EURUSD : Support – 1.2675 , 1.2650/40 , 1.2500 Resistance – 1.2740 , 1.2780/90 , 1.2880 , 1.2985
The Greece situation continues to fumble along making plenty of noise – now between Juncker (head of Eurogroup) and Lagarde (head of IMF), it still seem likely that a solution will be found in the near future, 20th Nov (according to Juncker), but for the time being it seems enough to weigh on what seems to be a very fragile market. It is not all bad news through and we continue to get small positives as we near the fiscal cliff, this time is was the turn of Republican economist Hubbard who writes that they should concede and agree on more tax hikes in line with the President’s view. All in all I expect both Greece and the fiscal cliff to provide positive outcomes but we are firmly in a position reduction mode for the time being as uncertainty (& year end profit protection) are giving markets an ugly veneer. We have taken out the touted stops at 1.2680 and now the market will be looking for a test of the 1.2640/50 level (100 DMA and multimonth pivot) but I think there is a growing risk of a short squeeze on the horizon – I will continue to range trade this market using 1.2650 – 1.2780 as my parameters. We have ZEW at 10.00 GMT which will a little more colour to the picture in Germany but the real release that we are waiting for is the Ifo (23rd).
GBP
Inflation report Wednesday the main focus but would look to sell sterling rallies towards 1.5930-40. Eurgbp holds firm at 0.7960-65 and it really is a toss up of which is the weakest, worst currency going into year end. Sterling exhibited some weakness most of the day yesterday but was then outpaced as the cross topped out at 0.8020 and drops back below the figure. Inflation data at 9.30am will most likely dictate the remainder of our day in sterling but I wouldn’t get carried away selling low ones in cable as we have come quite a long way in a short period of time. Would expect some corporate demand to kick in under 1.5850.
JPY
Fix demand took usdyen back above 79.60 but it trades poorly since, with exporters heavy sellers. Doesn’t appear to be any evidence of ‘overhedging’. Feels a little shaky to me this morning but would be a better buyer should we trigger some stops under 79.00. Yields suggest that it is not unreasonable to test 78.80. The cross remains heavy with European RM unwinding great swathes of euryen across the street.
CHF
Eurchf trickles off each day but approaching a buy zone for me and sensible risk reward – 1.2030-35. Usdchf meeting resistance around 0.9500-20 but the euro is the dominant factor here and I have no strong view on where euro is going short term.
AUDUSD: Support – 1.0380 , 1.0260 , 1.0140 Resistance – 1.0460 , 1.0500
Not much change in view here – AUD dragged around by global equities but underpinned by the brighter outlook in Asia, specifically China. I standby what I said yesterday – if equities bounce from here, which one would have to suspect is likely, then AUD will head back onto a 1.05 handle. On the day would look to play from the long side at 1.0380 while medium term our strategy has not changed and we will look to sell on medium term basis in the 1.0550/ 1.0600 area.
EURSEK: Support – 8.55, 8.5030, 8.45 Resistance – 8.60, 8.6220, 8.6790
EURNOK: Support – 7.25, 7.23 Resistance – 7.35, 7.4140, 7.44
As expected, EURSEK continues to push back towards a 8.60+ handle as the market digests the every increasing chance of a rate cut at the December Riksbank meeting (18th Dec). High levels of household debt remain a concern for the Riksbank but the second reason for keeping rates on hold last month, “a fairly resilient economy”, is becoming increasingly invalidated as SEK data continues to be weak. Swedish CPI data is released today at 8:30 GMT and I think that a neutral or negative number will provide further support to EURSEK. My view remains that EURSEK higher makes sense going into year-end and I am looking for more attractive entry levels to re-initiate longs. A pause in the EURNOK downwards grind yesterday as the pair closed the day close to flat. Story is still the same, the medium term risk remains to the downside in the pair. Looking for the pair to test support at 7.25 and then push on towards the all time lows at 7.23 going into year-end. Range to trade is 7.33 – 7.25 with a preference to re-initiating shorts if we see 7.32.
Morgan Stanley