EUR – After opening in Asia with a squeeze clearing the book of stops topside to 1.3240, assisted in no small part by eurjpy demand, we have settled back down into 1.3190/30 range. We have Italian election results today with exit polls from 2pm and results from 11pm onwards so expect the mkt to react as news comes out. 1.3175 (Asia low) then 1.3145/50 (Friday lows) still focus downside – topside 1.3250 then 1.3310 lvl to watch. Orderbooks bias to bids on downside 1.3170-1.3120 topside nothing until stops 1.3310+.
GBPUSD – Touched a low of 1.5073 in Asia, with Macro supply the noted driver. Whilst I am a little mindful that extremes have been set in Asia in recent sessions, I am still comfortable with shorts whilst below 1.5215 in the short-term. As discussed in the weekend commentary, the downgrade from Moody’s was not independently a surprise. Nevertheless, the very weak sentiment towards Sterling will now resurface in my view, and keep broad based selling of the Pound thematic. To the downside expect some interim support at 1.5073, with the psychologically important 1.50 marker likely to attract a lot of two-way interest.
EURGBP – has retraced 0.5pcnt from the Asian highs, but is now finding buying interest just above the former high on the year, .8717. The IT election results present some short-term event risk, but all else being equal, I expect further gains ahead. Resistance between .8821 and .8831 offers the next topside target, with support likely between .8700 and .8717, and then towards Thursdays low of .8624.
JPY – an eventful Monday session in Asia, interest should remain high this week with the 2010 highs round 95 figure within sight. I don’t think we test this level however until we get official confirmation on who will be nominated for BOJ Governor, at this stage it seems nominations will be presented to Parliament mid-week. Bids still in the books below, that said we are starting to pick up some stops through the NY closing levels round 93.40 and a further wave through 93 figure (which also more or less coincides with the 21dma at 92.97). We are long here through cash and options, only a move below the 21dma would make me question the rally. Topside some offers kicking in 94.75 and higher. I’ll be buying dips down to 93.50 on the day, but in the absence of any headlines I think we trade a 93.75-94.50 range in London.
AUD/CAD/NZD – Friday focus in EURAUD primarily post disappointing LTRO and in midst of Italian uncertainty saw leverage supply of EURAUD from 1.2820 to 1.2750, this kept AUDUSD supported around 1.0330/40 but orderbook reflects interest to still sell a rally in AUDUSD. Overnight February manufacturing PMI from China fell to a four month low at 50.4 unfortunately negating some of the good news from January, leverage selling of AUDUSD in the wake of this saw AUDUSD trade down to 1.0262. Thursday saw a lot of people get bearish in a hole around 1.0230 with corporate demand saturating a lot of fast money supply. Offers now lowered in AUDUSD to 1.0320 and few stops below 1.0230 which is important level of support on the day. Rather be selling back above 1.03 but maybe tentatively re sell test of 1.0230 if we take a look today but attention on Italian election results means EURAUD may take centre stage. USDCAD is asserting itself at the top of the second tier of favoured trends at the moment, we saw some very good RM demand Friday between 1.0180/1.0200 which initially was well absorbed however the shocking retail sales print (-2.1% MoM) and slightly softer CPI saw funds trade up to 1.0250 which then brought in fresh leverage profit taking. No reason why for now shouldn’t respect this up tick especially with sequester uncertainty looming, 1.0180/90 looks like good buy zone on the day.
Scandies – Lots of good news for Sweden on Friday, the economic tendency survey was better than expected at 94.7, manufacturing confidence not quite as low as first thought and an uptick in the German IFO. Net net I am short EURSEK as long as we remain below 8.52 and despite it being a crowded position particularly in the crosses I still think we test 8.40 soon, Riksbank minutes tomorrow may be the catalyst. NOKSEK looks a little overstretched according to the 2y swap rates, as such short a bit of EURNOK with a stop above 7.50 where locals were good sellers on the back of the position capitulation on Thursday last week. Any correction in NOKSEK back to 1.1400 I think is definitely worth a sell. EURSEK support: 8.40 8.30 8.20 resistance: 8.50 8.53 8.55. EURNOK support: 7.44 7.38 7.30 resistance: 7.50 7.54 7.60
Barclays