EUR – Eur did a lot of work yesterday on a 1.30 handle, but after the early LDN dip never really looked like it would revisit the early morning lows at 1.3018. Asia again play the 40-90 range, failing to breach the LDN afternoon lows. We have seen good demand o/n off the lows helping us squeeze back higher. Right now levels remain the same 1.3120 but more importantly 1.3150 topside – downside 1.3018 (yest lows) but 1.2990/1.30 will be key. We have an Italian auction to focus us this morning at 10am, before Draghi speaks at 5.30pm. – I am short and only start to worry above 1.3150.
GBPUSD – To my frustration, normal service was quickly resumed yesterday, at the first sign of further dovish language from MPC members. I have been guilty of over-thinking Cable thus far this week, and largely covered my shorts yesterday, believing the position liquidation that was evident in JPY and EUR crosses, would spillover into the Pound. From here, the years lows are located at 1.5073, and whilst the broader market will surely have stops below this region, my own order book shows interest to buy back Spec positions on the approach to 1.50. Should any rally into the 1.5150 – 1.5180 band play out, that should be sold into, with resistance likely at 1.5219 and then 1.5321.
EURGBP – Recovered surprisingly well on Tuesday, following the disorderly losses from .8815 ? .8576. I am square here for now, but would willingly buy weakness into the .8600 – 20 band on the day, expecting good support between .8576 and .8600. This morning’s IT auction is likely to be the bigger driver on the day in EURGBP, but unless the previous highs on the year of .8717 are recovered, I expect a day of rangy price action. *This morning brings the UK GDP revision for the fourth quarter, where Barclays expect an ‘in line’ outcome of -0.3pcnt q/q, along with the consensus.
JPY – not exactly sure what to do with USDJPY today, I am a bit clueless after the headless chicken like trading we saw yesterday. Rallies above 92 figure look lethargic at best, we just could not crack the 92.50 level yesterday despite a number of attempts at bouncing from 92.00. We seem to be carving out a 91.00-92.50 range, whilst we remain firmly anchored in the middle there is little incentive for me to get involved here. Book is similarly directionless, we see no prevailing skew one way or the other. Month-end flows likely to start gaining traction from today. The 55dma is the level to watch in EURJPY (118.97), we have tested this 3x now and bounced each time so keep a close eye on this today.
AUD/NZD/CAD – Evolved into a bit more of a USD move yesterday as EURUSD and EURxxx weathered the aftermath of the Italian election pretty well. The USD did rally after Bernanke spoke but clutching at a few headline straws as to why, given the statement looked fairly balanced. Anyways, AUDUSD made headway through the crop bids between 1.0230/20 which had acted as good support on previous occasions. Couldn’t breach 1.0200 and wary of selling with momentum in AUDUSD which has not been a winner recently! Still feels like AUD weakness should prevail but need to weather a few pullbacks, 1.0260/70 on the day should see some selling. USDCAD took a quick peep above 1.03 taking out barriers on the way, seemed to be some good selling off these highs as we drifted back to 1.0250 late in NY and overnight. Decent corp demand building now sub 1.0230 where I still think it makes sense to buy if we see it. Longer term names were good buyers of NZDUSD yesterday but it came very easy as AUDNZD position capitulation above 1.24 saw NZDUSD move from 0.8270 to 0.8230 very quickly. Overall I still like being long USDs against commods leading into month end and sequester, primarily in USDCAD unless we see some better levels to sell AUDUSD.
Scandies – Conviction remains the same in EURSEK and EURNOK at the moment, still remain short both but slightly more comfortable with EURSEK it must be said. Busy few days data wise which should kick things into gear. In Sweden we have trade balance and household lending today, PPI and retail sales tomorrow and then PMI and GDP to cap things off on Friday. These are exactly the kind of things the Riksbank will be looking at so consequently we shift back to domestic focus for a bit with the European backdrop meaning any negativity should boost safe haven type flows for SEK and NOK. For now as long as we remain below 8.50 happy to stay short and will add back towards 8.48. EURNOK equally feels like it should be lower but might be reliant on a NOKSEK correction higher for this to occur. Locals still sitting on top around 7.48/50 and will be weak stops through 7.43/42. 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