EUR – Sustained bout of EURUSD and EURxxx selling over the past 24 hours, initially in London yesterday it was CTA and model guys selling aggressively between 1.3150 and 1.3100, the next leg lower has purely been the surprise found in the FOMC minutes highlighting several members thinking about terminating QE3 at the end of 2013, this has lead to a broad based USD rally with the headline pair leading the way trading through 1.3050 and now looking to take out stops below 1.30/1.2990. Bids in our orderbook popping up around 1.2950 but payrolls this afternoon the focus. Will be interesting to see how market reacts to the number after last nights fresh info and whether a better number instigates USD buying on removal of QE sentiment, short EURxxx still makes sense leading into next weeks ECB but for today in EURUSD all about the greenback, sell rallies looks like the state of play.
GBP – Official reserves, money supply, mortgage approvals and Services PMI at 9:30. The USD still has traction as the ‘risk’ correlation breaks down….and good riddance. Cable has dropped over 3 big figures now since its early Asian spike on the first trading day of the year. EUR/USD also looks in similar trouble as EUR/GBP remains sidelined. Apart from longer term real money accounts, I don’t think many have this now. Those that did probably couldn’t resist banking profit way too early, especially at this stage in the year. This could just continue to rumble lower. Rallies will probably continue to be feeble. Resistance: 1.6100, 1.6130 and 1.6170. Support: 1.6050 (100 dma), 1.6020 and then the band of congestion 1.5990-1.6010. Further down the line, daily trend appears at 1.5940 and the 200 dma just ahead of 1.5900. EUR/GBP will probably trade within 0.8080-0.8150 and despite seeing some good interest to buy, the drag effect from EUR/USD keeps us towards the lower end of the range.
JPY – The perfect storm at the moment in USDJPY, despite having just seen leverage and model profit taking in both EURJPY and USDJPY recently and people tentatively looking towards stochastic and momentum data for a top the FED come in with a hawkish curveball. USDJPY traded from 87.30 up to 87.80 overnight before fresh waves of leverage buying this morning have taken us through barriers at 88.00 and still feels like there is further room on the topside. Orderbook sparse of any exporter selling interest and this afternoon payrolls will be key, everyone looking to buy a non existent dip. The slight change in FED rhetoric should add impetus to today’s number, feels a little tough to buy at these lofty levels but equally one way traffic for now.
AUD/NZD – FOMC mins were the spanner in the works, I think the price action in the antipodean space thus far is totally justified. NZD continues to under-perform almost everything in G10, we have seen some decent buying here on the lows though it remains heavy for now. A bit harder to predict the post-payrolls px action following the comments from Fed officials last night – at this stage I would imagine a strong payrolls print, they will sell AUD and NZD and + USDJPY (less QE, stronger US data etc). A weak print, I don’t see as compelling a case to be selling USDJPY (mkt won’t construe weaker data as necessitating more QE following the rhetoric last night) and I think any rally in AUD/NZD on the back of this will be tepid at best and present an opportunity to sell into. Picking up stops in AUD 1.0470/75 above, more stops in EURAUD down below some big moving avg support round 1.2420. NZD book cleaned out, some offers in the cross up round 1.27 figure.
CAD – EURCAD continued to dictate things yesterday in London with all EURxxx but notably EURAUD and EURJPY trading very soft, we saw some CTA and leverage selling of EURCAD through 1.2950 before a few bids popped up around 1.2900. This EURCAD selling managed to keep a bit of a cap on straight funds in London keeping us 0.9840/0.9865 before the FOMC minutes. A slightly hawkish blip from the minutes caught the market a little off guard and as such the USD has rallied across the board and USDCAD finds itself back to 0.9900 as we walk in this morning. All about payrolls this afternoon from here, I think we are approaching some good levels to sell USDCAD ideally around 0.9920/40 with a stop above 0.9970 but clearly catalyst this afternoon purely payrolls. Resistance 0.9900 0.9970 1.0000. Support 0.9830 0.9800 0.9730.
Scandies – NOK and SEK strength looking rosy at the start of the new year, US RM names selling EURSEK yesterday between 8.58 and 8.55 somewhat countered by local corp demand for USDSEK. Happy to sell rallies in EURSEK for now, and onshore consensus is for sustained SEK strength this year (yet to decide whether this is a good omen or not), will be more stops below 8.50 and offers back to 8.60/62. EURNOK found good offers yesterday in line with NOKSEK buying, I do understand the sentiment to own NOK which I agree with but not sure how much further we can aggress lower in EURNOK, 7.28/27 initially good support and then 5.50 in USDNOK is very important. Clean break of this level in USDNOK could be the catalyst needed in EURNOK, for now look to sell back to 7.35/36. EURSEK support: 8.53 8.50 8.45 resistance 8.60 8.68 8.72. EURNOK support: 7.30 7.28 7.24 resistance: 7.38 7.40 7.44.
Barclays Capital