EUR – Unchanged to where we left it friday and quiet in asia. There was alot of selling towards the back end of last week with the stronger ISM and more dovish Draghi and suprising that we havent retraced more post the weaker payrols. Last weeks low was 1.3105 and on the week expect dips to 1.3100/20 to be supportive now and think room to further extend back into the middle of the recent ranges above 1.3190-1.3250 area before we settle down and await the fed decision. On the fed, sentiment seems to be moving towards tapering with some sort of tinkering with thresholds. So ultimately while i think room for a mini usd sell off expect 1.33 to cap eur rallies now.
GBPUSD – Hovering close to the highs seen on Friday, post NFP. I expect GBPUSD to remain in a holding pattern, until we get more domestic newsflow on Wednesday and Thursday. My sense is this could be a positive week for the Pound, though I would rather express the view via EURGBP. In the event GBPUSD loses ground to sub 1.56, I would willingly buy, expecting Fridays low at 1.5565 to hold firm. To the topside, resistance will be found at 1.5681, 1.5718 and then at the multi-month range highs of 1.5752. Client flows have been light in recent sessions, though buying has been the noted.
EURGBP – Failed to achieve a close below the range lows at .8400 on Friday, but has not corrected meaningfully higher either. I retain a core short position, would like to see a close below .8400 develop in the days ahead to increase confidence. My central scenario of steady losses ahead for EURGBP remains, and I will add to the position if we correct into the .8460-70 area. Client flows remain skewed towards selling, with Leveraged and Real Money clients having been active recently. *UK Employment data will be released on Wednesday (Barclays Economics forecast a fall in the UR to 7.7pcnt), while Governor Carney will speak at the TSC on Thursday – look for discussion around markets apparent disregard, for the recent forward guidance on interest rates.
JPY – Only USD to rally o/n in G-10 on back of nikkei strength with Tokyo winning the race to host the 2020 olympics – A pre mkt high at 100.11 met by selling from Exporters/leverage – Once the dust settles i think significant that despite heavy buying last week usdjpy failed to break at 100.30 into a higher range and for me i prefer to play a 98.30/100.30 range – Ultimately i do like usdjpy to extend gains towards 101.70 but we expect we will need to hear from the fed on 18th before we attempt it.
CHF – The strong rally towards the top of this 0.92/95 range came to a halt last week post payrols after 2 attempts at fails at 0.9455 highs. We have since cleaned stops out back into middle of the range and we look now at the 200 day at 0.9345 as key support before 0.9280/90 – Happy to buy a dip once stops clear out at 0.9340-10 downside against that lower support lvl. Eurchf support 1.2330/1.2288 (200 day) – resistance 1.2385/1.2420 – Few corp sellers about capping the rally into 1.2385 resistance.
AUD/NZD – A small relief rally in AUD post election results ran out of steam pretty quickly as AUD/USD bumped into resistance at 0.9222. We then tailed off quite aggressively, only to be saved by stronger domestic data in the form of a stronger Home loans print. We now focus on the senate vote to see whether key changes in legislation proposed by the coalition will be passed. So, still some uncertainty and I don’t expect the AUD to get an extra set of wings just yet. However, the bias for me is still higher and if we crack 0.9222/0.9233 resistance, bigger levels at 0.9330 and 0.9406 could come into focus. I’ll look to buy on dips rather than chase it though, looking for 0.9170 and 0.9150 as the first levels to pick up. My order book suggests a pick up in momentum should we start to move through 0.9250. NZD/USD remains buoyant but I feel a bit out of touch with the bird right now. Support 0.7936, resistance 0.8058 and we should track the Oz until at least the RBNZ on Wednesday.
CAD – Strong Canadian payrolls (+59k vs. cf. 20k) simultaneous with a disappointing US payrolls didn’t leave USD/CAD with much chance as a position clearout was already underway leading into the numbers through support at 1.0470-40. More stops were then triggered on the break of 1.04. 1.0380 is now the first level of support and the pair continues to trade heavy with more early RM supply of USD/CAD as the market continues to reduce positioning. With US action in Syria still looming I think USD/CAD remains under pressure this week with further levels of support at 1.0355 (t/l support) and 1.03. To the topside I think 1.0440 will cap any move, as it did the on Friday with the limited USD bounce. I am running short USD/CAD and will add on any rallies above 1.04 with a stop through 1.0440.
Scandies – Should be a quiet day in scandies before we get inflation data out of Norway tomorrow (09:00LDN). EUR/NOK remains well supported against 7.98 while EUR/SEK held 8.7050 support almost perfectly on Friday. Despite having traded above 8.75, that should be the first small level of resistance for EUR/SEK while beyond 8.78/79 expect there to be some pain as the market still runs short of EUR/SEK, but 8.70-80 is now the broader range. NOK/SEK stops are building through 1.0950 but it feels like the RM supply seen 1.0880-1.09 is still in the market. The IMF has warned about a possible housing bubble ahead of Parliamentary Elections today which is at loggerheads with the favourite Erna Solberg who has denied Norway has a housing bubble and will be interesting to follow developments over proposed risk-weightings on mortgages for banks. The USD should remain under pressure after an underwhelming NFP print but Syrian issues should be back at the fore this week and leaves some risk for SEK particularly vs. CHF.
Barclays