen these odds cut to below 40% this morning.
USD/JPY: Next technical target at 88.95
The 38.2% retracement of the big down-move from 110.60 to 75.60 comes in at 88.95 and that looks like being the next big technical target.
Asian market open, Monday January 7th
You can click though here and read my full opening commentary on FX Street.