GBP – Early eurgbp seller catches the market off guard. Short term market makers are short sterling but the demand is solid and quality names. Models bought cable late yesterday but ran into fix selling and resistance at 1.5880. Whilst I want to be short with data and King – I think better to stand aside here and see if we get a move higher to more favourable levels to initiate shorts – 1.5970.
JPY – Further positive soundbites from Japan – Abe looking at changing the BOJ law and LDP targeting 2% inflation. Premium names are selling usdyen here from Japan – so I am more cautious with other global tensions on the increase. Large buyer as soon as we sit down off 81.00. Lightened up yesterday between 81.20-40 but will reestablish larger longs to 80.60 or on a break above 81.50 (barrier).
CHF – Eurchf trickles off each day but approaching a buy zone for me and sensible risk reward – 1.2030-35. Usdchf meeting resistance around 0.9500-20 but the euro is the dominant factor here and I have no strong view on where euro is going short term, but am long topside more medium term.
AUDUSD – Quiet overnight session with Oz not making any new headway lower – From a trading standpoint, we are going to be a slave to the equity market so for me, trying a long ahead of 1.0280 is the play for today. Plenty of explanations for yesterdays sell off, the favourite being bond redemptions which resulted in outflows. Personally I think was more the correlation with equities reasserting and the pressure of CTA and leverage selling finally showing in the price. I prefer to play from the long side as I think the short base has built rapidly. I see the range as 1.0300/1.0380. Support – 1.0320 , 1.0260 , 1.0140 Resistance – 1.0420 , 1.0460 , 1.0500
Scandies – was offered yesterday as unemployment data came in better than expected. For today looking to trade within a 8.65 – 8.61 range, with a preference to buying EURSEK on dips. Medium term focus remains on the every increasing chance of a rate cut at the December Riksbank meeting (18th Dec). I think that the chance of a rate cut at the December meeting (market is pricing in 17bps of cuts for December through OIS) is now higher than the chance of a cut at the equivalent point before the October rate meeting. EURNOK continues to slowly grind higher and broke through resistance at 7.35 yesterday as expected. I remain a Norway bull on medium-term fundamentals but at present the market is trading largely on sentiment regarding the Eurozone developments and the global risk-on/risk-off stance, so I remain cautious. EURSEK: Support – 8.62, 8.60, 8.55 Resistance – 8.6790, 8.69, 8.72. EURNOK: Support – 7.30, 7.25, 7.23 Resistance – 7.37, 7.4140, 7.44.
Morgan Stanley