EURUSD: Support – 1.2690, 1.2650, 1.2500 Resistance – 1.2740, 1.2780/90, 1.2880, 1.2985
Greece pass the budget overnight but and now the onus is back on Europe to approve the next tranche, I think this is only a matter of time given the political will we have seen towards this and save for more domestic revolt I think the Greek risk is well contained for now. Market’s, however still have a lot of potential bad news to think about with the fiscal cliff, the resulting decline in the stock markets has lent the greenback a firm bid which is likely to last a little while longer although I still believe we will see a timely resolution on this front.Overnight the good Chinese data and aggressive fix has sent USDAXJ lower and this complex continues to trade heavy as the region performs. I still think that this has the potential to turn into a theme in the near future that spills over in G10 in a more prominent way (recycling), this coupled with some positive news on the cliff could see risk trade very well but this is not a story for today.We (and the market) do not expect anything for the Eurogroup today and given the US is out I see some range trading taking place; I would be very surprised indeed is we break 1.2650-1.2780. ZEW tomorrow should get a lot of focus with the current in German data and the EcoFin meeting will focus on Banking union (timetable and legality).
GBP
With the Treasury taking an additional £35bio from the Bank, to fill today’s ‘holes’ with little regard for the future, cable came under renewed pressure as the market exhibited how it felt about this financial massage ahead of the Autumn statement. Even a woeful euro rallied against sterling as cable broke down through 1.5930 support triggering stop losses. Inflation report Wednesday the main focus but would look to sell sterling rallies towards 1.5930-40. Eurgbp holds firm at 0.7960-65 and it really is a toss up of which is the weakest, worst currency going into year end.
JPY
Usdyen unwind Friday led by a large seller of euryen finally saw the pair break 79.30 and trigger a host of clients to hit the ‘exit’ button. Significant selling with no obvious buyers until late in the day when the majority of macros and leveraged money had sold out. A poor round of data again overnight in Japan showing a further slowdown in GDP. Shirakawa tips his hat towards intervention as a policy tool and Noda says “We will respond with a sense of urgency,” – not sure where he has been for the last 20 years but I think Noda has the same sense of urgency as my builders…..none whatsoever. More rhetoric and intervention chat as we approach the elections – currently long looking to add on any weakness at 78.80 (rumoured stops). Cross trades heavy for me because of continued ‘ping pong’ of European ministers – 101.30 resistance – no reason to be long until something concrete comes from Europe or the US. Market pricing no good news now into year end so will be affected by positives.
CHF
A sublime performance by Federer last night causing a moody Scot to head for the exit door faster than my builders head to the pub on a Mon, Tue, Wed, Thur and Friday evening. Stg swiss looks like a sell to me based on this around 1.5100 targetting 1.4890. However, looking to buy eurchf should we test back down to 1.2020-30.
AUDUSD: Support – 1.0380, 1.0260, 1.0140 Resistance – 1.0460 , 1.0500
AUD had a very solid week despite the sell off in equities with CTAs reducing their large underweight in AUD crosses, EURAUD and AUDNZD the two most populated. This position reduction has been sparked by solid data domestically but also Chinese data has, as a whole beat estimates over the week. If equities bounce from here, which one would have to suspect is likely, then AUD will head back onto a 1.05 handle. On the day would look to play from the long side at 1.0380 while medium term our strategy has not changed and we will look to sell on medium term basis in the 1.0550/1.0600 area.
EURSEK: Support – 8.55, 8.5030, 8.45 Resistance – 8.60, 8.6220, 8.6790
EURNOK: Support – 7.25, 7.23 Resistance – 7.35, 7.4140, 7.44
Trading last week indicated that SEK may be trading as a quasi safe-haven once again, at least in the short run, whilst concerns over Spain and Greece remain unresolved. Very weak industrial production data from Sweden on Friday demonstrated the risk in this view as EURSEK shorts were cleared out. Further progress in Greece over the weekend, with the new budget passed with no complications, supports my view that going into year-end EURSEK higher still makes sense. This week I think we will see EURSEK back on an 8.60+ handle at some point as the market digests the every increasing chance of a rate cut at the December Riksbank meeting as Swedish data continues to underperform. Swedish CPI data will be released tomorrow at 8:30 GMT. Looking to buy EURSEK on dips down towards 8.54. EURNOK continues to trade with an offered tone and I still think the risk remains to the downside in the medium term. The all time lows at 7.23 are looking more and more achievable each day. Range to trade is 7.33 – 7.25 with a preference to re-initiating shorts if we see 7.32.
Morgan Stanley