EUR – Squeezed mkt out yesterday of weak shorts taking out the 1.3430/50 area but stopping short of breaking 1.3480. Selling dominated above 1.3450 from lev and RM a/cs. Focus will be 1.3400/10 downside and 1.3480 topside. A clean break and close above 1.3480 for me suggests the recent downtrend is over from post Draghi and we can attempt another run to the topside. Orderbooks light with offers 1.3475/90 and stops above 1.35 – downside bids 1.3410/30.
GBP – BOE quarterly inflation report at 10:30. The market is expecting an upward revision in inflation expectations together with a picture of weak domestic growth and global uncertainty. This will make additional QE in the short term less likely but the bank will be looking at every option to try and stimulate growth. If economic activity continues to drag its feet, then more flexibility around the inflation target will probably be part of policy decisions going forward…enter Mark Carney. For now, we are seeing consistent quality selling of pounds and interest in downside option structures. Any short term relief for sterling will be met with further selling. Topside levels for cable: 1.5690, 1.5710, 1.5755 and 1.5775. Below: 1.5630, 1.5570 and then a bit of a void until 1.5500. EUR/GBP RES: 0.8604, 0.8630, 0.8687. Support: 0.8555, 0.8537 and 0.8482.
JPY – The uncertainty around the G7s thoughts on the recent JPY sell off and Japanese monetary approach caused a sell off yesterday that has rolled over today into further position reduction into the BOJ meeting o/n – Support is the 92.80 lvl then 92.20 below that – topside 93.60 then 94.00 focus lvls. I think room for further reduction in positioning today but like to buy that dip towards 92.50 with a stop below 91.80. Topside 93.50/60 will be interim resistance. Then that 94.00 that we failed to break back above of the rally from the initial heavy sell off. Orderbook mainly bids 92.60-90 on the downside – topside clear until some selling 93.80/94.00.
AUD/NZD/CAD – Market caught short AUDUSD and feeling some pain overnight with an unwind in straight AUDUSD and the crosses instigated by better consumer confidence data and then leverage demand on the break of 1.0330 where other stops were also triggered. Orderbook a little cleaner now and skew towards topside offers with some corporate supply entering the fray now as I type. Think its worth leaning against 1.04 initially but market trades short, still fancy buying EURAUD back towards 1.2920/10. One way traffic in USDCAD yesterday, with swathes of corporate supply from 1.0080 down to 1.0030 weighing on funds. Through parity and I think being long feels wrong and we probably take a look back towards 0.9940/50 where there is still demand. Small correction in the bird yesterday in line with other commod ccy strength, saw some RM demand for EURNZD of all things but not much in straight NZDUSD however 0.8450 should offer a good level to get short intra day if we continue to squeeze this morning.
Scandies – Riksbank day upon us and it is nowhere near as cut and dry as perhaps thought after the last minutes, where we had 2 board members voting for a 50bp cut. The difference this time around is a pick up in lead indicators perhaps enough to avoid a cut this time but should see a lowering of the repo rate path. Given the sell off we have seen recently in EURSEK happy to go into this long looking for repo adjustment lower or even a surprise cut. But ultimately agree with our strategy in that medium term players will look to fade any SEK weakness, especially around 8.61\63 where a confluence of moving averages come into play 8.62 (200dma and 100 dma). If seen I will also be looking to flip short here or if I’m wrong cut out on break of 8.50 which should offer ok support initially. NOKSEK will be the catalyst for EURNOK today, expect the cross to be a bit whippy orderbook has offers around 1.1690\1.1700 and EURNOK has bids around 7.34\32 which should offer support but equally offers ahead of 7.40. EURSEK support: 8.52 8.50 8.40 resistance: 8.60 8.62 8.72. EURNOK support: 7.36 7.32 7.30 resistance: 7.40 7.46 7.48.
Barclays