G10
EUR – Big week for the euro with lots expected of the ECB on Thursday – A new high at 1.2637 Friday cleared a few more shorts out of the mkt but we struggled to sustain that move, backed up by the rally in Spanish 10 yr yields on Friday back towards 7%. With so much needed to be delivered by the ECB I prefer to fade moves towards 1.2650 looking initially for a move back towards 1.2510 then 1.2480.
GBP – PMI’s released over the next three days, PPI and production data Friday. So, month end flows pretty much done and dusted and USD selling was the net flow. 1.2630 holds on a daily close basis in EUR/USD and supply in cable into 1.5900 keeps us within the recent range. 1.5910 should cap today and I favour a drift back to 1.5750 recent range low over the week. U.S holiday today should keep markets subdued though. EUR/GBP 0.7900-0.7960 does it for me today.
JPY – Back at the low end of the recent range in line with the move in 10 yr yields – 77.90/78.10 first key lvl on the downside – with the QE3 debate raging usdjpy will continue to be reactive to US data so ISM and payrols this week should be key – bids 77.90/78.15 – stops building below 77.90 then 77.65 on the downside – topside 78.60/80 Japanese offers that should cap us for now.
AUD (1.0258) – weak Chinese PMI coupled with a poor domestic retail sales print; AUD was always going to struggle against this sort of backdrop. The latter is hardly unsurprising, we have seen a lot of corporates in the press of late expressing their concerns with consumers shifting to purchasing online and offshore given the continued strength in the AUD. RBA will remain the focus now, whilst consensus is for rates to remain unch I expect a slightly more dovish slant given concerns re: China, the recent performance of key AU commodity exports and the fragility of the domestic economy should conditions worsen in US/Europe. We don’t see much in the book to kick start the week, the only skew of note is a number of very decent stops building in this 1.0400-1.0450 region. Downside is quite thin, we see light bidding interest round the 100dma at 1.0206 but nothing overly material. Gamma will be king this week with GDP also to be released. Good luck!
CAD – Not a foregone conclusion by any stretch but the FEDs finger is on the trigger, combined with marginally better Canadian GDP on Friday (0.2% MoM compared with 0.1% MoM) and some further month end corp selling of funds all helped us trade from 0.9920 to 0.9850. We open around 0.9860 and with it being a US holiday don’t think the impetus will be there to break us out of this 0.9820/0.9920 range but crucial yearly support around 0.9800 is in the markets crosshairs. Orderbook has stops below this level and a sustained break below will drag in the systematic and fast money players, AUDCAD had a nice move over August and been quite a popular position, got a few bids popping up around 1.0100 but think the bulk of this move may be done now so not getting too excited at these levels. Square straight USDCAD but will look to sell back to 0.9900/20 with a 0.9950 chop. Good luck.
Resistance 0.9930 0.9970 1.0000 / Support 0.9840 0.9800 0.9750
Scandies – Friday a bit of a non-event in Skandiland, the huge USDSEK and USDNOK fixes never materialised, Norges announced that there will be an increase of EURNOK buying for September (500 mio NOK for Sept compared with 350 for August). EURNOK was quietly bid for most of the session but found some supply above 7.30 with NOKSEK finding some bids ahead of 1.1410/20. EURSEK remains 8.28/38 at the start of an important week (Riksbank Thursday), PMI just hit the wires much worse than expected at 45.1 compared with 50.1 f/c which has seen us rally from 8.3350 to 8.3650. There will be stops above 8.38/40 but don’t think the market wants to aggress to far before Thursday, will look to fade above 8.40 for now but equally happy to buy sub 8.30/28. Good luck.
EURSEK support: 8.28 8.26 8.20 resistance: 8.38 8.40 8.48
EURNOK support: 7.26 7.25 7.20 resistance: 7.33 7.38 7.40
EM
ZAR – Zar opened at 8.4900 Friday morning and traded low of 8.3700. Better sellers of USD from local exports on Friday. Zar trading back up to 8.4800 Post Jackson hole and sold back down to 8.3700 minutes later. From here think 8.3500-8.4500 range for today with US on holiday expect a quite afternoon. Think look to buy 8.3800 to 8.3500 and sell 8.4500 to 8.4800.
Barclays Capital