EUR – So full disappointment in the Italian elections for mkts leads to general cutting of major risk positions in eur and eur x’s – with eurjpy leading the charge (down 5%) Looking ahead sees uncertainty again in Europe suggesting that rallies will initially be sold 1.3290 (Asia highs) then 1.3140 (last Fridays lows) lvls to watch topside – downside focus 1.2990 and then 1.2880. Order books wiped clean in the main with now offers 1.3100-30 and bids 1.2970/00. Bernanke later this afternoon provides some short term focus so remain flexible till then. 1.3080-10 a sell wrong above 1.3150.
EURGBP – An incredible reversal from the .8815 highs traded on Monday, with HF and Spec liquidation the noted flows. The question from here is how much deeper can this correction be? I do not have a strong bias for where the next 1pcnt lies in EURGBP, but from a technical standpoint, any fall to .8448, would only represent a 50pcnt retracement of the years gains. I am inclined to stay square for now, but would also highlight a negative tilt to my order book today, and I do still believe the market is long EURGBP overall. Expect support at .8576, .8540 and then .8445, with resistance at .8634 and then .8717.
GBPUSD – Caught between the conflicting forces of EURGBP liquidation and a generally supported USD. Given the disorderly moves seen in the EUR and the JPY crosses, I have reduced my GBPUSD shorts to a core only. I am mindful that this has been a significant winner for many thus far this year, and with wide-scale liquidation pervading markets, GBPUSD shorts may also be taken back. Expect stop loss related buying on any breach of the 1.5218 Asian highs, and further, above the 1.5250 mark. To the downside, support will be noted at 1.5073 and then at the psychologically important 1.50 level.
JPY – if our book is any guide, there are quite a few participants sitting on the sidelines now with the overnight move having caused widespread pain. Timing is everything, I have thought for a few weeks now positioning would overwhelm this rally but I got caught long and wrong overnight with USDJPY not looking back once it broke the 21dma at 92.97. Have to be cognisant of headlines from Japanese officials today, surely we will get a few of these following the o/n move with a subsequent 40 tick knee-jerk reaction (most likely JPY sell-off). I am small long here, not sure where to place a stop to be perfectly honest but I will most likely be bailing if we head back through 91 figure. Unusual for USDJPY to move more than EURUSD, especially with the catalyst being EUR-specific – hence why I still believe this is a flushout that needs to be bought. 55dma in EURJPY comes in @ 118.76, this looks to have supported well for now so I will use this as my first support zone below for the cross. Bernanke at 3PM this afternoon.
AUD/NZD/CAD – Well it turns out it was a EUR focus but ay carumba I don’t think many people thought the Italians would steal the limelight in that spectacular fashion. All in all commodity ccys of course not specifically at the races, EURAUD (1.29 to 1.27) and EURCAD (1.36 to 1.34) did a quick 2 big figures lower each in line with EURUSD yesterday afternoon but limited action in straight AUD, NZD or CAD. From here though I think there is a danger that this turns into a full blown risk off move in which case you would expect AUDUSD to be testing 1.0220/00 where there are stops and USDCAD testing 1.03. This might be more instigated by sequester type uncertainty though as today all focus will be on BTPs/EUR so expect EURcommod to still be dominant. Will look to sell AUDUSD back to 1.0300 but think you need to be wary of EURAUD through 1.2620/30. USDCAD holds in well and think as long as it remains above 1.02 then it should be a buy on dips, offers around 1.03 but we require deterioration into risk off to push us there. NZDUSD saw some fast money sellers after the slightly lower RBNZ 2y inflation expectation 2.2% compared with 2.3%, on the break of 0.8350 still interest to sell this pair on any rally back to 0.8400.
Scandies – Scandies relatively unchanged after the last 24 hours of European turmoil, if last summers price action is anything to go by then one would expect both SEK and NOK to benefit from continued uncertainty. We have drifted lower overnight in both EURSEK and EURNOK but still very much within recent ranges. A Swiss name was a good buyer of EURNOK yesterday leading into the afternoon fix but still more than enough interest to sell around 7.50 and as such sitting short myself still. A little bit more local focus on EURSEK this morning with the Riksbank minutes, a much more hawkish outcome probably wont be bettered by these minutes and if anything it will probably be a closer call than most people thought however everyone looking to now sell EURSEK around 8.48 so happy to be short and will add as long as we remain below 8.50. EURSEK support: 8.40 8.30 8.20 resistance: 8.48 8.50 8.53. EURNOK support: 7.42 7.38 7.30 resistance: 7.50 7.54 7.60.
Barclays