Lot of volatility in EUR/JPY so keep positions manageable
- After opening 150 pips higher than its NY closing level, EUR/JPY dipped 60 pips in about 10 minutes and has now recovered 1/2 of that fall:
- EUR/USD has broken above resistance at 1.3170 and has scope for further gains now towards 1.3250:
- USD/JPY is choppy, either side of the previous 84.15 highs:
- Market is very short of yen, especially the big speculative players:
- My conclusion: The move higher in USD/JPY is reaching 'silly' status and is ripe for a very sharp downside clean-out. Maybe not in Asian trade, but during the next few sessions.
EUR/JPY starting to get hit by profit takers
There has been a fairly sharp 30 pip dip in EUR/JPY over the last few minutes with profit takers emerging in thin markets.
USD/JPY is re-testing the prior-highs-come-support at 84.15 and the bulls will be hoping this level holds. We can expect to see some of the bulls now placing their trailing stops below 83.70 I would guess.
Day ahead in the FX market, Monday December 17th
- Yen weakens further in early interbank trade after Japanese election result:
- Speculative Yen shorts at extreme levels so profit-taking after the event still a possibility:
- USD/JPY breaks above previous highs at 84.15 now targets 85.10 200-week MA:
- EUR/USD opening at technical resistance level 1.3170:
- Chinese economic conference ended yesterday evening so expect for risk-sentiment affecting headlines:
- AUD to be dominated by AUD/JPY flows and Chinese economic headlines:
Yen crosses holding on to gains; still no reports on volumes, orders
Interbank dealers are still way too busy to be chatting with any other traders, never mind commentators, so we won't hear any colour on what's happening at the coalface for a little while yet.
USD/JPY is quite steady between 84.25/40, after stops above the previous 84.15 high were triggered. Next technical resistance there is the 200-week MA at 85.10.
EUR/JPY is trading near 111.20 in early interbank trade and it needs to overcome two separate weekly highs near 111.50.
USD/JPY higher after LDP win
It looks like the LDP, in coalition with the smaller 'New Komeito' party will get the necessary 2/3 majority in the Lower House, allowing them the power to push through bills without fear of getting blocked in the Upper House.
USD/JPY is trading at 84.25 having been up to 84.40 in early interbank trade.
What to expect from the Yen on Monday morning
The election booths will close at 11:00 GMT and then major TV stations will immediately issue their forecasts. Based on the most recent newspaper polls, the opposition and previously dominant LDP are expected to return to power with a resounding majority, but its the nature of the majority in the 480-seat Lower House which will determine what happens to the Yen:
- An overall majority of 2/3 to the LDP alone would ensure that they can pass most bills and therefore could initiate the extreme easing policies which have been foreshadowed. Such a result would see the Yen crosses open significantly higher in my opinion (EUR/JPY 110.50/111.00 probably). There are some risk factors that such an overall majority would bring, like more potential conflict with China over Sovereign lands etc, but they are longer-term concerns:
- The LDP gain the 2/3 majority with the help of smaller parties, and this seems to be the most expected result. This would probably see some initial Yen weakening before the 'buy-rumour-sell-fact' effect leads to JPY short-covering:
- Any other result will be bearish for USD/JPY in my opinion.
See you tomorrow morning for what should be an exciting open.
USD/CHF: Breaks below prior support but no sign of any big stops being triggered
A previous daily low at .9215 has been breached but there was no sign of any major stops being triggered and the pair is settling down. I'm running a small long position here and am happy to stick with it for the time being.
AUD/JPY giving up some earlier gains
AUD/JPY rallied from 88.00 to 88.50 after the Chinese PMI data but has now given back half of those gains on some Friday evening profit taking out of Tokyo. Not quite sure what to think of this pair, AUD/USD still looks quite bullish to me after the break and hold above 1.0510 so I guess much will depend on what happens to USD/JPY at 84.00/15.
EUR/JPY: Here we go again, my my, how could I resist you...
Haircut 100 have been replaced today in the "Ohrwurm" stakes (a song that you can't get out of your head) by Abba, sad but true. EUR/JPY is marching higher again as the early Swiss hedge funds hit their buy buttons like crazy. No word yet of any optionality at 110.00 but it wouldn't surprise.
Quick overview of Asian FX market
- Japanese Tankan manufacturing sentiment at 3-year lows:
- HSBC China manufacturing PMI slightly better than expected at 50.9:
- Rumours (usual Friday fare) about a possible Chinese weekend rate cut:
- Regional stocks +0.4% on average:
- Gold $1698/oz:
- AUD/USD tested support at 1.0510 pre-PMI but rallied thereafter:
- EUR/JPY makes fresh recent highs above 109.80, more Japanese retail investment fund buying noted.
EUR/JPY making fresh session highs
EUR/JPY is trading above 109.80 and just like yesterday, it's looking very strong headed into the European open in a few hours. I'm still happy to try and fade any sharp spikes higher but I will keep positions small and manageable until I sense a change in the wind direction. 110.50 or even 111.00 look possible even tonight but I'm going to pick a fight with a bull I think.
AUD bounces off support after China PMI data
AUD/USD has bounced off 1.0510 support after decent PMI data out of China. Looks like we might see a bit more risk on trading for the afternoon. Once again no sign of any panic Yen buying.
AUD/USD: Eyeing short-term stops below 1.0500
The HSBC China manufacturing PMI data will be released in an hours time and this will be the next major risk event for the AUD. Commodity and precious metal prices have taken a hit in the last 24 hours and AUD bulls will be disappointed that we are currently testing short-term support near 1.0510. There are stops reported below 1.0500 and again below 1.0480 and they will be targeted if the PMI number disappoints.
I've got a bad feeling about these Yen crosses
Something just doesn't smell right about these moves higher in the JPY crosses, they feel totally overdone to me and I think it's 100% driven by speculative plays. It's December, the month for silly moves, and I think some professional players are trying for the "Hail Mary trade" in the hope of redeeming their year.
If we get another silly exhaustive spike up towards 110.50/111.00 in EUR/JPY then I will try counter trading. If we continue to get a slow and gradual squeeze higher, then I'll leave it alone.
Day ahead in the FX market, Friday December 14th
- Japanese Tankan and HSBC China manufacturing PMI:
- AUD/USD opens near break-up level at 1.0510:
- EUR/JPY still main focus, will run into heavy sell orders between 110/111:
- USD/JPY technical levels to watch at 82.80/84.15:
- EUR/USD depends on EUR/JPY intraday but real money flows noted into EUR as EZ debt markets improve.
Yen trend stays strong: Problem is you won't want them once it starts dipping!
Nobody ever claimed that trading is easy. The Yen trend of recent weeks is very strong indeed but as we know the market is already quite short. Pullbacks have been minimal so if you want to start trading these moves, you are forced into buying the Yen crosses at or close to recent highs. The problem with this type of trend, where the market is positioned one way, is that once it starts falling it will be very difficult to stop as trailing stops pile on top of more trailing stops.
Not the normal way of trading I know, but don't buy dips or sell rallies in vertical trends. If you want to be long then bite the bullet and buy into the market, adding your tight trailing stop in with everyone else. If you want to be short, wait for the turn and then start selling into the trailing-stop zones.
Its been fairly quiet for the last 12 hours or so but surely we are due for some more pre-election volatility.
May the luck be with you++
Last day for Yen shorts to cover before general election
Tomorrow that is, and if we are to see some serious profit taking ahead of the event then it must happen tomorrow. Various sets of positioning data from the IMM, retail brokers and prime brokers all suggest that Yen shorts are at extreme levels. The market isn't trading that way but as we know that can change quickly.
Let's see what tomorrow brings.