EUR/USD: More likely to go up than down
- The EUR is fairly neutral on the crosses, bullish against the GBP and CAD, medium-term overbought against the AUD and consolidating against the Yen;
- EUR/USD remains in a predictable short-term up-trend which is obeying technical guidelines like Fibonacci retracements;
- Talk of large optionality at 1.40 will only act like a magnet.
I prefer to be very patient here and buy big dips towards 1.3780. A break above 1.4000 will change the game and cause some heavy short-covering.
Cable: Buy big dips onto 1.64 handle
The GBP remains under pressure with quite heavy selling against the EUR, AUD and the NZD. Cable will struggle to rally whilst this cross selling is going on but the dominant up-trend should start to re-assert itself once we get closer to important levels around 1.6400.
Buying big dips is still the best strategy here IMHO.
USD/JPY: Large bids reported towards 101.00
USD/JPY as usual will be all about stop-loss runs. The market is bullish and wants to buy. but momentum simply isn't strong enough and the Yen shorts are constantly getting squeezed. Range trading is definitely the way to go in USD/JPY.
Everyone is talking about large bids between 101.00/25 which usually means there will be plenty of stops below 100.90! The bulls should be patient and wait for bigger dips towards 100.00.
AUD and NZD on cusp of big moves higher
I'm still holding off on calling a base in the AUD/USD as we could get some extended sideways trading between .8900/.9150 but the case for the contrarian bulls is looking much stronger. China is still the main driver but this time it's not Chinese imports of iron ore but Chinese money flowing into Australasian capital markets.
Sources in the prime brokerage market suggest that there are still plenty of sellers on the approach to .9150 in AUD/USD which will prove tough to budge but that a break above .9200 will swing momentum very heavily in the bulls favour.
There have been large selling flows in GBP/NZD over the last few days and I get the sense that the NZD top-pickers are about to throw in the towel. Yesterday's historic currency agreement between China and New Zealand will also greatly improve NZD sentiment.
Buying dips in both AUD/USD and NZD/USD is definitely my preferred strategy.
AUD/USD: Order board reports suggest .9065/.9125 consolidation
- Prime brokers refer to large offers starting above .9125 through .9140;
- Local bank reported very solid bids near .9065.
If in doubt, stick to the range.
EUR/USD: Still very much in buy-dip mode
The only cross where the EUR is looking a bit susceptible is EUR/AUD (yet another reason to consider the bullish AUD/USD contrarian play!) but the others like EUR/GBP and EUR/JPY continue to look very solid. EUR/USD will run into heavy optionality towards 1.4000 so buying at these lofty levels doesn't offer great risk-reward so dip-buying remains the prime strategy.
I'd suggest patience on all time frames with levels now near 1.3780 looking likely medium-term entry levels.
AUD/USD: Market is bearish but struggling for momentum
AUD/USD has been trading below it's 200-dma for almost a year now but it looks like we are priming ourselves for another test. It comes in now near .9148 and we can expect plenty of big macro players to start re-assessing if we get a break above there.
Most of the big players are very bearish (Goldman Sachs lowering its forecast to 80 cents and most of the other banks issuing sell strategies) but these are the types of market situations when we often get big contrarian moves. With Australian interest rates now unlikely to fall any further (next move up in early 2015), with Chinese money still flowing into the property market and with the unemployment situation looking fairly stable, one would have to think that the contrarian bulls have a reasonable chance of making a killing.
The main reason for selling the AUD is given as 'risk aversion' but the logic in this argument is extremely flawed imho.
I'm still holding off on calling a base in this pair, given the lack of momentum, but the signs are again strengthening.
IMM positioning shows continued moves into EUR
This is the HSBC update on IMM figures good up until last Tuesday.
- Long USD positions fell to USD9.6bn from a peak in early February of 25.3bn;
- Long EUR positions rose from USD4.0bn to USD6.3bn in the week to 11 March;
- Long GBP trades contracted from USD3.1bn to USD2.3bn;
- Short JPY positions increased from USD9.7bn to USD12.1bn;
- Short AUD and long NZD positions remained unchanged at USD3.7bn and USD1.2bn respectively;
- Short CAD positions slipped modestly to USD4.7bn from USD5.5bn;
- Long CHF positions increased from USD0.3bn to USD1.3bn.
AUD/USD: Early morning losses now reversed
The result of the vote in Crimea had widely been expected as had the PBOC band-widening.
It was not surprising that the market tried to sell-off first thing this morning and it's also no surprise to see these losses unwound pretty quickly as soon as momentum started to wane.
Let's start again.
FCA first regulatory body to license copy trading
We've expected this for many years but reports from last week suggest that the UK's FCA will be the first regulatory body to seek registration of those providing copy trading services as investment managers.
The whole 'social trading' space has been growing exceedingly quickly over the last few years and the regulators have obviously been receiving complaints, hence the move to regulation. It will be only a matter of time before the other jurisdictions follow suit.
PBOC band-widening had been widely expected
The move by the PBOC to widen the USD/CNY trading band to 2% had been widely anticipated over the last few weeks. This should not have any effect on the AUD apart form the usual very short-term gyrations.
Risk aversion to the fore in early FX market trade
AUD/USD is trading near .9000 and USD/JPY is at 101.25 as the market focuses on geo-political uncertainty in the Ukraine and Crimea. Lots of the bigger banks are recommending trades such ar short AUD/USD in this environment.
Elsewhere the EUR/USD is fairly steady around 1.3900, USD/CHF is .8725 and cable is at 1.6635.
Have a great week ahead.
Goldman Sachs revises 12-month AUD/USD forecast down to 80 cents
If I were a total cynic, which of course I'm not, I would be saying that they are short :)
Our hedge fund insider in the FXWW chatroom is reporting that Goldman Sachs have revised their 12-month AUD/USD forecast down to 80 cents from 85 cents citing weak domestic demand and falling commodity prices.
EUR/USD: Still in dip-buying mode
- Initial technical support comes in at 1.3840, which is hourly lows and a 38.2% retracement;
- There is much stronger support near 1.3765, the bullish trendline and a 61.8% pullback.
Despite the sell-off in EUR/JPY, I see no reason to get off the EUR/USD dip-buying strategy.
AUD/USD: Need to see some bullish technical tendencies
The price-action over the last few days in AUD/USD has been bullish in my view but I would like to see some technical justification before turning completely bullish.
Short-term trend-lines and Fibo retracements will need to be obeyed if the market really is changing its colour.
Current levels near .9020 is where the really heavy turn-over was earlier in the week and if this level can now provide support, that will become yet another clue.
Sidelined for now but tending towards a buyer.
JPY shorts squeezed as market lacks conviction
The one constant in recent months in the FX market has been lack of conviction amongst traders.
Erstwhile trends like GBP-bullish or JPY-bearish have run out of steam and now we get choppy consolidative markets with stop-loss runs becoming the norm.
We can blame risk-aversion out of Ukraine or any other factor but the main reason for the JPY buy-back was that too many were short and no new sellers emerged post-BOJ.
What to do now? Nothing! Wait for really silly over-kill moves and then jump in on the edges.
AUD: Nearly time to call a bottom?
There have been plenty of reasons over the last few weeks for the AUD to fall even further, risk-aversion out of Ukraine, collapsing commodity prices, verbal intervention from the RBA etc yet in spite of all this the AUD has actually strengthened slightly whilst all this has been going on.
Am I calling a bottom for the AUD? Well I'm thinking about it! If the market can't fall on bad news then it will roar higher once the news improves.
- AUD/NZD is trading at 30 year lows;
- GBP/AUD looks to be forming a top;
- EUR/AUD is back at long-term neutral levels near 1.55.
Worth keeping a very close eye on the Aussie me thinks.
Cable: Hate to say I told you so but...
Some things in the FX market never change, stop-loss hunts being one of them.
As I guessed yesterday in cable, the stops below 1.6580 would get triggered before the bargain hunters turn up to buy in line with the up-trend.
I think we will see levels 1.6750/75 before the GBP cross selling takes over again and sends the cable back into sideways range-trading mode.