EUR – Holding nicely above the 1.3025/1.3045 resistance zone without really pushing on. Yesterdays break of 1.3050 resulted in a wave of profit taking from rm/lev and spec so it will be interesting to see how we respond today. Orderbook still suggests that 1.3080/1.3130 will be slow going topside on a move higher with selling dominating. Downside expect 1.3010/20 to provide support with a move back below 1.2985 a worry for longs.
GBP – UK construction PMI at 9:30. So, a fresh lunge higher in EUR/USD and GBP/USD but the moves don’t excite. Good supply in both pairs waits just above should we have another go but I have faded and look for a retrace. The market liked the fact that Spain has applied for bailout funds but I don’t see what all the high fiving is about. They were always going to apply anyway and the ‘good news’ was priced in when the funds were made available. For cable, good offers 1.6120-50 should top us out and with similar dynamics in EUR/USD, EUR/GBP should respect the 0.8100-0.8135 range for now. I maintain long dollar positions from yesterday and look for moves back to 1.6010 in cable and 1.2975 in EUR/USD, especially as equities slip away in the background. Good luck
JPY – Continues to frustrate in this 81.65-82.80 range – Feels like we stuck like this until we get more from risk events in the next 2 weeks – Payrols friday, FOMC and then the elections on the 16th. Order books clean within the range although stops there below 81.65-30 on downside and topside the selling pressure reduced 82.75/83.20. Still have a long on but reduced leaving me room to buy that dip 81.70/30 with a stop at 80.50 – i still believe in the move higher but feel need to be flexible while we continue to fail at 82.60/80 topside at least until the election
CHF – we saw good demand for EUR/CHF on the back of headlines yesterday that Credit Suisse has informed bank clients of negative rates on CHF deposits from Dec. 10 i.e. charging banks to hold CHF cash balances. Speculation rife now over what other banks will follow this decision, and if they do then likely to see sustained demand for EUR/CHF. We have stops in USD/CHF through 0.9240 but EUR/CHF orderbook remains light but will likely build over the next couple of days and give a picture of what the market thinks.
AUD – o/n price action exactly as we expected, a 20 tick sell off post-cut followed by a 50 tick squeeze higher. Hardly unsurprising, the weight of positioning really is overwhelming fundamentals at the moment. I remain long AUDNZD, this is my favourite trade of the week as we have a number of catalysts in the coming days (AU GDP, AU employment and RBNZ) and by week end I expect to see this cross 1.28+ with the RBNZ to deliver an extremely dovish statement in my opinion. Market is short this cross (namely for reasons pertaining to the base ccy component), we see decent pain through 1.2750 (100dma) and again through 1.2775/80 (200dma). AUD bids kick in 1.04 and are consistent all the way lower, stops topside start 1.0490 and are consistent all the way higher. Again, no major surprise to the topside skew here. Buy dips the name of the game today, keep an eye on this 1405 level in the eminis (100dma) which should provide initial support.
CAD – we have spent over a week now in the 0.9910-0.9975 range and while there has been no game changing news, starting to get a feel the catalyst for USD/CAD could be coming. EUR/USD broke through resistance at 1.3050 which saw us test lows of the range in USD/CAD again yesterday with a low of 0.9915, but the pair rallied on the back of a weak US ISM Mfg PMI Print falling just short of our first good offers 0.9960 to make a high in Asia of 0.9955. Orderbook composition remains heavily skewed to the topside with good offers from 0.9960-1.0025, but would also expect there to be stops above parity even though we don’t have them. The BoC are expected to keep rates on hold today at 14:00GMT when they make there policy announcement. With rates markets pricing no change in, attention will turn to rhetoric and I’d expect language to remain dovish and with that test the top of this recent range. Combine this with good demand for AUDCAD and AUDxxx in general following this morning’s RBA decision to cut rates to 300bp and it feels like today could seriously test the range highs.
Scandies – No significant data from the region today. With both pairs trading well trodden ranges I maintain mean reversion tactics. EUR/NOK 7.32-7.4150 and I favour the short side near 7.4000, looking to square but not go long towards 7.3200. For EUR/SEK, I’m a little more mixed but respect the importance of tech resistance up at 8.7000-8.7250. NOK/SEK threatens to break higher onto a 1.18 handle and although I look to buy dips, I think we need a fresh driver to spark more demand.
Barclays Capital