EUR – As much as the mkt is trying to maintain a short into the ECB tomorrow, month end eur demand, fears over weaker US data, possibility that the FED talks about falling inflation and positioning putting the squeeze on. With ADP, ISM and FOMC today we start to get answers to these points which will in turn help to cement the rally or see us move back into the range ahead of the ECB tomorrow. Yesterday saw very good selling 1.3070-1.3110 but all well absorbed and we open within reach of the previous highs at 1.3205. A break there opens up a target of 1.3310. The orderbook back this up with stops 1.3210-40. Downside also dominated by bids 1.3120-1.3080 suggesting if we do retrace we don’t fall too far. On the day looking at 1.3130 as support then 1.3080 below.
GBPUSD – Peaked at the 100dma on Tuesday, in part due to very significant month-end related buying. As the UK PMI releases approach, my feeling is the risks now shift to the downside for the Pound. Positioning is now materially lighter and the recent good news is fully ‘priced in’ in my opinion. This backdrop leaves the Pound vulnerable to some negative newsflow. I am now holding a small short position, risking above the 50pcnt retrace of the Q1 downmove (1.5606), and will add to the position if UK Man PMI surprises to the downside. Some buying interest will be evident on any dip towards yesterdays 1.5467 lows, with interim resistance at the 100dma at 1.5561.
EURGBP – Threatening Thursday’s breakdown level of .8490, EURGBP is back in ‘range trading’ territory. Gyrations in EURGBP will now be very much event driven, with a series of UK and EU events between now and the end of the week. Having squared my EURGBP short position, I am now inclined to stay out for the time being, waiting for a clearer picture to emerge. A recovery of .8490 on a closing basis, would keep pressure on the upside, meanwhile .8398 marks the lower end of recent ranges and will form support. Real Money supply the main theme in EURGBP in the recent past, though little of interest has been apparent thus far this week.
JPY – fairly quiet overnight session with a lot of Asia on holiday, we open the day ahead of some small resistance round 97.50 with a few offers creeping into the book above. Support kicks in at 97 figure, the complexion of the book has changed from yesterday with some good bidding interest now kicking in should we break the figure below. Focus for the day will be ADP at 1.15PM and FOMC later in the evening at 7PM, until then I don’t expect any major fireworks.
AUD & NZD – USD selling into month end saw both AUD and NZD get bought hard into 4 pm. We have since settled back but lack of general interest at these levels leaves the market elevated. China PMI was a small miss o/n but not enough away from consensus to cause a ripple. So, today AUD/USD trades 1.0330-1.0400 range with minor support 1.0350. A host of moving averages/fibo and tech levels with make 1.04 a tough nut to crack for now. NZD/USD seems to be supplied in the 0.8580’s for now, with 0.8540 support. AUD/NZD continues to trade heavy, with 1.2143 top and shorts waiting for 1.1930.
CAD – There was good demand for CAD yesterday vs. the USD after GDP beat expectations at +0.3% mm and month-end USD selling took hold. A few RM accounts stopped out through good tech support at 1.0075/1.0080 but corporates took the USD dip as an opportunity to do more hedging. I continue to sit long USD/CAD with a stop below 1.0050. We have the first set of April data today in the form of Manufacturing PMI which I would expect to see back above 50.0 after contraction to 49.7 in March. EUR/CAD held support at 1.32 perfectly yesterday before the month-end USD sell off, and I will take the opportunity to buy any dips as an intra-day trade ahead of the ECB rate decision tomorrow, with a tight stop below 1.3190.
Scandies – Most of Europe off today and expect liquidity to be an issue in these today. EUR/SEK feels tired at elevated levels and I still feel that accounts want to own SEK. The catalyst for the next move will be PMI tomorrow. Get ready for a re-price. Today we range trade inside 8.50-8.59, wide but real. EUR/NOK should continue to trade in a holding pattern within 7.5780-7.6500.
Barclays