EUR – Wave of general usd selling yesterday led to a further squeeze in eur after we failed to get back below 1.2830 in LDN yesterday. O/n we have topped right on this 1.2904 area with key resistance now at 1.2930 important now. Stops starting to build 1.2925-1.2950 topside and with Bullard and Dudley speaking later in states possibilities for further pain on those short positions – Ultimately however I still like to sell into spikes towards 1.2950 with a stop above 1.3010. Downside lvls to watch 1.2840 then 1.2790, however feeling like we may need to get the FOMC minutes Bernanke and PMIs out the way before those downside lvls in eur again come into play.
GBPUSD – Recovered to just shy of Fridays high, as many of the less-committed USD bulls were forced to exit on Monday. I remain short, though have reduced a little and will increase the position only in the event of a material downside surprise in UK CPI at 9.30. My sense is the risk over this week’s UK events is for negative surprises, and I intend to trade with a short GBP bias. Given the risks around the USD side of the equation I will split my GBP short via both GBPUSD and EURGBP (to a lesser extent). On the day, expect selling interest into the 1.5280 – 1.5320 band, with equally good support between 1.5158 and 1.5180. Flows thus far this week have been light, though on balance I have seen better buying interest from Real Money and Corporates.
EURGBP – Could potentially come to life this week, having spent the recent past very rangebound. I am holding a small long position, but will need to see some bearish UK news emerge, before being encouraged to add. Alternatively, a close above .8500 will increase conviction, whilst any close below .8398 would suggest significant risks shift to the downside. Some Corporate selling interest has been apparent thus far this week and my order book does have a bias for selling over the next 0.5pcnt to the topside. I consider this interest to be passive however, so will stick with my bullish bias.
JPY – So brief dip o/n in usdjpy but again supported ahead of 102 and 101.80 support – With buying int from Japanese names reportedly related to Toshin demands and with Amari qualifying the comments made yesterday on FX lvl to say he was miss reported. Today resistance this 102.80 area then 103.30/50 area Still target further upside but I think will need to wait until we see what Bernanke has to say.
CHF – Little change in CHF overnight and whilst we continue to hold above 0.9578, confirmation that for now the trend is still to the topside. We remain long through options and ultimately while we stay above 0.9480, target a break of 0.9750 and a move towards the old highs on a 0.99 handle. EUR/CHF remains well supported above 1.24 and with European PMIs to come later in the week, this could be the cross of choice as we still house strong demand in EUR/USD 1.2770-90 (Friday low 1.2796) and stops looming above 1.2930, looking first off to target 1.2525/30 which were the highs last week.
AUD & NZD – A whippy night, with AUD/USD trading from 0.9825 down to 0.9751 before reversing the whole move and trading 0.9842 again. RBA minutes were fairly balanced but left the market pondering whether the recent 5% drop in AUD/USD on top of the good employment data post rate cut, was too strong a reaction. Strong performances in some commodities, with gold in particular posting a key day reversal on the NYK close, helped underpin. 0.9850 remains the big hurdle for further gains in AUD/USD and through there we have mild congestion 0.9885-0.9930 and then not much until parity. NZD/USD attracted some quality buying from more medium term accounts, leaving us just shy of resistance at 0.8225. If we pop through there, 0.8283-88 tech level and 200 dma become targets. So over all, I think it’s safer to play from the short USD side now and look to buy both AUD and NZD on dips. 0.9800 and 0.8180 as the starting point. Risks for the USD going into Wednesday night are for a reversal on anything less than a reiteration of tapering by Bernanke.
CAD – A lot of USD profit taking yesterday ahead of Bernanke speaking tomorrow. We’ve now squared up our longs in USD/CAD, together with many others it seems, trading a high of 1.0293 on three different occasions yesterday, proving we don’t yet have the momentum for a kick higher beyond last week’s high at 1.0313. To the downside 1.0237 (o/n low), 1.0217 (Friday’s low) will be first support and then the bigger level at 1.0150 which supported the pair twice after we broke up through 1.02 for the first time on the recent USD rally. Canadian March retail sales are released tomorrow but likely to be out of focus in the run-up to Bernanke speaking, and with a low consensus forecast of +0.1%, seems difficult to envisage any big surprises.
Scandies – Unemployment data at 8:30 from Sweden and the scandie market desperately needs a new thread to trade on. I expect the market still runs long of NOK/SEK and with real money profit takers noted into 1.1450-60, the risks are for a flush out of recent longs back through 1.1350. Stronger numbers from Sweden could be the catalyst. In the EUR pairs, EUR/SEK naturally struggles to maintain its higher trading range above 8.5850 and feels more comfortable back towards 8.5000. EUR/NOK has died on its feet with recent NOK strength hitting a wall into 7.4800-7.5000. So, risks skewed but the data itself is a coin flip. Feeling lucky?
Barclays