EUR – Frustration again yesterday for eur bears with a retest below 1.2950 met with corp and longer term demand. Right now still reluctant to sell dips until we get a clear close below the 200 day at 1.2995 and 1.2950 lvl – topside stops cleaned out with the move to 1.3027 in Asia leaving a few offers 1.3050/70 and then again 1.3120/50 topside. Couple of European data points today so look to see how that impacts eur but for now we seem stuck 1.2930-1.3070.
GBPUSD – Touched as low as 1.5278 on Monday and is now consolidating a little, as EURGBP finds resistance at the upper end of recent ranges. Overall, I continue to expect GBPUSD to make downside progress, though would be uncomfortable being very short around current levels. Instead, I would advocate selling strength back into the 1.5370 – 1.5410 band, unless a clear catalyst presents itself in the form of tomorrows UK Inflation report (in which case, I will happily hit sell at market). Support will now be found at 1.5265 (25.4 low), and then at the series of lows from mid to late April (1.5197 – 1.5227). Client flows have been firmly skewed towards selling in the recent past, with Hedge Funds and Systematic accounts the most active since Friday morning.
EURGBP – Testing the upper end of the well-defined .8398 – .8495 range that has contained trading since late April. I have sold some EURGBP around current levels with a tight stop loss, seeking to exploit these parameters, though the view is rather low conviction (I am firmly bearish GBP overall). Until a close outside of this range is achieved, I do not see anything very directional developing, though tomorrows UK Inflation Report does offer the potential for interest in this cross to be reignited. In terms of flows, the recent pattern remains intact – Real Money and Corporate supply above .8450, vs. range-player demand sub .8420.
JPY – No surprise to see usdjpy lower after ldn/ny failed to take usdjpy back above 102 successfully post retail sales yesterday – mkt hung on well in ny only for Asia to hit the sell button knocking us back to 102.27 low. A combination of profit taking from Japanese and lev a/cs and the squeeze in JGB yields helping to clear some stops between 101.45-101.27. On the day looking at support 101.25 (Asia lows) then 100.90 below – topside 102.102.20 key now for next momentum wave to topside – still long usdjpy through options and looking to reload long spot on dips to 100.90 and 100.50 with a stop at 99.80.
CHF – Like usdjpy, usdchf failed to regain the highs of Friday at 0.9625, running into a few corp / lev offers at 0.9590/9600 area on the 2 rallies yesterday – O/n we have come back to the first support lvl at 0.9520 and held. I remain long usdchf will add on dip to 0.9520 with a stop at 0.9480 or on a break of the Friday highs at 0.9625. Target is 0.9720 initially. On eurchf side in middle of wider 1.2330-1.2550 range now – few lev and corp sellers into 1.2430/50 area capped us yesterday.
AUD & NZD – Australian federal budget at 10:30. As AUD/USD settles in choppy range, we are starting to look a little over sold on the techs and my order book is starting to show increasing signs of demand below. This morning’s budget will receive some short term focus, with the market expecting an increase in budget deficit both from the starting point and over the full period of the forecast. My research calls for a 25bn AUD shortfall2012-13 and 12bn 13-14. Level wise, yesterdays low at 0.9941 supports, with strong support kicking in at 0.9880 as daily trend from 2011 and 23.6% fibo of the whole 2008-present range kick in. Topside, some sellers will probably be lurking around parity but 1.0050 and 1.0115 are more meaningful. 1.0150 and 1.0210 now represent strong resistance. NZD/USD seems to have tagged onto the coat tails Of AUD/USD with the cross clinging onto a 1.20 handle. 0.8300-20 resistance, with 0.8230 and 0.8245 support in the kiwi.
CAD – The strong US retail sales print yesterday actually led to some USD selling against CAD yesterday, even after the Canada payrolls miss on Friday. That said overnight we have seen good RM demand 1.0120-1.01, but for now corp offers and profit taking ahead of last week’s highs at 1.0152 should act as good resistance. On the downside 1.0050 should act as good support, then May lows at 1.0014 but can’t see much traction beyond these levels given the amount of interest building to buy 1.0020-1.00. April inflation data on Friday will be the main data focus for the week.
Scandies – Swedish CPI at 8:30 with consensus forecasts 0.1% MoM and -0.2% YoY. EUR/SEK has been pretty dull of late, confined to a 8.5850 top and support ahead of 8.5000. It feels like the market has been getting long of SEK again though and disappointment from CPI could see us regain an 8.6000 handle. Bit of a coin flip on the print itself but it feels like we could see a bigger reaction to the topside than we would get lower on good news. The NOK has been stuck above 7.5000, maybe due in part to expected flows from bond redemptions but these will be mainly hedged by now. I expect pressure to build, with NOK/SEK resistance above 1.1400 coming under pressure and EUR/NOK itself to have another go at 7.5000. Flows have been modest with one decent seller of USD/NOK emerging yesterday. Liquidity has been thinner than usual, all be it within recent ranges.
Barclays