EUR – support at 1.2880 held perfectly yesterday as a quick headline saw waves of short covering with this showing no signs of slowing overnight. EUR trades to an Asia high of 1.2962 and fails again there on a second attempt, so looking at that as first line in the sand today on the topside, and still have good orderbook corp supply back up to range highs at 1.3025. Would expect to see stops above 18 month trendline resistance at 1.3045. We’ve picked up fresh demand in the orderbook 1.2910-1.2890, stops now through 1.2860. Still happy to fade any move back towards 1.3025 until we see any real progress out of US.
GBP – M4 money supply data at 9:30, CBI reported sales at 11:00. So, just as the market felt like it was going to roll over, Boehner’s comments hit the wires and risk jumped. The market was clearly getting short EUR/XXX and retraced quickly. EUR/USD bounced out of 1.2880 support and pulled EUR/GBP away from the lows. The market feels more neutral now and I think price action could be choppy an erratic today. I look to play ranges with a bias to short EUR today, with 0.8100 in EUR/GBP the first level to fade and dips into 0.8055 used to cover shorts. Cable should trade a little sidelined today with UK data a non event. Expect the pair to ghost EUR/USD. 1.6040 and 1.6060 topside resistance, 1.5977 and 1.5955 support.
JPY – USDJPY had a small wobble yesterday with eurjpy selling the catalyst initially trading down to 105.50, our orderbook is a little cleaner on the downside in USDJPY with stops below 81.80 triggered and now better bids appearing around 81.50\40. We saw some leverage buying after the positive fiscal cliff news and have subsequently seen domestic demand overnight up to 82.20, some exporter supply around 82.40/50 exists in the orderbook but not substantial, clear line in the sand topside remains between 82.84 (Thanksgiving high) and certainly 83.00. Important EURJPY resistance comes in around 107.10/20 and a move above here would certainly be the next leg higher for USDJPY. We remain long as a desk and still recommend buying the dip (nothing too novel in that regard!), orderbook has bids around fibo support 81.40/50 and then will be stops below 81.00 including ours.
AUD/NZD – no need to reiterate the the outcome of the capex data, suffice to say we have seen a good amount of AUD selling in the wake of the print. AUDNZD bearing the brunt of the move, I have hedged half the o/n straddle I bought yest so we now have some free optionality into expiry this afternoon. We shouldn’t trade back above 1.27 figure, offers are being lowered from 1.2760 down to the figure for those who missed the opportunity to sell this higher. AUDUSD support still exists down round 1.0420/25 which was the ‘breakout’ level we cleared last week. We are accumulating some decent stops on this break, I don’t like selling it through here and wouldn’t be surprised to see these get done and then we bounce, a la what happens every time the mkt focuses on a particular level in AUD. Square AUDUSD here, irrespective of the marginal shift in mkt pricing o/n, as we have seen over the course of the past year rate cuts rarely necessitate AUD weakness. We are now almost fully priced for a cut and AUD is still nudging against range highs – I think it is clear where the real risk lies heading into the RBA next week. I’ll be taking advantage of low vols and steep skew heading into the meeting.
CAD – Lots of two way interest yesterday in USDCAD around 0.9950 where we were better sellers for corps and RM names who eventually won out with EURUSD bouncing from sub 1.2900 with stocks regaining lost ground after some positive fiscal cliff rhetoric on the wires. Certainly month end becomes a focus now and there will be more corporate selling around but not too excited about selling usdcad through 0.9900. Having said that though I think EURUSD has room to squeeze above 1.30 so short usdcad or selling back towards 0.9950 with a parity stop makes sense over the next 24 hours and month end. US jobless claims and pending home sales this afternoon. Resistance 0.9970 1.0000 1.0050. Support 0.9910 0.9900 0.9875.
Scandies – Given the nature of the economic tendency survey and some of the news articles surrounding job losses in Sweden at the moment (Sandvik AB the latest), people are expecting a bad gdp print today however EURSEK has seen some good selling between 8.65\61 as the market is also aware of the farmers payment that’s meant to be happening over the next 48 hours. Difficult to recommend being short EURSEK on the back of one publicly known flow, but if the stars align and we get a better than expected gdp print eursek may be testing 8.55 and the more important 8.50 support. Either way I think its still worth fading sek strength and will be looking to buy EURSEK between 8.56\54 or break of 8.72 which I think is tested in December with a cut by the Riksbank still very much a possibility. EURNOK still a little subdued, I like being long eurnok at these levels especially back towards 7.30 which technically looks like good support. Tomorrow we find out whether the norges will break a habit of a lifetime and initiate any eurnok purchases for December, it’s a binary event and ultimately I’m trying to disguise the fact I’m taking a punt but I do not believe the market is talking about this. Combined with holiday liquidity we may see a more exaggerated effect if they do decide to do anything, will be long for tomorrow in case they do. Offers up to 7.40 and then stops above 7.41. Swedish GDP and retail sales today at 8:30. EURSEK support: 8.58 8.55 8.50 resistance 8.68 8.72 8.75. EURNOK support: 7.32 7.28 7.24 resistance: 7.38 7.40 7.45.
Barclays Capital