G10
EUR – Consolidation the order of the day yesterday after heavy selling from 1.2270 down on Friday – we made a new low at 1.2067 but took a breather on aggressing further – Overnight moody’s puts the big boys of Europe on negative watch piling on more gloom onto the euro fire so the longer we consolidate below that 1.2160 (triple low we broke Friday) then the more chance we aggress below 1.20 – today we await the euro area pmi’s I expect the mkt is looking for some kind of bounce so we may get opportunity to sell against 1.2160 or sell on disappointment. 1.2070/50 support downside.
GBP (1.5515) – the mkt continues to look to sell cable on any spike, the problem is these brief rallies seem to be becoming more and more shallow with every passing day. In the absence of any domestic data, trading should be dictated by the broader risk sentiment with a close eye on EURGBP given the EU PMI #’s to be released and the precarious situation on the Spanish/Italian yield front. We continue to harbour a skew to sell the cross on rallies, first level topside comes in round yesterday’s highs at 0.7825/30, with more supply hitting the books ahead of the key 0.7850 level. Cable book quite thin, I certainly won’t be selling any at current levels but will look to sell rallies round 1.5575/80 should I get the opportunity with 1.5600 being the key level topside for me. G’luck!!
JPY – Fresh lows yesterday back below 78.00 (77.94) but demand from Japanese investors there for now – focus for me is that 77.65 lvl that we touched 2 payrolls ago, especially with eurjpy making new years lows – I like to be long adding on dips for now with an initial stop below 77.00 – I think MOF/BOJ cant be happy with these recent moves and action, intervention or easing is likely to follow soon. Topside 78.55/60 resistance then 79.00.
AUD (1.0292) – I thought it was slightly unusual for Steven’s to anticipate tomorrow’s CPI print, irrespective though the tone of the speech was generally more upbeat and along with the stronger China Flash Man’f PMI #’s this provided the catalyst for a small squeeze higher. Resistance still comes in round 1.0320, we see some decent supply ahead of here so it will be a tough nut to crack should we make any attempts today. Downside remains quite neutral – mix of stops and bids scattered sporadically from spot down to 1.0200 with no general skew to the book. AUDNZD continues to trade bid, 1.3065/70 is the key level topside and I will be short until we see a clean break of this level. I continue to think that AUDJPY remains particularly vulnerable in this bout of risk aversion, though I will be looking to sell rallies up to and above 81.00 as a means of scaling into a short. G’luck!!
CAD – Quiet session in CAD yesterday on the whole, we saw some corp demand for EURCAD which helped take us from 1.2280 to 1.2320 which was inline with general corp demand for EURUSD and EURxxx. Oil slipping away also aided CAD weakness and straight USDCAD was bid for most of our session trading up from 1.0140 and peeping above 1.02, no real interest at these levels, still corp offers around 1.0250 and unless we see this materialise into a full blown risk blow out scenario then still happy to fade EURCAD back to 1.2350/60. CA Retail Sales (13:30 BST). Good luck.
Resistance 1.0230 1.0260 1.0300
Support 1.0130 1.0050 1.0000
Scandies – SEK and NOK still performing very well, EURSEK was sold after the WMR fix from 8.44 to below 8.40 into the New York afternoon and EURNOK failed at 7.40 with some model and RM supply entering the market. EURSEK on the daily since the middle of May makes for some powerful viewing and begs the question how much further can we go? Feels like at the moment people cant afford to not be short which in itself is helping us extend lower, not sure the fast money guys have this position on in the size they want and I am taking my lead from EURUSD and whether there is still a 10 bid in EURCHF. Considering that still feels like rallies should be sold and in EURSEK first level is 8.45/46 and in EURNOK it is 7.43/45. Square for now but looking to fade. Good luck.
EURSEK support: 8.35 8.30 8.25 resistance: 8.45 8.55 8.60
EURNOK support: 7.30 7.25 7.20 resistance: 7.40 7.45 7.60
EM
ZAR – Massive risk aversion yesterday as bad headlines out of EZ kept markets on the offence. USDZAR was bid from the go and after opening at 8.3200 shot to an 8.4810 high before finally running out of steam. On the day better buyers of USDZAR with local and offshore names paying us in good volume. Taking over from Asia sees risk trade marginally firmer. From here it’s all about EZ and as was the case yesterday headlines has the potential to cause further risk aversion in world markets. That being said USDZAR has come a long way from Friday’s 8.1605 low and in the absence of more bad news USDZAR should regain some lost ground. Overall we remain bearish on risk and we’ll use dips back to 8.3800 to reload the long USDZAR trade. Euro Zone PMI should keep us busy especially if the prints disappoint. We also have leading indicators out Locally.
Barclays Capital