EUR – After yesterdays choppy trading the take away is that they did discuss negative rates and would use if necessary and deal with the consequences – that said it’s not going to be right now – I think on the day people will look to sell 1.3120-50 area but 1.2980/1.3010 will be a tough nut to crack again on the downside. Payrols the focus today – a weaker no. squeezes a few shorts towards 1.3150 which I think should be a sell – a strong number and we see some attempt at 1.3040 (yest lows) then 1.30.
GBPUSD – Showing signs of having peaked at 1.5606 on Wednesday. If indeed 1.5606 does prove to be the short term high, I would consider that to be an almost perfect correction, and the downside can then begin to develop once again. I am square at current levels, but would happily re-enter a GBPUSD short if a weak Services PMI release emerges this morning. In the event of a positive surprise, I would suggest fading strength in small into the 1.5580 – 1.5606 band. In the last 24hrs the pattern of our flows have been skewed towards GBPUSD selling, with the HF community having been active. Expect initial support at 1.5497 (Thurs low) and then 1.5467 (Tues low).
EURGBP – Tested the lower end of recent ranges on Thursday, and will now be dictated by UK Services PMI. In the event of a strong outcome, I expect swift losses, and a new .8230 – .8410 range to be defined. I would happily sell EURGBP on a strong release, risking .8455, whilst a weak survey will encourage EURGBP back into the middle of the .8398 – .8495 range, and I will stand aside. UK numbers have clearly rebounded versus expectations in the recent past, and in the event of more optimism today (and in light of the tone of yesterdays ECB meeting), this could create a clear EURGBP trade. Support should be evident at .8398, .8364 (22.1 low) and then .8300 (17.1 low).
JPY – all about payrolls, until then I don’t expect many fireworks. Not a great deal to report from overnight, as expected ranges were tight and interest low ahead of the number. Price action is always very binary on payrolls day, one thing to note is we do have quite a few bids now creeping into the book down round 97.50/60 so I think dips will be well supported into the data. Topside not a great deal until we see a break of 98.40, a few small stops now starting to congregate here. I will be long into the number, you have a clean stop through 97 figure which as we know has held very well this week.
AUD & NZD – A lot of attention now turning to May 7th rate decision with a 13bp cut currently priced in. Feels like spot market now questioning this pricing, particularly after the sell-off on Wednesday afternoon, and with AUD/USD finding good support 1.02/1.0220 now could be time to look at reinitiating longs. We prefer to express this through being short EUR/AUD with a stop at 1.2850 looking for re-test of support at 1.2550. AUD/NZD is sat right on trendline support off Q4 2012 lows and short term downward trend channel support, which comes in around 1.2030. We hold our view that this pair will be a slow grind down to 2009 lows around 1.1930 but approaching levels with the market will be looking to call the bottom. For now in NZD/USD any dips continue to be bought but there is some RM supply building in the order book around the April highs at 0.8676.
CAD – In a slight surprise, Stephen Poloz has been elected the next Governor of the Bank of Canada and immediately came out with comments on the dovish side, ”We’re in a recovery mode, but a recovery that is not as robust as was anticipated, or as we would have expected. I think that we will have to stimulate the economy for a certain length of time.” USD/CAD broke through resistance at 1.01 on the announcement, through which we added to our long position looking first off to test resistance 1.0150-1.0160 and then 1.0236 which was the high after April 5th payrolls. We have now raised our stop to 1.0070 which is below the area of tech support (1.0084-1.0075) we broke down through earlier in the week. Short term focus now on NFP, with no CAD payrolls until next week, but CAD market likely to be paying heightened attention to US data after Poloz’s early comments.
Scandies – EUR/NOK just had a quick re-price higher on a PMI miss, (48.9 vs cons 49.8) but stalls ahead of tech resistance at 7.6150. NOK/SEK buyers over the last few sessions, mainly on the back of a series of weak Swedish will be concerned if we slip through 1.1200. Unemployment data at 9:00 will decide the next leg in NOK. 7.5770 is support, despite testing briefly through there yesterday. EUR/SEK feels like its 8.50-8.59 broad range as price action treads all over previous 8.5450 tech level. I’ve got to say that despite a continued weak macro backdrop the SEK performs quite well. Any good news and EUR/SEK should get stamped through 8.5000 and set up previous lower trading ranges. I look to range trade with a bias to short EUR/XXX on rallies today. All eyes on NFP’s and the weekend.
Barclays