G10
EUR – Recent range continues 1.22-1.23 while eur x’s, especially against aud and nzd, continue to trade lower – While 1.2150/60 remains key support downside and we keep bouncing from around 1.22 the market is susceptible to a deeper squeeze so wouldn’t be surprised to see 1.2350/1.24 at some stage as we go into the weekend – currently however offers remain 1.2290-10 with stops still in the right place 1.2320-60 topside – short term look at 1.2255/60 as support a break of 1.2320 should see a 30-50 pip spike before we run into selling against 1.2380-1.2410.
GBP – Retail sales at 9.30 and as I type this, the headline ticker on CNBC says ‘Prime minister sees no end to UK austerity’. Let’s see what the data says. Growth data is attracting more attention and a print away from expectations could give us a short term direction. G10 pairs feel a little in limbo right now though, with erratic price action and liquidity noticeably dropping off. Positioning is lighter and Euro shorts seem to be looking to cover on dips. So, I’ll continue to respect ranges and play a faders game today, although my gut feel is that the USD is going to struggle. Cable levels, resistance-1.5680, 1.5720 and 1.5750, (200 DMA). Support, 1.5625, 1.5580 and 1.5550.For EUR/GBP 0.7830 is becoming more respected as we continue to hold. Topside moves though still get met with supply and another contracted range is expected. 0.7880 resists.
JPY – Heavy buying yesterday 95-10 couldnt help us to rally and so we walk in with a generally weaker usd across the board and usdjpy making new recent lows – Today some early model selling against japanese bids 78.50/55 zone – Like to buy any dip towards 78.00 initially with a stop below those payrols lows at 77.65 back in June – topside expect 90/00 to be toppy initially
AUD (1.0393) – another day, another squeeze, another interim high. No wonder AUDUSDV1M is sub 9 at the moment. Approaching levels where I am starting to look to own AUD vol, though I think it will be a stagger in type trade as it seems no one has any interest in paying for risk premia at present. One look at the move in the AU risk-reversal paints a clear enough picture I’d say. The stand out trade for mine in the broader AU-Spectrum is still to pay AU rates, notably Dec which I think it still pricing in considerably too much tail risk. As for spot, I really have little interest in getting involved at current levels. 1.05fig is the only genuine level of note above here, in between really is just thin air. We see stops from 1.0410-40, nothing major but consistent in frequency. I am square cash here, really do have little desire to get heavily involved today.
CAD – The USD is slip sliding away at the moment and slowly but surely in USDCAD decent corp bids are being eroded. 1.0080 is crucial support and on the day I am small long but not married to it if we break this level where there should be stops below. USDCAD was small paid up after yesterday’s monetary policy report but a LHS WMR fix took us back below 1.0110. The 100 dma comes in around 1.0076 so a close below here should reinvigorate the bears, if the demand for AUDCAD and EURCAD can abate then we may see a catch up in straight USDCAD and parity threatened. CA Wholesale sales, Philly Fed, existing home sales and leading indicators this afternoon.
Resistance 1.0140 1.0190 1.0260
Support 1.0080 1.0000 0.9950
Scandies – Complete NOKSEK capitulation yesterday as the pair made fresh yearly lows and once it breached 1.14 we saw a host of different names stopping out, medium term RM guys the stand out sellers all the way down to 1.1350. This of course weighed on EURSEK which had a quick move from 7.53 to 7.49. With the dust settled difficult to say what the next move is, the speed of the move in EURSEK since the Riksbank minutes a full 16 big figures in 48hours has caught a few people off guard, and so I think there is a chance of consolidation and a move back to 8.56/58. Having said that until we see deterioration in Swedish data (Labour market and NIER July sentiment survey next Thursday the standout) I think this pair remains a sell on rallies. I am square for now but will sell 8.55/56 today if we see it. EURNOK underlying bid with the waves of NOKSEK selling going through but having said that can’t sustain a break above 7.50. I still maintain that the reasons for the strength of the SEK are as if not more prevalent in NOK so this should play catch up at some point, clearly the realignment of NOKSEK the major force for now but a slow down or base in this flow should see EURNOK back at 7.40/42. Core short EURNOK and will add above 7.50, expect 7.53/55 to be good resistance. Good luck.
EURSEK support: 8.48 8.40 8.25 resistance: 8.58 8.65 8.70
EURNOK support: 7.43 7.40 7.38 resistance: 7.52 7.55 7.60
EM
ZAR – Another tight range for the local currency, spending the whole of yesterday trading 8.1500 – 8.2087 but failing to break lower despite risk rallying late afternoon. Not a lot to report as far as client participation is concerned with flow all but drying up, on the day small better sellers of USD. MPC day in the Republic and for the first time in a while market isn’t overly convinced of the outcome. At the open USDZAR feels heavy and with other commodity currencies trading bid the local looks set to squeeze lower. A break of 8.1400 opens the door for a move to the 8.0600 level and after that 8.0000 (200dma) although it’s unlikely we’ll see that sort of volatility before MPC. This afternoon also sees the release of Initial Jobless Claims, Existing Home sales and Leading Indicators out of the US.
Barclays Capital