EUR – Quiet week for data and eur relatively quiet in Asia – After Fridays post payroll sell off and nasty retrace we seem to have defined a few levels for this week. 1.3150/60 topside providing decent resistance now and on downside 1.3030/40 decent support – orderbook continues to be dominated by buying between 1.3050-1.2970 with a few stops mixed in below last Fridays low (1.3033). topside offers 1.3120/50 with not a stop in sight until above 1.3230. My preference is to fade a bounce to 1.3120 and 1.3150 with a stop above 1.32 initially.
GBPUSD – There have been four failures in the last four sessions between 1.5591 and 1.5606. The upper end of the range is clear, and my feeling is, GBPUSD is attempting to put a multi-week peak in place. The two headwinds to this scenario are, firstly, that a catalyst is required to get the client base interested in the short trade once again. Secondly, EURGBP is threatening a major break to the downside, which could lead to EURUSD being a better expression of a USD positive view. I am holding a very small short position, and will willingly add, on any bounce into the 1.5580 – 1.5606 band. Expect some support towards Fridays low of 1.5481, with 1.5419 important thereafter. In the recent past, we have been better sellers of GBPUSD on behalf of Corporates and Leveraged accounts.
EURGBP – has printed no less than six lows between .8398 and .8410 since the last week of April, yet EURGBP continues to probe this area. I am square right now, but would consider entering into a short position, on a close below .8398. If that scenario develops, a shift into a new lower .8230 – .8410 range is then likely. On the topside, I would expect selling interest to re-emerge on any strength towards .8438 and then at .8482, with momentum sellers likely if .8398 is breached below. Client flows have been relatively light in recent sessions, though some range-playing activity has been evident sub .8420.
JPY – first look at the book and we see a decent skew to sell above 99.50, unsurprising that we failed at this exact level with 100 again within striking distance. We have seen some leverage supply from the outset, 98.50 is the first support level below with a good deal of 2-way in the books round here. I prefer to buy dips still, any move down to 98.60/70 and I will be dipping my toes in. Another strong performance by the Nikkei overnight never looked back once it broke 14,000 so I will now be watching this as the first support level below. No major US data today.
AUD & NZD – The RBA’s decision to cut comes with a lot of discussion over employment and market now looking to Thursday’s employment data with a keen eye. We saw good supply immediate post-decision, trading a low of 1.0178, but from here on we have seen good two-way interest sub-1.02 with corp names in particular taking the dip as an opportunity to bolster hedging. Support levels to the downside are 1.0160/50 followed by March lows at 1.0116. Doesn’t feel like everyone had this trade on with the split between rates pricing and economist expectations, and with another 25bp cut priced in by August, I would expect any rallies to pre-decision levels around 1.0240 to be sold. AUD/NZD has broken down through trendline support around 1.2030 and we maintain that this will be a slow grind down to 2009 lows around 1.1930. Continue to see light RM supply of NZD/USD, first support at 0.8456 (May lows) and then 0.8360 (April lows), and market will now start to pay attention to domestic NZ data (after terrible building permits last week), as the RBNZ has maintained similar rhetoric to the RBA thus far with similar concerns over currency strength.
CAD – Strong building permits data yesterday (+8.6% vs. 1.0%) has helped support CAD but haven’t seen anything to change my view, so for now remain long USD/CAD with a stop through 1.0030, looking to target 1.0150 then 1.0230. Have seen some RM supply this morning and just feels like people getting frustrated with the slow burn nature of the pair. If anything the decision overnight from the RBA lends even more support to the position as pressure now mounting on commodity currencies. Focus for the CAD market now Friday payrolls which is the first significant set of April data.
Scandies – Very strong Swedish IP out first off (+0.8% vs. 0.4% con), data was driven by an unusually large one off increase in transport production. Fast-money supply notable post data but we bounce back against support at 8.53, next level beyond that is support at 8.50/8.5050 which has acted as good a good level throughout April and more recently defining the bottom of the recent 8.50-8.59 range. NOK/SEK has now broken down through 1.12 and would expect to see stops through 1.1050 from RM accounts, who have taken the Q2 dip as an opportunity to get long. Resistance at 7.68/7.70 in EUR/NOK should help support NOK/SEK and market will now be looking at tomorrow’s Norwegian manufacturing data.
Barclays