Good morning all. Plenty of whip-saw movement at the end of last week mainly caused by a huge flight of capital out of emerging markets and continued doubts about China’s growth and 2nd-tier credit system. Articles such as this one from Reuters suggest that the capital flight out of EMs might only be beginning, and if that’s the case then pairs like GBP/JPY could be in for more serious retracements.
- The fact that the big 61.8% retracement in USD/JPY at 105.50 held firm is looking increasingly relevant. The big downside levels to watch are a previous pivot at 101.60, the 100-dma near 101.00 and the very important 200-dma at 100.00;
- The AUD remains under severe pressure across the board and there seems little point in trying to pick a bottom in it, except perhaps against the heavily overbought NZD;
- The speculative community is quite long of GBP and events in the EMs may cause them to reconsider. Cable in a 1.6250/1.6650 short-term range so no need for panic selling or buying just now;
- In times of panic, the EUR will tend to outperform many other majors, so further slow gains against the USD are certainly possible.