EUR – Full wash out yesterday in eur once we broke 1.3550, 1 way traffic down to 1.3479 low cleaning ‘safe haven’ longs out as we approach a deal in states. This 1.3450/1.3480 area continues to be key support and yesterday RM and Mid east demand held us in. Orderbooks much cleaner now within this 1.3450/1.3600 range only stops appearing either side. Topside resistance lvls 1.3540 (interim res) then 1.36 (range highs) Expect us to stay relatively quiet in the morning as we await news on Reid/McConnell plan and republican reaction. After yesterdays flush of longs expect support on downside to hold wrong below 1.3450. Looking for 1.3600/20
GBPUSD – Has recovered well, having held the lows from last week (1.5914). Today the run of important hard data points begins, with the release of Labour Market data. I am long of GBPUSD and will be adding aggressively on a positive outcome. To have a combination of GBPUSD and some form of GBP cross seems wise though, given the current uncertainty around the USD. 1.5914 remains the major support to the downside, though any close below 1.5940 would be a negative development from a technical standpoint. To the topside meanwhile, a close above 1.6035 (pre IP level) would be encouraging, with a test of the 1.6107 – 1.6122 band then likely. Client flows have been mixed thus far this week, though Spec selling on a stop loss basis, was a noted theme yesterday, and Real Money demand remains a broader theme.
EURGBP – Slowly making downside progress, and in my mind, we now have confirmation of a short term peak at .8510 on Friday. .8420/25 remains formidable support, and a close below that area is required to reopen the lower-range, .8333 – .8425. I am square right now, having marginally missed my preferred sell-zone at the end of last week, so from here, would advocate selling an upward correction into the .8485 – .8510 area. Client flows have been EURGBP negative in recent sessions, and I expect other clients to sell into strength going forward.
*UK Employment data due at 9.30. Barclays Economics forecast 7.7pcnt UR, together with a -28k outcome for the claimant count. Consensus expectation is a 7.7pcnt UR and -25k claimant count, though a number of banks are calling for a fall in the UR to 7.6pcnt.
JPY – Managing to weather the headline roulette on US debt problems so far and maintain a hold towards the top of the recent range – Expect more of same as we await further news – on resolution i expect to see a quick spike towards 99.00 possibly 99.50 before we run into exporter selling and profit taking from Japanese retail a/cs that according to recent data are max long. If we get further delays then risks of a quick flush towards 97.50 intensify but ultimately these dips should be bought.
CHF – Bid from the open yesterday with some gd RM demand and once we breached the old highs at 0.9130 didn’t take long to spike higher – Mkt positioning seems to be much cleaner now so looking at Asia lows at 0.9120 as pivot support then 0.9070 below Topside expect corp selling into 0.9180/0.92 should cap us initially on deeper squeezes. Eurchf toppy against 1.2385 res topside while support at the 200 day m.a 1.2315 should be sticky.
AUD/NZD – Another lacklustre day yesterday as the market tested higher in the AUD/USD, bumping into heavy supply ahead of 0.9550, (0.9548 high). It feels like there’s some optionality at the level and will be the immediate line in the sand for any risk on move. The market is bid though, with that ‘risk on’ tone in the air. I noted heavy RHS interest from all client sectors. Weak USD shorts elsewhere were taken out, notably against the EUR and GBP, taking both EUR/AUD and GBP/AUD lower as AUD/USD hung on to recent gains. No real domestic data until Oz CPI on the 23rd. Suggest we look to but dips in AUD for now. 0.9500 and 0.9484 are the initial levels of value with 0.9458 behind. I’ll also look to buy the topside break on a short term play. NZD/USD also dull in terms of price action but again the pair trades with an underling bid tone. 0.8342 is the level to hold below looking for a break of recent 0.8436 high. Guess we focus on U.S debt negotiations again and watch the news tickers like a cat watching a tank of tropical fish. Good luck.
CAD – Some light stops were cleared yesterday through 1.0340 but good RM demand off the 1.0331 lows saw USD/CAD regain the early week losses. If this move is to extend I’d like to see USD/CAD hold above that 1.0340 level, which should leave us in a position to take a look at 1.0420 resistance IF a deal is confirmed in the US today. I’ve taken profit on some of my long USD/CAD and will re-add on any dip sub 1.0350, risking 1.0310 still.
Scandies – USD/NOK and USD/SEK held support at 5.9450 and 6.45 respectively, as USD buying took hold across G10. There was good two-way interest in USD/SEK 6.47-6.50 and some very short-term profit taking in USD/NOK above 6.01. No data again today so expect things to be driven by developments from the US. I think the USD crosses should re-test those levels of support as we head into this evening on a “buy rumour, sell fact” outlook, but while the USD is the focus I’m mindful of EUR/NOK running stops above resistance at 8.17. A host of accounts are still short EUR/NOK and I think positioning still a dominating factor despite the drastic split from fundamentals. Equally 8.8250 in EUR/SEK is strong trend line resistance going back to the Q4 2011 highs.
Barclays