EUR – So right not to stand in the way of the break at 1.3230 yesterday as we saw widespread capitulation in the mkt below that lvl on the slightly disappointing PMI’s. Eventually trading to 1.3161 in ny before a stop clearing run back to 1.3222 in Asia/London open. With IFO at 9 and then the LTRO at 11 room for further volatility today and the decks in the short term pretty clean. We haven’t managed to break that 1.3230/35 topside so that will be the first focus but the downward momentum still inplace while we stay below 1.3280/1.3310. Downside focus is 1.3160 (yesterdays ny lows) then 1.3130 and 1.3050. Sentiment still for further weakness in eur while we go into the Italian elections this weekend. If we do get that clearout lower towards 1.3050/1.31 I like to own upside for next week. For now remain flexible.
GBP – my conviction in the cable short trade has been reduced a little, given a close above the 2012 lows of 1.5235 has been recovered. Overall, I remain bearish, and retain a core short position, but the potential for a deeper pullback exists. 1.5430 marks the level going into the MPC minutes on Wednesday, and if the down-move is to remain direct, that level should not be breached. Should 1.5330 – 1.5360 be reached, I am happy to add to shorts again, risking 1.5450, and I do note some Spec demand in that region in my order book today. To the downside, expect some support between 1.5215 and 1.5230, where buying was found, immediately after the Phil Fed release yesterday. Meanwhile, EURGBP should find selling interest between .8675 and .8700, but equally good demand on the approach to the weeks lows at .8601. On balance, client flows have been GBP positive in the last 24hrs, mostly against the EUR.
JPY – meeting between Abe and Obama will be the focus today, I imagine USDJPY will be well supported heading into this with the 21dma again proving strong (comes in today at 92.81). Book is much cleaner on the downside now following the flush out through the figure yesterday, pain starting to creep in above 93.50 though with a scattering of stops on the break. EURJPY will be the focus this morning with IFO and LTRO (2nd tranche) to be released. Small pain through the Asia highs round 123.50, we did see some good demand on the dip below 122.50 yesterday and I imagine this will remain should we see these levels again today.
AUD/CAD/NZD – Just when you think AUDUSD is ready to roll over and get a good shoeing it bounces back (hopefully the opposite of what’s going to happen on the Lion’s tour this summer). It was Stevens this time round with his semi-annual testimony highlighting the slowdown in China has come to an end and that there is a good deal of interest rate stimulus in the pipeline amongst others helped AUDUSD trade from 1.0250 taking out stops to 1.0323. Market got itself a little bearish yesterday (guilty as charged) around 1.0230 and even though I think more medium term AUD bearishness justifies selling a rally back to 1.0360/70 not quite sure I want to be selling low 1.03s. More EUR focus today with LTRO and upcoming Italian elections, may see a EURAUD focus and continued unwind on anything disappointing. Seeing sharp sellers of USDCAD above 1.02 but still holds in relatively well, starting to be a very consensus type trade to be long funds which concerns me somewhat, think pullbacks for now ahead of 1.0140/30 should be bought however unless we see another leg lower in stocks or risk I think a sustained break of 1.02 looking a little unlikely. CA CPI today and clearly market looking for a weak number, fade CAD strength the state of play for now but 1.0250 looks a little toppy given the orderbook composition. NZDUSD back to the sidelines really, 0.8310/00 looks like ok support I have no strong conviction in this pair but still happy to sell AUDNZD back to 1.2370/1.24.
Scandies – Well that was a little out of left field yesterday! I think it was decent leverage demand for USDSEK and USDNOK in the wake of the FOMC minutes that kicked things off then a little bout of risk off, with oil soft and weaker German numbers both helping EURSEK and EURNOK higher on the day. EURSEK after having taken out some weak stops above 8.47/48 saw local RM and leverage names come in and sell it. I have taken this opportunity to get short EURSEK with a stop above 8.52 looking for a move back to 8.40, despite the European woes from the PMIs I think given the Riksbank stance there are still benefits to owning SEK. Stops building in GBPSEK above 9.85 but think this could be a worth a sell as long as we remain below 10. EURNOK perhaps the more aggressive of the Scandies yesterday with a sharp move between 7.44 and 7.50 as a market lazy long NOK was caught with its hands in the cookie jar, again locals were notable sellers above 7.50 albeit very briefly and I am also short a bit of EURNOK. The back drop of Olsen’s dovish comments and oil trading soft not that supportive of NOK but equally not sure we have seen anything substantial enough to justify us breaking into a higher range just yet, expect 7.44/43 to offer good support first off. EURSEK support: 8.40 8.30 8.20 resistance: 8.50 8.53 8.55. EURNOK support: 7.44 7.38 7.30 resistance: 7.50 7.54 7.60
Barclays