EUR – Barring 1 big sell order yesterday which caught the mkt offside, as we backed off from 1.31, eur remains bid. We saw strong demand from all sectors yesterday between 1.3050-90 area. We held nicely at 1.3040 and then 1.3060 in late ny and asia and now taking a look at this 1.3130/40 resistance (oct/dec highs). Important to be respectful of these lvls as we have topped and reversed hard from here, however if we can chip away i think above 1.3140 and then 1.3170 we will start to accelerate topside. German pmi first up at 8.30 we will see what tone that sets for the day. Long looking to add on the break topside.
GBP – No UK data today. Last nights downgrade by S&P of Britain’s triple A outlook to negative, was taken with a pinch of salt. They are the latest of the big three agencies to assign a negative rating and didn’t come as a massive shock. Price action saw a quick 40 pip sell off in thin liquidity but then a bounce to recover most of the move. EUR/GBP though, has traction above 0.8080 with little pullback. EUR/USD has remained so robust since Monday, that I feel as if there is some very heavy buying going through in the background. So, I think core long EUR crosses still works. GBP/JPY also looks like a buy whilst above 133.50 and decent interest appeared yesterday at 134.30. Techs look bullish, with chartist targeting 140.00. I look to buy a dip in the pair at 134.40-50. EUR/GBP levels: support 0.8100, 0.8080, 0.8051, (200dma). Resistance 0.8147, 0.8165 and 0.8220. Cable support 1.6120, 1.6085 and 1.6065. Resistance: 1.6178,1.6220 and then 1.6278.
JPY – Another nice rally o/n with latest polls showing LDP+New Komeito may win more than 300 seats. As well as a weak tankan report. We have seen strong model demand o/n but also decent profit taking on longs around this 83.75/95 area and selling from exporters – I have squared longs against this 84.00/20 area and with only selling on the books for the next 60 pips topside look to rebuy a dip towards 83.20/25 lvl.
CHF – Market very slightly disappointed after the SNB meeting and press conference yesterday which sees EUR/CHF back below 1.21. The SNB retains rhetoric (“We cannot exclude the possibility that we will have to intervene substantially again,”) but makes no policy change on the 1.20 limit or rates. We took out real money stops in USDCHF through 0.9250-30 which all but clears the orderbook. Have some demand for EUR/CHF from 1.2060-30, and with this pair well supported for now USD/CHF likely to remain vulnerable to moves in EUR/USD. Next level of support in USD/CHF 0.9210/00 a break of which could open up some downside towards 0.91.
Commodity CCY – A day of consolidation in commod ccys yesterday amidst continued political stagnation, we were very good sellers of AUDUSD between 1.0540 to 1.0510 for primarily RM names but also some AUDcross selling at the afternoon fix. Barclays has lowered its1 month AUDUSD f/c to 1.03 and NZDUSD to 0.81 more than feasible if we breach the cliff in the new year but for now people still happy to buy the dip in risk ccys which is what we saw in AUDUSD off the lows around 1.0510 which continued into Asia partly helped by EURUSD through 1.31. NZDUSD flow on the whole muted but underlying demand through our ecom continues to support the pair ahead of 0.8420/00. USDCAD found good support yesterday afternoon around 0.9820 with some corp buying around and then rallied up to 0.9950 into the London close where some leverage profit taking came to the fore. Still happy to sell rallies in USDCAD ideally with a stop above 0.9900, will look to sell 0.9850/60 on the day if we see it. CA Manufacturing Sales this afternoon.
Scandies – I perhaps underestimated the desire of the market to sell EURSEK rallies because the market traded short yesterday and is currently not feeling too comfortable above 8.72. We had an early dip yesterday morning to sub 8.70 but this was scooped up with vigour from a few RM and model guys after unemployment came in at 7.5% and CPI was slightly worse now all but confirming a rate cut from the Riksbank next Tuesday. Stops now lurk above 8.76/77 and look vulnerable given market positioning, I don’t have a huge conviction now and will wait for Riskbank next Tuesday and reassess, I think we ultimately flush out the stops higher but given massive expectation for Riks I think chances are we top out ahead of 8.80 and might be worth selling some at those levels. EURNOK uninspired but steadily bid, increasing interest in people looking at long NOK into the start of next year in different variations. This may be partly explained by yesterday and the SNB declaring they ‘want to further diversify FX investments’, adding NOK to their list even if it is a very small percentage would certainly galvanise the NOK bulls. For now though respect the ranges, look to buy 7.32 and sell 7.38/40. EURSEK support: 8.68 8.65 8.59 resistance 8.75 8.78 8.80. EURNOK support: 7.30 7.28 7.24 resistance: 7.38 7.40 7.44.
Barclays Capital