G10
EUR – Dips remain shallow barring 1 crazy sell off pre the esm vote in Germany yesterday down to 1.2815 – We go into the FOMC today against some pivotal resistance lvls at 1.2950/80/1.30 a break and close above 1.3050 would create further pain for the remaining shorts however its unlikely we see that break before 5.30pm – I cant help thinking the mkt has yet again got ahead of itself and while we get something we probably don’t get everything the mkt requires so while below 1.3050 happy to fade but wont fight on a break above there – downside 1.2810/20 then 1.27 lvls to watch.
GBP – No UK data today. The market still has its foot on the USD and faders of these moves are either burnt or nervous. This evening could be pivotal and it feels like we have a big medium term move coming. Disappointment on the QE front seems the biggest risk, with so much apparently priced in. For cable 1.6167 and 1.6208 are big resistance levels. Support 1.6060, 1.6020 and 1.5980 initially but if we are heading lower post FOMC I expect those to get snuffed out and check out 1.5910 double quick. Order wise, supply 1.6050-70 and very little left below. EUR/GBP will get put where the USD legs are but 0.8045 and 0.8070 resist well on the techs. Chop session until 5.30. Good luck.
JPY – Continues its grind down we are on the pivot lvl now at 77.65 (June payroll lows) we bounced hard from here last time although a very different situation – With today all about the FOMC and QE3 usdjpy should remain under pressure until 5.30 ldn – Happy to buy this dip against options for either disappointment later or a shift of focus back onto easing from the BOJ next week. 77.30 then 76.80 support lvl 78.00 then 78.40 lvls to watch topside.
Commodity CCYs – To QE or not to QE, the market certainly feels like QE3 is coming and for the next leg of this USD sell off to be sustained we desperately need something substantial. AUDUSD saw some leverage and RM supply around 1.0500 yesterday and have drifted lower overnight, will be some interest to buy ahead of 1.0420/30. The domestic ozzie and China concerns on the back burner for next 24 hours with all focus on greenback, first resistance at 1.0550 and then 1.0615. I think in the short term clearly AUDUSD will rally testing 1.0550 if Ben delivers, if nothing happens then the USD will stage the mother of all fight backs and we probably see 1.0250 fairly sharpish. More medium term I think AUD weakness in the crosses is still a good play, AUDCAD and EURAUD the standouts. RBNZ kept things on hold last night and NZDUSD holds in above 0.8200, similar story to AUD in terms of USD focus, orderbook has some stops above 0.8240 which look vulnerable. USDCAD steadily bid yesterday and we took some profit on our long above 0.9750 where some good selling was saturated. Still interest to sell back to 0.9800 ahead of tonight and think this strategy still makes sense, barrier action at 0.9700 and little else below if we see the final instalment of Ben’s trilogy this evening. Good luck.
Scandies – Some important data over the coming days out of Sweden, CPI and unemployment today and then q2 GDP revision tomorrow, will be interesting to see whether the rate cut has been justified from a fundamental perspective as opposed to just the strength of the krona. Had a peep above 8.51 yesterday before selling off back to 8.4600 where there seems to be good demand, need to break either of these 8.45/51 levels to gain some traction. I still think there is interest from local corporates to sell back towards the Riksbank high around 8.5520 and certainly up to 8.60. My bias is to sell rallies unless we see some very shocking data and also because I think USDSEK might get a mild slapping this afternoon courtesy of the FED. Look to sell 8.53/54 or break of 8.45 this morning. NOKSEK looks like a buy ahead of 1.1400 and EURNOK should be thrashed around according to the behaviour of the cross this morning, still interest to sell EURNOK around 7.44/46 but stops above 7.48/50. Good luck.
EURSEK support: 8.45 8.36 8.28 resistance: 8.5520 8.60 8.70
EURNOK support: 7.35 7.28 7.20 resistance: 7.45 7.48 7.50
EM
ZAR – Very messy day in USDZAR yesterday as a combination of bad sentiment and stop losses catapulted the pair from an 8.1492 low to a 8.3905 high. All and all it just wasn’t the Rand’s day as the mining sector strike gathered momentum and brought 3 of South Africa’s biggest mines to a standstill. On the day we saw a hailstorm of flow with a variety of offshore names selling USDZAR first thing in the morning, then buying the pair aggressively on the way to 8.3000 before taking profit at 8.3500. This morning USDZAR opens a tad firmer than yesterday’s close as global risk sentiment remains well supported. The local currency was the clear underperformer in the EM space yesterday and with EURUSD still performing well we should see a correction back to 8.2500. That being said there is still no solution to mining strikes and for the time being or at least until some sort of agreement is reached, ZAR will struggle to regain lost ground. The big event today is this evenings FOMC meeting where we expect the Fed to announce another round of quantitative easing (QE3) which should be risk supportive.
Barclays Capital