EUR – Stable o/n holding 1.2875/80 (yesterdays dip lows) supporting by some decent demand from custodials and euraud buying from spec and lev – Interesting to see o/n that starting to get increased headlines on Spain ready to apply for help and expect more of this going forward – I think we are rangey still 1.28-1.2970 but I bgt that late dip to 1.2880 last night and will play from long side taking a stop on a close below 1.2825 (200 day) – ultimately i looking for a break of 1.2970 topside to confirm this recent bout of selling is over – order book is offers 25-35 with stops above before fresh selling against 1.2970 stops appearing 1.30+ downside some range bids 1.2850/80 no stops until 1.2780.
GBP – Construction PMI at 9.30. A generally light day for data globally today we walk in this morning with ranges intact. EUR cross sellers from last week seem to have been feeling the squeeze already and have been quick to square up positions. Cable still resists in the 1.6170’s, EUR/GBP runs out of steam at 0.8000. I feel a little in limbo right now and running a tight book. Maybe a squeeze again, higher in EUR/USD will tow cable/EUR/GBP through the topside levels and give us an opportunity to play an extended range. I’m keeping my powder dry and waiting for the next thread.
JPY – Struggling to get through some gd Japanese selling 78.15-20 for now after 3 solid attempts at higher – I remain long but it seems we stuck now needing fresh impetus from ADP and payrolls to confirm that move to 78.60/78.80. Continue to be long leaving room to buy the extra dip towards 77.60 with a stop below that 77.10 support.
AUD (1.0305) – no need for a recap of the RBA meeting, suffice to say they met market expectations in my mind. Dec OIS thus far is pretty stagnant, strange price action given the move though perhaps suggesting the mkt had somewhat expected this outcome. Sure AUD is lower on the back of the decision, but this should come as no surprise given the ‘formal’ consensus was for rates to remain unch. I see scope for AUD to continue it’s under-performance on the crosses, but I will not be selling AUDUSD anywhere near or below 1.0300. Selling spot following an RBA cut is usually fraught with danger, the ensuing 24 hours certainly doesn’t constitute rational trading in my opinion. I will be monitoring 1.2550 in EURAUD (Sept’ highs), 1.0080 in AUDCAD (trend-line from May lows) and 1.2330 in AUDNZD (2011 lows) as key levels in the crosses. We see quite a bit of support in AUDUSD from spot all the way down to the 100dma at 1.0237, anywhere below 1.0160 and I will be bearish but until then I won’t be selling cash here. Unsurprisingly we see stops higher in EURAUD and GBPAUD, though for the most part the AUD book remains quite thin with most of our resting orderbook interest cleared following the o/night move. Bids kick in down round 1.0250, stops topside through 1.0360 which should be the first level of resistance above. G’luck!!
Scandies – Noticeably difficult to transact yesterday, with liquidity at a premium. EUR/SEK broke through hourly resistance yesterday at 8.4620 and now stays firm in line with general EUR outperformance. Topside levels now 8.5180, 8.5500, (some supply noted) and 8.6000, (100 DMA). Support at 8.4500 and 8.4150. Again it feels like some shorts from last week have scaled back but we still trade on the firm side as supply holds fire until above 8.5000. I look to fade/add into 8.5500, risking 8.6000 as recent weak data from Sweden has a temporary effect. EUR/NOK less in focus it seems. Hourly resistance there is still intact at around 8.4000 right now. Suggest range 7.35-7.4150 holds until fresh news.
ZAR – ZAR underperformance extends post WGBI euphoria. Flows remain light but broadly seeing better USD demand both locally and offshore. As focus now turns more to local fundamentals and structural cracks appear to be broadening, sentiment for the outlook into year-end is dampening. We find ourselves firmly in this camp and although against USD, ZAR remains range bound, our bias is to play ZAR from the short side on an RV basis. We see USDZAR trading a 8.32 -42, with risks to the topside, a break through 8.4200 opening up 8.5000.
Barclays Capital