EURUSD : Support – 1.2760 , 1.2690 , 1.2650/40 Resistance – 1.2820 , 1.2880 , 1.2985
Risk traded very well yesterday pushing the USD broadly lower as stocks remembered how to rally after a dismal post election week. Last noises we heard on the cliff seem to be pretty positive and there is not much more expected over the Thanksgiving holiday so likely this is one less thing to worry about in the immediate term. The Greece situations also sounds on track with the EUR44bn initial disbursement a little bigger than expected, maybe Germany getting their way to lump more of it together which is politically favourable. There are still some doubts over the IMF’s stance which should become more clear throughout the day as the meeting comes to a close – given these doubts I see further room for Euro to rally should they reach a compromise. Also overnight we had Moody’s downgrade France; firstly this just brings it inline with the prior actions of S&P and secondly out European bond strats think that there will be pretty much zero index related selling of these bonds and thus any splash could be minimal. As I said yesterday we were unlikely to extend much past the 200 DMA and indeed we could not close above, I am still positive but think this market is a buy on dips – look to get some EURUSD 1.2740-60 today.
GBP
Sterling rebounds with the wider risk rally and whilst the market sat short, as we noted Friday, the demand for pounds from corporates and a wider sovereign base has taken its toll and stopped the slide. Still look towards 1.5970 as a sell level for myself. European risks once again this week and Thanksgiving will likely lead to some illiquidity and volatility. MPC minutes may be of interest tomorrow but in reality this week it feels like the market is entering holiday mode so ranges persist. 0.7990 and 0.7960 support in the cross with 0.8065 seen as first resistance, then 0.8090.
JPY
BOJ unchanged as expected ahead of the election. No change in USDJPY and we trade in a sideways pattern ahead of the holiday season. Still see a chance we dip from here but plenty of interest to buy dips. Should we push on again through 81.50, the market is much lighter, once again. Selling flows stand out significantly 81.15-40 in the last 3 sessions. Long, looking to add on a dip and increase longer dated calls or will add through 81.50.
CHF
EURCHF around 1.2035 proved to be good support. Whilst we cited it as a buy level we saw no demand whatsoever and in the main, selling, for reduction of longs. It’s a slow burner and clearly has limited attraction but you can be long and benefit from any European positives with limited downside risk. USDCHF continues to be pushed around by the Euro with no natural interest at all.
AUDUSD: Support – 1.0320 , 1.0260 , 1.0140 Resistance – 1.0420 , 1.0460 , 1.0500
RBA minutes delivered a predictably dovish tone with little reaction in AUD suggesting we have further topside to explore before we think about selling it. In truth, this market feels range bound with 1.0250 and 1.0500 the trading locations that deserve respect. On the day, upticks above 1.0440 will be selling opportunities – I expect the range to be 1.0380 to 1.0440. Domestically, we don’t get any data now until next month with retail sales on the 3rd being the first report we can get our teeth into. With that in mind, I think AUD will continue to get dragged around by global sentiment so I don’t see much of the way in opportunity here. Medium term, I still standby selling rallies but we need a catalyst for us to resume selling off, something that does not look likely in the very short term.
EURSEK: Support – 8.60, 8.55 Resistance – 8.65, 8.6790, 8.69. EURNOK: Support – 7.30, 7.25, 7.23 Resistance – 7.40, 7.4140, 7.44
EURSEK was led lower overnight by the Euro leg as France was downgraded from Aaa to Aa1 by Moody’s. Whilst the downgrade is likely to yield a setback in EUR/Scandinavia crosses, I believe that it is only a temporary move and one that provides an opportunity to buy the dip. With an absence of Swedish data this week, I am looking for focus to re-align onto sentiment and commentary surrounding the Riksbank’s monetary policy. I remain bullish EURSEK and look for the pair to test back towards a 8.70+ handle this week. EURNOK was also led lower by France’s downgrade overnight as is now trading back around the 7.35 resistance level. It is important to keep an eye on developments in Israel and the Middle-East as any deterioration is likely to lead through to inflated oil prices and supportive to NOK. At present EUR/ Scandinavia crosses are predominantly driven by risk-on/risk-off sentiment rather than macroeconomic fundamentals, so I remain cautious. Relative value appears to be the safer way to express a view in the Scandinavian space and NOK/SEK has held firm in 1.1720-1.1755 range overnight.
Morgan Stanley