G10
EUR – The selling continues after the end of last weeks Spanish yield inspired Friday blow out, London walks in with EURUSD lower on the Sydney open and taking out 1.21 barriers as I type. Orderbooks a little cleaner now it seems but expect more barrier type action around the psychologically important 1.20 level, we are starting to gather offers around 1.2160/1.22 and this certainly feels like the first sell zone on the day. In general feels like as we slip into summer EURUSD and EURxxx weakness should continue so be prevalent unless we see any tangible developments on Eurobonds or fiscal union. No data as such today with PMIs tomorrow and the Troika lurking in Greece waiting to attack the wires. Expect price action to be reliant on what Spanish 10 yr does today. Square for now but selling rallies still makes sense.
GBP (1.5560) – we open right on support round 1.5550, we are seeing some decent CTA selling early doors but we hold the level for now. No domestic data today, so again key will be EUR and the situation on the yield front. We are starting to see some supply of EURGBP hit the books round 0.78 figure, this should be sticky and for the most part add some support to cable on any dip. GDP will remain the main focus this week, but until Wednesday sticking with the established levels will be key. Still think cable gamma is cheap, will look to own some at some pt this week. Am square cash here.
JPY – CrossJPY still the main protagonist at the moment with decent selling from RM and models overnight keeping USDJPY heavy with barriers taken out at 78.00 as we sit down. More stops lurk below 77.50 in USDJPY but certainly feels like we are approaching levels where big brother might be calling in checking rates or we get some verbals from the MoF. More stops in EURJPY below 93.50 and some offers building back towards 95.00. Not sure the risk reward is great with getting fresh short USDJPY at these levels, in fact if we see spot below 77.50 think that’s the time to stick on some 2week upside for the back book.
AUD (1.0300) – the grind lower continues, it really did pan out exactly as we thought with the perceived corp flow rolling off and the ensuing move lower undoubtedly assisted by this sudden bout of risk aversion. Key today will be Spanish spreads, this should dictate sentiment so I will be keeping a very close on eye on these as we progress through the day. We open right on support in AUD, this 1.0300 level should be sticky for now with bids lining up from spot down to 1.0275. Topside we see offers being lowered to 1.0360, but for the most part it is quite thin. Domestically all eyes will be on the CPI print this week; don’t read too much into the PPI number today as the correlation between the two is weak at best. Am small long here at the figure, will have a tight stop through 1.0270.
CAD – EURCAD joins the EURxxx party trading through 1.2300 and looking to kick on lower, straight USDCAD remains a little suppressed with the EURCAD selling and finds itself back in no mans land somewhat, seems to be good support around 1.0080/60 and equally still corp interest to sell around 1.0250/1.0280. Like playing either extremity in USDCAD for the time being with bias favouring buying back below 1.01 but equally like selling rallies in EURCAD so net net maybe I just wait and sell EURUSD somewhere.
Resistance 1.0190 1.0260 1.0300
Support 1.0050 1.0000 0.9950
Scandies – Finally see NOK play some catch up to SEK which is what we have been looking for the past week or so. The selling accelerated through 7.4400 and wasn’t as much support as anticipated around 7.40, now trading below where the Norges started to get a bit antsy over the strength of the kroner though which is a slight concern for NOK bulls. Having said that USDNOK was on a 5.65/70 handle when they cut so on a weighted basis there might still be room to the downside in EURNOK. Taken back most of our shorts on this break of 7.40 and really quite simply unless we see Norges or Riks cut rates EURSEK and EURNOK will continue to be a sell on rallies especially with insatiable demand for EURCHF around 1.2010. Good luck.
EURSEK support: 8.40 8.30 8.25 resistance: 8.50 8.55 8.60
EURNOK support: 7.30 7.25 7.20 resistance: 7.40 7.45 7.60
EM
ZAR – ZAR sold off on Friday as global risk sentiment came under renewed pressure, trading from an 8.1605 low to an 8.2900 high. All and all we saw good 2way flow with both local and offshore names active on both sides of the market. Walking into the office this AM sees the deterioration of risk sentiment continue from Friday and USDZAR opens 8.3500. EUR continues its downward spiral against the greenback as renewed concerns over Spain/Greece hit the wires over the weekend. Risk looks set to get a bit of a hiding today and on the day we’ll use dips back to 8.3000 to go long the pair, aiming for a test 8.4500. Light day on the data front, keep an eye on Spanish yields.
Barclays Capital