EUR – Definitely didn’t move as expected yesterday as eur defied general bullish USD in g10 and eur x’s rallied hard to topside led by eurjpy/eurgbp. We have stabilised here around 1.34 in asia as some US corp demand helps cap topside momentum – All about the fed today and Bernanke press conf, so expect eur to be 1.3350/1.3430 range initially – if Bernanke mentions tapering I would expect eur to correct sharply considering it hasn’t backed off at all recently (1.32 region), if not and its data dependent still then eur has room to 1.3450/1.35 before I expect us to top out again – draghi started verbal intervention yesterday morning mentioning he hasn’t discounted using non standard measures and so signalling a high eur isn’t what the ecb wants. I remain short but will cut above 1.3420 and reassess closer to the fed.
GBPUSD – Recovered very well off yesterdays 1.5565 lows, but the pattern of our client flows has certainly turned GBP negative in the last 24hrs. There has been no obvious catalyst for the shift in sentiment, though positioning and technical indicators, do suggest lower levels are now the path of least resistance. I have a core short position, and will be encouraged to add should a close below the 1.5590 mark develop in the days ahead. Equally, selling anywhere in the 1.5690 – 1.5710 band seems a fair strategy, to play recent ranges if nothing else. Expect support between yesterdays lows and 1.5580, with resistance in the 1.5720 – 53 band.
EURGBP – Seemed supported by a large on-off flow on Tuesday, though this is pure speculation on my part. Taking a step back, EURGBP remains firmly entrenched within the well-trodden range, and unless .8599 were to be breached on the topside, trending conditions are unlikely to develop for now. I am square here, but would favour buying any dip into the .8480 – .8520 band for choice. Systematic demand was the noted theme from our clients on Tuesday, though client volumes remain very low overall.
JPY – Finally got that clear out of weak short positions yesterday with the high at 95.77 – We saw continued buying from lev, bank and RM names supporting us in the morning but we capped at Fridays Asia highs at 95.80 and reversed – Feels like we settle no 94.70/95.50 range with mkt pretty balanced and waiting for new news later.
CHF – Capped at 0.9260 area yesterday and seemed to be some aggressive selling in mkt that helped to push usdchf back to 0.9176 low and run some stops on eurchf positions initiated the previous day – Continue to think into Fed the 0.9130/50 area offers good support as does eurchf between 1.2270/90 range – Into Fed tonight and SNB tomorrow I remain long eurchf looking to add 1.2275/45 with a stop below the 200 day at 1.2210. – Topside need to recover above 0.93/1.2350 to gain further traction higher again.
AUD & NZD – FOMC. Seems it’s getting analysed to death and with a light data day ahead we’re in for a flow driven day of chop as accounts jockey for position. For AUD/USD though it seems the risks are asymmetric, with positioning data showing heavily over extended shorts out there. Any tilt in the balance towards the dovish side of expectations from the FED could see flurry of covering. I’ll be watching flows today and will act if I see any pattern of short covering emerging pre FOMC, reluctant to play from the short side unless we see extreme value on the topside. 0.9435 and 0.9450 support, resistance 0.9520, 0.9575 and then the 0.9620-40 band from Monday. If we do get a shock and the market runs for cover, 0.9710 and 0.9800 are the big levels to watch above. NZD/USD also having a look higher and trying to get a foothold on 0.8. GDP later tonight from NZ could again expose USD longs. Suggest 0.7960-0.8060 should cover it on the day until the fireworks get let loose. AUD/NZD hovering around the 61.8% fibo of the whole 2008-2011 range and threatening to set new lows sub 1.18. Techs look weak whilst below 1.2100.
CAD – Continues to sit comfortably in a range with topside resistance at 1.0240/60, where Real Money supply remains, having traded a high of 1.0239 overnight. Flows have been very light this week, with most notable flow being range supply yesterday 1.0210-20. We have another speech from Gov. Poloz today, released at 5:25LDN, and while this will be out of focus in the build up to the FOMC it will be another piece in the puzzle on trying to capture what the BoC’s approach post-Carney may be. Downside 1.0120-50 should remain a pretty thick patch of support with corp. interest continuing to dominate.
Scandies – late headlines *Swedish Government to Sell 5.7% Stake in Nordea Bank* has put EUR/SEK under pressure with initial estimates that $2.7bn+ worth of SEK will be bought if sold to an external buyer. We continue to flip flop through 8.6550, which was the top of previous range, and post-headline have picked up a few spec stops back through 8.6650. NOK/SEK has cleared the first batch of stops through trendline support at 1.1220/30 and on a technical level has completed a double top of the 1.1470/60 highs from May/June, and expect more stops through 1.12. EUR/NOK continues to probe the band of resistance 7.70/7.72, some position squaring ahead of the Norges Bank and will look to sell any rallies in this pair against 7.72 with a stop through 7.77. Swedish manufacturing confidence and consumer confidence (4.5 cf.) up in a couple of mins then unemployment at 08:30LDN.
Barclays